Ramavtar Akar Vs ITO (ITAT Jaipur)
Issue of Seven Notices Is Not Proof of Their Service: ITAT Restores ₹66.16 Lakh Demonetisation Appeal for Decision on Merits
The Jaipur Bench of the ITAT has held that merely mentioning the issue of several hearing notices does not establish that those notices were actually served upon the assessee. The appellate authority must record its satisfaction regarding effective service of notice before drawing an adverse inference on account of non-appearance.
Finding that the NFAC had referred to seven notices but had not identified which of them had been served, the Tribunal set aside the ex parte appellate order and restored the matter to the CIT(A) for fresh adjudication on merits after granting a reasonable opportunity of being heard.
₹1.27 Crore Cash Deposited During Demonetisation
The assessee was engaged in the business of trading in gold & silver ornaments under the name M/s Shree Nath Jewels. For AY 2017-18, he declared total income of ₹10,63,810 after claiming Chapter VI-A deductions of ₹1,26,033.
The return was selected for scrutiny and notice u/s 143(2) was issued on 11-08-2018. The assessee appeared during the assessment proceedings and furnished the details & information called for by the AO.
During scrutiny, the AO noticed that the assessee had deposited cash aggregating to ₹1,27,49,000 in different bank accounts. Out of this amount, ₹1,26,99,000 represented Specified Bank Notes (“SBNs”) deposited during the demonetisation period.
The assessee attempted to explain the source of the deposits with reference to his jewellery business. The AO, however, did not accept the explanation and treated ₹66,16,353 as unexplained cash deposit. The assessment order, as recorded by the Tribunal, referred to the addition as having been made u/s 68.
NFAC Dismissed the Appeal for Non-Appearance
The assessee challenged the addition before the CIT(A), NFAC. However, the first appeal was dismissed on the ground that the assessee did not appear and was apparently not interested in prosecuting the proceedings.
Before the Tribunal, the assessee contended that the CIT(A) had wrongly assumed a lack of interest in pursuing the appeal. It was specifically argued that no adjournment application was filed in response to the notice dated 11-09-2025, but this solitary circumstance could not justify confirmation of the entire addition without deciding the grounds on merits.
The assessee challenged the addition of ₹66.16 lakh and also raised an important alternative ground concerning the applicable rate u/s 115BBE. According to him, the enhanced tax rate of 60% introduced by the Taxation Laws (Second Amendment) Act, 2016 could not be applied retrospectively to transactions occurring before 01-04-2017. Reliance was placed on the decision of the Madras High Court in SMILE Microfinance Ltd. v. ACIT, dated 19-11-2024.
Seven Notices Claimed, but Service Not Established
The ITAT examined the table contained in paragraph 5 of the NFAC’s order. The CIT(A) claimed that seven notices had been issued to the assessee during the first appellate proceedings.
However, the appellate order did not state which of those notices had actually been served. There was no finding regarding the mode of service, date of delivery, delivery status on the income-tax portal or communication of the notices to the assessee’s registered email address.
The Tribunal held that the appellate authority was required to record its satisfaction regarding the service of the notices. The mere generation or issue of notices could not automatically lead to the conclusion that the assessee deliberately failed to participate.
This distinction is important. Issue of notice is an administrative act; service of notice is the communication that enables the assessee to exercise the right of hearing. Unless effective service is shown, non-appearance cannot safely be treated as intentional.
First Appeal Must Be Decided on Merits
The Tribunal further observed that, to settle the controversy once and for all and avoid multiplicity of proceedings, the first appeal ought to be decided on merits after providing the assessee a reasonable opportunity of being heard.
The CIT(A) is the first appellate authority and possesses co-terminus powers with the AO. Even where an assessee does not appear, the CIT(A) is ordinarily expected to examine the assessment order, grounds of appeal, material available on record and applicable law, and thereafter decide the issues on merits.
The appellate authority cannot merely treat the appeal as abandoned and allow a substantial addition to survive without judicial examination, particularly where effective service of hearing notices itself remains uncertain.
The ITAT consequently set aside the NFAC’s order and restored the appeal for fresh adjudication after granting reasonable opportunity to the assessee. The appeal was allowed for statistical purposes.
Merits of Addition & Section 115BBE Left Open
The Tribunal did not delete the addition of ₹66,16,353. It also did not adjudicate whether the demonetisation deposits represented explained business receipts or unexplained money.
Similarly, the controversy regarding the applicable tax rate u/s 115BBE was not decided. All these issues remain open for examination by the CIT(A) in the restored proceedings.
