Case Law Details
Harish Kumar Vs ITO (ITAT Chandigarh)
Summary: The appeal before the Income Tax Appellate Tribunal (ITAT), Chandigarh, arose from the order dated 5 September 2024 passed by the Commissioner of Income Tax (Appeals), NFAC, for AY 2017-18. The assessee challenged the confirmation of an addition of ₹16,88,000 under Section 69A as unexplained money, estimation of income of ₹19,896 at 1% of credit card transactions amounting to ₹19,89,621, application of Section 115BBE, and the alleged denial of a reasonable opportunity of hearing.
The assessee had originally filed a return declaring total income of ₹3,28,250. The case was selected for scrutiny under CASS. During assessment proceedings, statutory notices were issued, but the assessee did not comply. Consequently, the Assessing Officer completed the assessment ex parte under Section 144 read with Section 143(3).
Based on information available on record, the Assessing Officer observed that the assessee had deposited ₹16,88,000 in cash during the demonetisation period and had made credit card payments aggregating to ₹19,99,621. As no explanation was furnished, the Assessing Officer treated the cash deposits as unexplained money under Section 69A and estimated income at 1% of the credit card transactions, resulting in an addition of ₹19,896. The total income was assessed at ₹20,36,150.
The assessee appealed before the Commissioner (Appeals), specifically contending that the bank account in which the alleged cash deposits were made did not belong to him, and therefore the addition under Section 69A was unsustainable. The assessee also challenged the estimation of income on the credit card transactions and the applicability of Section 115BBE.
The Commissioner (Appeals) observed that despite several notices, the assessee neither appeared nor filed submissions during the appellate proceedings and had also remained non-compliant during the assessment proceedings. The appeal was therefore dismissed for non-prosecution, and the additions were confirmed on the basis of the material available on record.
Before the Tribunal, the assessee submitted that the Commissioner (Appeals) had dismissed the appeal without proper adjudication on merits. It was argued that the assessee could not effectively represent the case before the lower authorities due to reasonable cause. The assessee further contended that the very foundation of the addition was erroneous because the bank account did not belong to him and that this crucial issue had never been examined. The assessee requested that the matter be restored to the Commissioner (Appeals) for fresh adjudication.
The Departmental Representative supported the orders of the lower authorities, submitting that the assessee had consistently failed to comply with statutory notices and had not discharged the burden cast upon him.
After considering the rival submissions, the Tribunal observed that although the assessment had been framed ex parte and the assessee had failed to appear before the Commissioner (Appeals), the Commissioner (Appeals), being the first appellate authority, was required under Section 250(6) to decide the appeal by passing a speaking order stating the points for determination, the decision thereon, and the reasons for the decision. The Tribunal also noted that the powers of the Commissioner (Appeals) are co-terminus with those of the Assessing Officer and that the issues should have been independently examined.
The Tribunal held that the assessee’s contention that the bank account did not belong to him went to the root of the addition under Section 69A and required proper verification by calling for evidence or a remand report from the Assessing Officer. The appellate order did not indicate that any meaningful verification had been undertaken.
In the interest of substantial justice, the Tribunal set aside the order of the Commissioner (Appeals) and restored the matter for fresh adjudication. It directed the Commissioner (Appeals) to provide the assessee with a reasonable and effective opportunity of hearing and to pass a speaking order in accordance with law.
At the same time, the Tribunal noted the assessee’s repeated non-compliance during both the assessment and appellate proceedings. Accordingly, while restoring the matter, it imposed costs of ₹10,000 on the assessee, directing that the amount be deposited with the Old Age Home run by the Red Cross Society, Sector 15, Panchkula, within one month. The assessee was required to produce proof of payment before the Commissioner (Appeals), failing which appropriate adverse inference could be drawn.
The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This appeal filed by the assessee is directed against the order dated 05.09.2024 passed by the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi for the assessment year 2017-18.
2. In the present appeal Assessee has raised the following grounds:
1. That on the facts, circumstances and legal position of the case, the Worthy CIT(A),NFAC in Appeal No. CIT (A), Patiala/10465/2019-20has erred in passing order dtd. 05.09.2024in contravention of provisions of S.250 of the Income Tax Act, 1961 (hereinafter referred to as “Act” ).
2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the impugned addition of Rs. 16,88,000/- u/s 69A by holding the cash deposit as unexplained money from undisclosed sources without considering that the bank account number does not pertain to the assessee.
3. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in treating credit card transactions of Rs. 19,89,621/- as Business receipts and estimating income at 1% thereon without any evidence, leading to an unjustified addition of Rs. 19,896/-.
4. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO in imposing tax rate of 60% u/s 115BBE plus surcharge thereon on above addition made u/s 69A in Ground No. 3, even when if the said addition is accepted academically, the same could only have been taxed at normal slab rates.
5. That on facts, circumstances and legal position of the case, the order passed by Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been passed without affording reasonable opportunity of being heard to the appellant.
6.That the appellant craves leave for any addition, deletion, or amendment in the grounds of appeal on or before the disposal of the same.
3. Briefly stated, the facts of the case are that the assessee is an individual who filed his return of income declaring income of Rs.3,28,250/-. The case was selected for scrutiny under CASS. During the course of assessment proceedings, statutory notices were issued from time to time; however, the assessee failed to comply with the same. Consequently, the assessment was completed ex-parte u/s 144 r.w.s. 143(3) of the Income Tax Act, 1961.
3.1 The Assessing Officer, on the basis of information available on record, observed that the assessee had deposited cash amounting to Rs.16,88,000/- during the demonetization period and had also made credit card payments aggregating to Rs.19,99,621/-. In absence of any explanation from the assessee, the Assessing Officer treated the cash deposits as unexplained money u/s 69A of the Act and further estimated income @1% on credit card transactions amounting to Rs.19,896/-. Accordingly, the total income was assessed at Rs.20,36,150/- as elaborately discussed in the assessment order and reproduced in the appellate order at pages 2 to 6 .
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The assessee, inter alia, raised a specific ground that the bank account in which the alleged cash deposits were made did not belong to him and therefore the addition made u/s 69A of the Act was liable to be deleted. The assessee also challenged the estimation of income on credit card transactions and the applicability of section 115BBE, as reflected in the grounds of appeal placed on record .
4.1 The Ld. CIT(A), however, observed that despite issuance of several notices during appellate proceedings, the assessee failed to appear or file any submissions. It was further noted that the assessee had remained non-compliant even during the assessment proceedings. In view of such conduct, the Ld. CIT(A) dismissed the appeal for non-prosecution and also proceeded to confirm the additions on merits on the basis of material available on record.
5. Against the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal.
6. During the course of hearing, the Ld. AR submitted that the Ld. CIT(A) has erred in dismissing the appeal without proper adjudication on merits. It was contended that the assessee could not effectively represent his case before the lower authorities due to reasonable cause. The Ld. AR further submitted that the very foundation of the addition is erroneous inasmuch as the bank account does not belong to the assessee and this crucial aspect has not been examined at any stage. It was, therefore, prayed that the matter may be restored to the file of the Ld. CIT(A) for fresh adjudication.
7. Per contra, the Ld. DR relied upon the orders of the lower authorities and submitted that the assessee has consistently failed to comply with notices and has not discharged the onus cast upon him. It was thus contended that the order of the Ld. CIT(A) deserves to be upheld.
8. We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the assessment in the present case has been framed ex-parte due to non-compliance on the part of the assessee. It is also a matter of record that the assessee did not appear before the Ld. CIT(A) despite several opportunities, resulting in dismissal of the appeal for non-prosecution. 8However, we find that the Ld. CIT(A), being the first appellate authority, is duty bound to adjudicate the issues on merits in accordance with the provisions of section 250(6) of the Act, which mandates passing of a speaking order stating the points for determination, the decision thereon and the reasons for such decision. The powers of the Ld. CIT(A) are co-terminus with that of the Assessing Officer and he is required to examine the issues independently.
8.1 In the present case, the primary contention of the assessee that the bank account in question does not belong to him goes to the root of the addition made u/s 69A of the Act. Such a contention required proper verification and adjudication by calling for necessary evidences or remand report from the Assessing Officer. The impugned order does not reflect any such exercise having been carried out in a meaningful manner.
8.2 In view of the above facts and in the interest of substantial justice, we deem it appropriate to set aside the impugned order of the Ld. CIT(A) and restore the matter to his file for fresh adjudication. The Ld. CIT(A) shall afford reasonable and effective opportunity of being heard to the assessee and shall decide the issues afresh on merits in accordance with law by passing a speaking order.
8.3 At the same time, we cannot lose sight of the conduct of the assessee who has remained non-compliant both during the assessment as well as appellate proceedings. Such conduct not only delays the administration of justice but also burdens the judicial system.
8.4 Accordingly, while restoring the matter to the file of the Ld. CIT(A), we impose a cost of Rs.10,000/- upon the assessee. The said amount shall be deposited with the Old Age Home run by Red Cross Society, Sector 15, Panchkula, India within a period of one month from the date of receipt of this order. The assessee shall furnish proof of such deposit before the Ld. CIT(A) at the time of fresh appellate proceedings. Failure to comply with this direction shall entail appropriate adverse inference.
9. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 16/04/2026
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