Case Law Details
Venugopal Reddy Yeravally Vs ITO (ITAT Hyderabad)
Introduction: In the case of Venugopal Reddy Yeravally vs. ITO (ITAT Hyderabad), a significant issue arose concerning the denial of opportunity to the assessee due to non-acquaintance with the new procedure of sending notices through email. This resulted in an ex-parte order against the assessee. The Income Tax Appellate Tribunal (ITAT) Hyderabad addressed this issue and set aside the ex-parte order in favor of the assessee.
Detailed Analysis: The case involved Venugopal Reddy Yeravally, an individual and a salaried employee, who faced scrutiny of his income tax return for the assessment year 2017-18. During the assessment, the Assessing Officer noted that the assessee had made a payment of Rs. 13,68,503/- towards discharging credit card payments. Given that the assessee’s income was primarily from salary, the Assessing Officer considered the credit card payments as undisclosed income, subject to taxation.
The assessee contested this addition before the Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“CIT(A)”). The assessee provided evidence, including HDFC credit card statements and Form-16, to support his claim that friends and relatives had used his credit cards, and he had subsequently paid the credit card bills from amounts remitted by them.
However, the CIT(A) noted that the assessee had failed to respond to multiple notices specifying hearing dates, and it was assumed that the assessee had no interest in defending the case. As a result, the CIT(A) proceeded ex-parte and upheld the addition to the assessee’s income.
The assessee, in his appeal to the ITAT Hyderabad, raised a crucial point. He argued that the notices sent to the authorized representative were mistakenly placed in the spam folder, and due to the unfamiliarity of professionals with the new electronic notice procedure, the assessee was denied the opportunity to participate effectively in the proceedings. The assessee asserted that he had evidence to substantiate his claims and was willing to present it.
The ITAT Hyderabad considered the circumstances and acknowledged that the introduction of faceless appellate proceedings and email notices was relatively new. Given this, the non-acquaintance of stakeholders with the new procedure and the possibility of emails entering spam folders were not surprising. Furthermore, the ITAT recognized the merit in the assessee’s argument that he could provide evidence supporting his claim.
In the interest of justice, the ITAT Hyderabad set aside the ex-parte order and directed the Assessing Officer to cooperate with the assessee in presenting relevant evidence. The ITAT emphasized that the assessee would not be granted any further opportunities, and the matter should be decided on its merits.
Conclusion: The case of Venugopal Reddy Yeravally vs. ITO (ITAT Hyderabad) highlights the challenges and adjustments required in the transition to new procedures, such as faceless appellate proceedings and email notices. The denial of an opportunity to the assessee due to the unfamiliarity with this new process was considered unjust by the ITAT. As a result, the ITAT Hyderabad set aside the ex-parte order and provided the assessee with a chance to present evidence in support of his claims. This case underscores the importance of ensuring that all stakeholders are well-informed about and comfortable with new procedures to avoid such situations in the future.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 16/06/2023 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“Ld͘ CIT(A)”), in the case of Venugopal Reddy Yeravally (“the assessee”) for the assessment year 2017-18, assessee preferred this appeal.
2. Brief facts of the case are that the assessee is an individual and a salaried employee. During the scrutiny of the return of income for the assessment year 2017-18, learned Assessing Officer found that the assessee made a payment of Rs. 13,68,503/- towards discharging of credit card payments. According to the learned Assessing Officer assessee had no other income than from salary and, therefore, the amount paid towards credit card payments were to be treated as undisclosed income and chargeable to tax.
3. Assessee challenged such an addition before the learned CIT(A) and by way of statement of facts, contended that his credit cards were used by friends and relations for their purchases and they credited such amounts to the account of the assessee which the assessee in turn paid towards credit card payments. Assessee also produced the HDFC credit card statements and Form-16 to evidence the sources. Assessee, therefore, submitted that this fact should have been considered by the learned Assessing Officer.
4. Learned CIT(A) recorded that in spite of issuance of notices specifying the date of hearing as 11/03/2021, 18/11/2021, 02/05/2022, 27/02/2023, 21/03/2023, 10/05/2023 and 30/05/2023, assessee failed to avail the same and, therefore, it shall be construed that either the assessee had no case to defend or he must have lost interest in prosecuting the appeal. Therefore while placing reliance on many decisions referred to in his order at paragraph No. 5.3 and 5.4, learned CIT(A) proceeded ex-pate. Observing that since the assessee did not file any written submissions, there was no reason to interfere with the assessment order, he upheld the addition.
5. Assessee is, therefore, before the Tribunal contending that the notices sent to the authorized representative were automatically shown in the spam folder, and since the professionals are not accustomed to this procedure, missed the attention of the authorized representative resulting in the ex-pate order. Learned AR submits that the assessee is having evidence to prove the fact that the friends and relatives, who made use of the card, made the remittances for such payments and given an opportunity, the assessee is ready to prove the said fact.
6. Learned DR placed reliance on the impugned order and summitted that though reasonable opportunity was granted, the assessee failed to avail the same and hence, there is no point in giving such opportunity.
7. I have gone through the record in the light of the submissions made on either side. Contention of the assessee is that under the faceless appellate proceedings, the notices were sent to the authorized representative through electronic mode and since many people are not accustomed to this new procedure and also because of the fact that such notices entered into spam, those notices missed the attention of the authorized representative, resulting in ex-pate order. The sum and substance of assessee’s case is that the non-acquaintance with the new procedure resulted in denial of opportunity to the assessee.
8. There is no denial of the fact that this faceless procedure is introduced newly and the non-acquaintance of stakeholders with such procedure or the notices sent through e-mail entering into spam, missing the attention of the addressee is not something unbelievable. In the inception of a new procedure, such things are likely to happen. Be that as it may, the contention of the assessee that he is only a salaried employee and will not incur such huge expenditure to the tune of Rs. 13 lakhs on his own, but it was the usage of the card by his friends and relatives, who remitted back the amounts also needs consideration.
9. Since the assessee expresses willingness to produce all the relevant evidence to prove his contentions, in the interest of justice, I am of the considered opinion that giving an opportunity to the assessee would meet the ends of justice.
10. With this view of the matter, I am inclined to set aside the impugned order and restore the issue to the file of the learned Assessing Officer with a direction to the assessee to co-operate with the learned Assessing Officer by producing all the relevant material he relies upon for disposal of the matters and in getting the matters disposed of on merits, without seeking any adjournments and the learned Assessing Officer to take a fresh look at the matter, after affording a reasonable opportunity to the assessee of being heard. It is made clear that assessee will not be given any further opportunity.
11. In the result, appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on this the 7th day of September, 2023͘
