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Judgment
PER AMITABH SHUKLA, AM,
This appeal by the assessee is directed against the order of Ld.
Commissioner of Income Tax(Appeals)-30, New Delhi, [hereinafter referred to as ‘ld. CIT(A)] dated 30.06.2025 arising out of assessment order dated 03.03.2025 passed under section 147 r.w.s. 144 of the Income Tax Act, 1961, for the Assessment Year 2022-23. The word ‘Act’ herein this order would mean Income Tax Act, 1961. 2. The assessee has raised following grounds of appeal:-
1.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the action of the Learned Assessing Officer in making an addition of Rs.3,09,00,000 - and in completing the assessment at an income of Rs.4,65,09,910/-, and the Appellant accordingly denies its liability to pay the resultant tax, interest and other consequential demands.
2.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the assessment being illegal, arbitrary, perverse and baseless, having been passed in violation of the principles of natural justice, without jurisdiction and without authority of law, and therefore liable to be vacated as being non est in law.
3.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the fact that the reassessment proceedings initiated vide notice under section 148 dated 22.03.2024 was void ab initio, inasmuch as no reasons, tangible material or evidence were disclosed to substantiate the alleged escapement of income, in clear violation of the law laid down by the Hon'ble Supreme Court in GN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC).
4.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the fact that the impugned order passed by the AO was illegal as Mandatory approvals under Explanation 2(iv) to Section 148 were not provided despite repeated requests.
5.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the assessment being illegal and violative of the principles of Natural Justice as the Respondent deprived the Appellant of a fair opportunity to defend its case by failing to disclose the reason for reassessment proceedings until 14.02.2025, after 11 months of proceedings.
6.On the facts and in the circumstances of the case and in law, the Learned CIT (A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the impugned assessment order passed by the AO being illegal and in violation of Natural Justice, as the Respondent failed to provide the opportunity for cross-examination of persons whose statements were relied upon in the assessment order despite the repeated request made by the appellant.
7.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the impugned assessment order passed by the AO being illegal and in violation of Natural Justice, as the Respondent failed to provide the Satisfaction Note, Appraisal Report and relied upon statements and documents to the appellant for rebuttal.
8.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the impugned assessment order passed by the AO being illegal and without jurisdiction, as the Respondent failed to issue a mandatory notice under Section 143(2) of the Income Tax Act, 1961, before completing the assessment, hence the illegal assessment order is liable to be vacated as being non-est in law.
9.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the Impugned assessment order being passed mechanically Without considering the Appellant's detailed reply dated 17.02.2025 along with documentary evidence (bank statements, TDS compliance, lender's ITR and financials proving creditworthiness, and books of account) to substantiate the legitimacy of the loan transaction with M/s Attractive Capital Services Pvt. Ltd, for his perusal, Regrettably supporting documents and detailed submission dated 17.02.2025 were not even seen by the respondent and the same were disregarded without providing any valid reasons hence the order passed is illegal and liable to be quashed.
10.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the Ld. AO having erroneously made an addition of 73,00,00,000/- under section 68 of the Act by treating the loan received as unexplained cash credit,, even though the loan received and repaid during the year and was duly reflected in the Appellant's audited books, supported by banking channels, TDS compliance, and the lender's audited financials. Considering the same as unexplained transaction is unsustainable in law and liable to be vacated as being non est in law.
11.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the Ld. AO having erroneously made an addition u/s 69C amounting RS 9 Lakh by considering the imaginary commission which is unsustainable in law and the same as is liable to be vacated/deleted as being non-est in law.
12.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the Ld. AO wrongful action of invoking Section 11SBBE of the Income Tax Act, 1961, while making additions under Sections 68 & 69C, without satisfying the mandatory conditions for its application. The invocation of Section 11SBBE is thus without jurisdiction, arbitrary, and contrary to the principles of natural justice and is liable to be vacated/deleted as being non-est in law.
13.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in setting aside the impugned order passed by the Assessing Officer, instead of quashing the same, despite the Learned Assessing Officer having mechanically and arbitrarily raised illegal demands of tax and interest and initiated penalty proceedings, all of which are consequential to an invalid assessment and therefore liable to be quashed.”
The perusal of the grounds of appeal extracted hereinabove alludes that the appellant has through its grounds of appeal no.2 to 12 has agitated the action of the Ld. CIT(A) in setting aside the assessment order and directing the Ld. AO to do afresh adjudication.
We have heard rival parties in the light of material available on record. As per facts recorded by the Ld. Assessing Officer Returned declaring income of Rs.1,56,09,910/- was filed by the assessee on 03.11.2022. The ld. AO received information that the assessee was beneficiary recipient of accommodation entry to the tune of Rs.3 crores from Shri Pradeep Indra prasad Aggarwala of the Galaxy Group through its entry providers namely Shri Himanshu Verma and Shri Deepak Aggarwal. The ld. AO initiated proceedings u/s 148 of the Act. No Return of Income was filed in response thereof. It is noted from the assessment order that the assessee did not comply with the statutory notices of the ld. AO, as evident from page-6 of the assessment order, compelling him to proceed with best judgment assessment u/s 144 of the Act.
