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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal is directed against the order dated 18.03.2025 of Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the “CIT(A)/NFAC”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] wherein the addition made under Section 68 of the Act, vide assessment order dated 25.05.2023 were confirmed.
Facts in brief are that assessee has filed return of income on 26.09.2015 for A.Y. 15-16, declaring total income Rs. Nil. On the basis of the information available on insight portal regarding accommodation entries in the nature of fictitious loans, fictitious share premium and fictitious sale from the entities in whose accounts during demonetization, huge amount of cash was deposited in their bank accounts. Accordingly, notice under Section 148 of the Act was issued on 24.06.2021. After recording of reasons in the case of the assessee was thus re-opened and selected for scrutiny. The reply furnished by the assessee was not found tenable. Hence, the addition was made to the tune of Rs.5,25,00,000/-.
Aggrieved by the assessment order, assessee filed appeal before the Id.CIT(A) which was dismissed ex-pate on the ground that despite notice sent on three dates, assessee failed to file response and has sought adjournment on 19.12.2024.
Aggrieved by the impugned appellate ex-parte order, the assessee is in appeal before us and has raised the following grounds of appeal:
"1.That the Ld. CIT(A) has erred both in law and on facts in upholding the addition of ^5,25,00,000 under Section 68 of the Income Tax Act, 1961, by treating genuine unsecured loans as accommodation entries.
2.That the Ld. CIT(A) and AO have failed to consider that the Appellant had submitted documentary evidence to establish:
•The identity of the creditors (via PAN, MCA database),
•Their creditworthiness (through ITRs and audited financials), and
•The genuineness of the transaction (via banking channels and confirmations).
3.That the reliance placed on third-party statements, such as alleged entry operators, without affording the Appellant the right to cross-examination, is in violation of principles of natural justice. The denial of this opportunity renders the assessment void ab initio.
4.That the AO has made the addition without conducting any independent inquiry at the level of the Appellant or its business dealings, and has merely borrowed conclusions from Investigation Wing material not confronted to the Appellant.
5.That the reassessment proceedings initiated under Section 147 are bad in law as the reasons recorded indicate no independent application of mind, and merely rely on generic information from external sources.
6.That the Ld. CIT(A) has failed to distinguish the facts of the Appellant from other alleged entry providers and has erroneously relied on generalized statements.
7.That the Appellant's right to be heard and present evidence was undermined by the mechanical rejection of submissions and the absence of cross-examination, contrary to the rulings in Andaman Timber Industries v. CCE and similar judgments.
8.That the orders passed by the AO and CIT(A) are against settled judicial law and are liable to be quashed.
9.The Appellant craves leave to add, amend, alter, or withdraw any of the above grounds at the time of hearing."
The Ld. AR would submit that the impugned order has resulted into miscarriage of justice as principle of natural justice has not been followed because no effective opportunity of hearing was given as the assessee had never received the notice after 19.12.2024 when adjournment was sought and therefore the matter may be restored to the file of the Ld. CIT(A) for deciding afresh. Learned DR on the other hand while supporting the judgment of the learned CIT(A) has left to the discretion of the court to consider the submissions of the assessee as per law.
We have considered the rival submission and examined the record, Section 250(2)(a) lays down as under:
'250(2) The following shall have the right to be heard at the hearing of the appeal-
(a)the appellant, either in person or by an authorized representative;"
Thus, the hearing mandated by Section 250(2)(a) of the Act is not a mere formality but a mandatory statutory requirement for following the principle of natural justice by the quasi-judicial authority.
In view of the above facts and circumstances, it is evident that the impugned order has been passed without effective hearing and principle of natural justice has not been followed. For these reasons, the impugned order is not maintainable and accordingly set aside. The end of justice shall be met in case the matter is restored to the file of the Ld. CIT(A) for deciding the issue of requisite approval sought by the appellant afresh by affording an effective opportunity of hearing and considering the submissions to be made by the appellant/assessee. The assessee/appellant is also directed to make the necessary submissions/ detailed material before the Ld. CIT(A) within the period of 60 days of this order.
In the result, the appeal of the assessee is allowed for statistical purposes.