There is also an apparent discrepancy in the order. The grounds of appeal describe the addition as one made u/s 69A, whereas the factual narration states that the AO made it u/s 68. The exact charging provision adopted in the assessment order should therefore be verified and specifically addressed before the CIT(A).
Author’s Comments
The decision reiterates a simple but frequently overlooked principle: a list of notices is not a substitute for proof of service. In faceless proceedings, the appellate order should clearly record the date, mode & status of service before attributing deliberate default to the assessee.
The restoration, however, is only a procedural victory. The assessee must now reconcile the cash deposits with books of account, stock register, sales invoices, VAT returns, cash book, opening cash balance and bank-wise deposits. In a jewellery business involving SBN deposits, a general explanation of “cash sales” may not be sufficient unless supported by contemporaneous records.
The assessee should also clarify whether section 68 or section 69A is legally applicable and press the section 115BBE rate issue independently. The ITAT has reopened the door; the evidentiary burden inside the room still remains with the assessee.
Cases Discussed
S.M.I.L.E. Microfinance Ltd. Vs ACIT — relied upon by the assessee on the applicability of the enhanced rate under section 115BBE to income relating to the period before 01-04-2017. TaxGuru has also discussed this decision in subsequent litigation concerning the applicability of the enhanced section 115BBE rate.
Section 68, 69, 69A, 69B and 69C — TaxGuru’s statutory analysis distinguishes the provisions dealing with unexplained cash credits, investments, money, undisclosed investment and unexplained expenditure.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The Appellant, Ramavtar Akar (hereinafter referred to as the ‘assessee’) by filing the present appeal, sought to set aside the impugned order dated 06.10.2025 passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] qua assessment year 2017-18 on the grounds inter-alia that:-
“1. The Ld. CIT(A), NFAC has erred on facts and in law in holding that assessee is not interested in prosecuting the appeal in as much as he has not filed the application for adjournment against notice dt. 11.09.2025 and thereby confirming the addition/disallowance challenged in the grounds of appeal.
2. The Ld. CIT(A), NFAC has erred on facts and in law in confirming the addition of Rs.66,16,353/- u/s 69A of IT Act by treating the cash deposit in the bank account during demonetization period to this extent as unexplained.
3. The lower authorities have erred on facts and in law in taxing the alleged amount u/s 115BBE at the rate of 60 per cent instead of taxing the same at the rate of 30 per cent by ignoring that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 15.12.2016 and made applicable from 01.04.2017 is applicable to any transaction from 01.04.2017 onwards and not to any transaction prior to 01.04.2017 as held by Honble Madras High Court in case of SMILE Microfinance Ltd. Vs. ACIT vide order dt. 19.11.2024.
4. The appellant craves to alter, amend and modify any ground of appeal.
5. Necessary cost be awarded to the assessee.”
2. Briefly stated, facts necessary for consideration and adjudication of the issues at hand are: Assessee’s return of income was put to scrutiny and accordingly notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred as to the “Act”) was issued on 11.08.2018, which was duly served upon the assessee. In compliance to the notice the assessee filed necessary details/information. The assessee was into the trading business of gold and silver ornaments in the name and style M/s Shree Nath Jewels. The assessee declared total income of Rs. 10,63,810/- after claiming deduction under chapter VI-A to the tune of Rs. 1,26,033/-. During assessment proceedings, the AO noticed that the assessee had deposited cash amount of Rs. 1,27,49,000/-in the different bank accounts and out of which Rs. 1,26,99,000/- were SBNs. Declining the contention raised by the assessee, the AO proceeded to make addition of Rs. 66,16,353/- to the total income of the assessee as unexplained SBNs deposits u/s 68 of the Act.
3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has dismissed the same due to non appearance of the assessee. Being aggrieved with the impugned order passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeal.
4. We have heard Ld. ARs for the assessee and Ld. DR for the Revenue and perused the record available on file.
5. Bare perusal of the impugned order passed by the Ld. CIT(A) goes to prove that during the first appellate proceedings numerous notices were shown to have been issued to the assessee, but he has reportedly not appeared. When we see table in para 5 of the impugned order 7 notices are claimed to have been issued, however it is nowhere mentioned as to which of the notices were served upon the assessee. Satisfaction by the appellate authority is required to be recorded as to the service of notice, which is not there on the file.
6. Even otherwise to decide the issue once for all and to avoid the multiplicity of the proceedings, first appeal is required to be disposed off on merits by providing reasonable opportunity of being heard to the assessee.
7. Resultantly, the impugned order passed by the Ld. CIT(A) is hereby set aside to be decided afresh after providing reasonable opportunity of being heard to the assessee. The appeal is accordingly, allowed for statistical purposes.
Order pronounced in the open court on 15-09-2026.