Aggrieved the assessee filed an appeal before the First Appellate Authority, who passed its order dated 30.06.2025 recording following findings in para-8 to 8.5 on pages 56 to 58 of the assessment order. For the purposes of clarity, the same is reproduced hereunder:-
“……8. Ground nos.1 to 7 and 9: Violations of Natural Justice:
Upon careful consideration of the assessment order dated 03.03.2025 passed by the Assessing Officer (AO), DCIT, Central Circle-32, New Delhi, under Section 147 read with Section 144 of the Income Tax Act, 1961, the written submissions of the appellant, and the grounds of appeal numbered 1 to 7 and 9, I find that the reassessment proceedings are marred by significant procedural irregularities that contravene the principles of natural justice. The appellant has raised compelling arguments that warrant setting aside the assessment order to ensure a fair hearing, and these are addressed below.
8.1The appellant, M/s Rita Finance and Leasing Ltd., a listed Non-Banking Financial Company (NBFC), challenges the reassessment proceedings initiated vide a notice under Section 148 dated 22.03.2024. The A completed the reassessment ex-parte under Section 144 on 03.03.2025, assessing the income at Rs. 4,65,09,910/- against a returned income of Rs. 1,56,09,910/-, and making additions of Rs.3 crore under Section 68 (unexplained credits) and Rs.9 lakh under Section 69C (unexplained expenditure). The appellant's primary grievances, as articulated in grounds 1 to 7 and 9, centre on violations of natural justice, including:
* Non-supply or delayed supply of relevant material: The appellant alleges that critical documents such as the Satisfaction Note, Appraisal Report, seized documents, and statements relied upon were either not provided or disclosed only at the fag end of the proceedings (on 14.02.2025, 11 months after the initial notice).
* Non-consideration of the reply dated 18.02.2025 (or 17.02.2025): The appellant claims that their detailed reply, submitted on 18.02.2025 was disregarded by the AO before issuing a Show Cause Notice (SCN) on 18.02.2025 and passing the ex-parte order on 03.03.2025.
* Other procedural lapses: These include the lack of opportunity for cross-examination of witnesses, non-disclosure of mandatory approvals under Sections 148 and 151, and the failure to provide a fair hearing.
8.2The AO asserts that all objections were settled, referencing a speaking order dated 14.02.2025. However, this claim is untenable given the timeline: the appellant's reply was submitted on 17.02.2025 (or 18.02.2025), after the speaking order, and the SC was issued on 18.02.2025 without acknowledging it. The assessment order dated 03.03.2025 does not discuss the reply or its supporting evidence, contradicting the AO's position. The record, including the appellant's submissions and annexed documents, clearly establishes that the reply was not considered, undermining the AO's assertion.
8.3The cumulative effect of these procedural lapses non-disclosure or delayed disclosure of reasons and materials, non-supply of critical documents, and most importantly, failure to consider the appellant’s reply deprived M/s Rita Finance and Leasing Ltd. of a fair opportunity to defend its case. Natural justice, encompassing the right to be heard (audi alteram partem) and access to relied-upon evidence, is not a mere formality but a cornerstone of valid proceedings, as affirmed by judicial precedents like GN Driveshafts. The appellant has substantiated its claims with documentary evidence, including written submissions and correspondence which the AO failed to address adequately.
8.4Given these findings, and extending the benefit of the doubt to the appellant due to the evident non-consideration of their reply dated 17.02.2025 (or 18.02.2025), the assessment order cannot stand. The principles of fairness dictate that the case is set aside for a fresh hearing, ensuring the appellant's right to due process. For the sake of natural justice, the assessment order dated 03.03.2025 is hereby set aside.
8.5The AO shall provide the appellant a reasonable opportunity to be heard and pass a comprehensive, reasoned order addressing all contentions raised. No comments are made on the merits of the additions under Sections 68 and 69C or the assessed income. The appellant is directed to cooperate fully in the fresh proceedings and furnish any additional information required by the AO…..”
The ld. Counsel for the assessee drew our attention to judgements including those of this Tribunal, wherein, it is held that where loans have been received and repaid through banking channels, the transactions cannot be treated as non-genuine entries by solely relying upon Investigation Report. Thus, it was requested that the addition of the ld. AO be directed to be deleted.
The ld. DR, Shri Ravi Kant Chaudhary, on the contrary fiercely argued that the assessee had not complied during the assessment proceedings, and during appellate proceedings had alluded that its certain replies were not considered by the AO and that therefore no fault can be found to the decision of remission back to the ld. AO. It was argued that no prejudice is caused to the assessee since it is well within its rights to defence its case before the ld. AO.
We have noted from the discussion in preceding paragraphs that it is an undisputed fact on records that the assessee had not responded to the AOs statutory notices. Before the ld. CIT(A), the assessee has adduced evidences to suggest non-consideration of its defence. Thus, the assessee not being adequately and appropriately heard by ld. AO is totally made out. In this background, we do not find any infirmity in the decision of the ld. CIT(A) to have set-aside the matter to ld. AO for re-adjudication. Accordingly, we confirm the order of the Ld. CIT(A) and dismiss all the grounds raised by the assessee.
In the result, the appeal of the assessee is dismissed.