Case Law Details
DTC Trading CO Vs ITO (ITAT Chandigarh)
Chandigarh ITAT remands DTC Trading Co. tax appeal for fresh hearing, citing advocate’s depression and memory loss as sufficient cause for ex-parte order.
In a notable decision, the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has set aside an ex parte order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] against DTC Trading CO, remanding the case for fresh adjudication. The Tribunal’s ruling, dated June 27, 2025, for Assessment Year 2017-18, was prompted by the assessee’s plea that their advocate’s severe medical condition—depression and memory loss—prevented effective representation.
The case originated from an assessment order passed by the Assessing Officer (AO) under Section 144 read with Section 143(3) of the Income Tax Act, 1961, on December 30, 2019. This order was issued ex parte due to incomplete compliance from the assessee. The AO had made significant additions to the assessee’s income, including Rs. 1,22,50,000/- as unexplained money under Section 69A read with Section 115BBE, and Rs. 31,73,100/- as unexplained cash credits under Section 68 read with Section 115BBE, for which no confirmations were filed. Consequently, the assessee’s income was assessed at Rs. 1,64,03,302/-.
DTC Trading CO subsequently filed an appeal before the CIT(A) through the same counsel, Advocate Ajay Pal Singh. However, this appeal also resulted in an ex parte order from the CIT(A) because no submissions were made on behalf of the assessee.
Before the ITAT, the assessee’s counsel argued that the non-compliance before both the AO and the CIT(A) was due to the advocate’s severe medical condition. It was submitted that Advocate Ajay Pal Singh was suffering from depression and memory loss, leading to his inability to attend office and file necessary submissions. The assessee asserted that they were solely dependent on their counsel for the income tax proceedings and were under a bona fide belief that all matters were being handled appropriately. Given these circumstances, the assessee prayed for the case to be remanded back to the AO for a fresh decision, emphasizing that partial information had indeed been filed before the AO initially.
The Departmental Representative left the decision to the merits of the case.
After reviewing the orders of the AO and CIT(A), and considering the arguments from both sides, the ITAT acknowledged the submissions regarding the advocate’s medical issue. The Tribunal concluded that, in order to provide “natural justice” to the assessee, the case warranted a fresh adjudication. The principle of natural justice, a cornerstone of Indian jurisprudence, dictates that a party must be given a fair opportunity to be heard before any adverse order is passed against them (audi alteram partem). Courts and tribunals, including the Supreme Court and various High Courts, have consistently applied this principle to set aside ex parte orders where a “sufficient cause” for non-appearance or non-compliance is demonstrated. While no specific judicial precedent was cited in this order, the ITAT’s decision aligns with the well-established legal stance that genuine impediments, such as severe health issues affecting legal representation, constitute sufficient grounds for granting further opportunities.
Accordingly, the ITAT remanded the case back to the AO for fresh consideration, instructing that a reasonable opportunity be provided to the assessee, who is expected to cooperate fully. The appeal was thus allowed for statistical purposes, paving the way for a re-examination of the tax assessment on its merits.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 31/07/2024 pertaining to Assessment Year 2017-18.
2. In the present appeal Assessee has raised the following grounds of appeal:
“1.a) That the Ld. AO has erred in passing the assessment order u/s 144 r,w.s. 143(3) of the Act.
1.b) That the Ld. CIT(A) has erred in passing the order without giving sufficient/adequate opportunity to the assessee and the order having been passed without giving sufficient and adequate opportunity, the said order deserves to be set aside to the file of the Ld. CIT(A) in order to give adequate/reasonable opportunity to the assessee.
1.c) That no submissions could be filed before the CIT(A) since the assessee was prevented by sufficient and reasonable cause in not been able to file the submissions and which is highly regretted.
2. That the Ld. CIT-(A) should have passed the order on merits and as such the order passed by the Ld. CIT-(A) deserves to be set aside.
3. That the addition by Assessing Officer and confirmed by CIT(A) of Rs. 1,22,50,000/-made on the basis of deposit of cash in their bank account without verifying the detail of sales made and cash withdrawn from bank accounts was against the law and as well as against the facts of the case and uncalled for hence liable to be delete.
4. That the Assessing Officer/CIT(A) was wrong by considering Rs.31,73,100/-as unexplained cash credits which is bad in the eyes of the law.
5. That the Ld. CIT (A) has erred in invoking the provisions of Section 69A r.w.s 115BBE of the Income Tax Act, in respect of the addition of Rs. 1,22,50,000/- and also on account of the addition on account of alleged unexplained cash credit u/s 68 r.w.s 115BBE amounting to Rs. 31,73,100/-.
6. Notwithstanding the above grounds of appeals, the Ld. AO has also erred in applying the provisions of section 115BBE of the Act on the amount of cash deposited in the bank account of the assessee before 15.12.2016 i.e. the 60% rate of tax + Surcharge + Cess is not applicable in the case of the assessee.
7. Notwithstanding the above grounds of appeals, the Ld. A0 has also erred in applying the provisions of section 115B8E of the Act on unexplained cash credits by applying 60% rate of tax + Surcharge + Cess in the case of the assessee.
8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”
3. It was argued by the Ld. Counsel for the Assessee that the return was filed declaring income of Rs. 7,83,350/- on 06.11.2017 which was processed u/s 143(1). Thereafter, notices u/s 143(2)/142(1) were issued and certain Partial compliances were made by the Counsel of the assessee, Adv. Ajay Pal Singh. It has been mentioned in the order in para 5, that part compliance was made before the AO. However, complete information could not be filed by the assessee before the AO and, thus, the AO passed the order u/s 144 by rejecting the books of accounts vide order, dated 30.12.2019. Certain additions on account of deposits in the different bank accounts of the assessee were made as unexplained money u/s 69A r.w. the provisions of the section 115BBE, amounting to Rs. 1,22,50,000/-. It was noticed by the AO that certain unsecured loans were there in the balance sheet of the assessee to the tune of Rs. 31,73,100/-, for which, no confirmation was filed so, it was also added. Finally, the income of the assessee, was assessed at Rs. 1,64,03,302/-.
4. Appeal was filed by the assessee before the CIT(A) through the same Adv. Ajay Pal Singh. It was argued by the Ld. Counsel that the e-mail.id on Form No. 35 was given of the assessee’s Adv. Ajay Pal Singh. Though, his staff sought adjournments on few dates as the said Advocate was suffering from depression/memory loss and was not attending the office on account of such depression/memory loss.
5. Further, it was brought to our notice by the Ld. Counsel that the assessee was solely dependent on his counsel for the Income tax proceedings. He was under a bonafide belief that everything is being taken care of. Thus, it was prayed that, since there was a bonafide reason on account of the counsel’s medical issue due to which, the ex-parte order has been passed by the CIT(A). It was prayed that since the part information was filed before the AO, in the interest of justice and equity, request was made that the case may, please, be remanded back to the AO for fresh decision.
6. The Departmental Representative Pleaded that the decision be taken as per the merits of the case.
7. We have gone though the order of Assessing Office/ CIT(A) and also the arguments of Ld. Counsel and DR. The Ld. CIT(A) has passed an ex-parte order, since no compliance was made by the assessee or his counsel before CIT(A). We have also considered the submissions of the Ld. Counsel for the Assessee about the medical issue of the counsel of the assessee at the time of CIT(A) and AO. We are of this considered view that in order to give natural justice to the Assessee, the case should be remanded back to the AO. Thus, we remand the case to the AO for fresh adjudication after giving reasonable opportunity to the assessee and to which, the assessee shall cooperate. Thus, appeal is allowed for statistical purpose.
8. In the result, appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open Court on 27/06/2025
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