Mr. Deepak Kumar vs The Assessing Officer

PER RAMIT KOCHAR, AM:

This appeal in ITA No. 3006/Del/2026 for Assessment Year: 2017-18 has arisen form the learned CIT(A)’s appellate order u/s 250 dated 12.07.2024 in DIN & Order No: ITBA/NFAC/S/250/2024-25/1066658244(1), which in turn has arisen from the reassessment order dated 30.03.2022 passed by the AO u/s 147 r.w.s 144 read with Section 144B of the Income Tax Act, 1961 (hereinafter called “the Act”), for Assessment Year 2017-18 in DIN ITBA/AST/S/147/2021-22/1042104765(1).

At the outset, it is observed that this appeal is filed belatedly by the assessee beyond the time stipulated u/s 253(3) of the 1961 Act by 539 days. The assessee has filed application for condonation of delay along with supporting affidavit, wherein the assessee has averred that the assessee was passing through severe mental tensions owing to huge business losses, as well the erstwhile CA of the assessee who was handling appeal with ld. CIT(A) did not apprise him of the passing of the appellate order by ld. CIT(A) in July, 2024, and it is only in December, 2025 , the CA informed assessee of the dismissal of the appeal by ld. CIT(A) , which led to delay in filing this appeal with the ITAT. It is averred in the affidavit that the assssee then took immediate steps and appointed new counsel to represent assessee. It is further averred that immediately on receiving the correct legal advise and after arranging documents and records, the assessee took prompt steps to file appeal with the Tribunal and there are no malafide , negligence or dialetary tactics on the part of the assessee. It is further submitted that the assessee has good prima-facie case on merits , and irreparable loss and injustice will be caused to the assessee , if the delay in filing this appeal is not condoned. Thus, the assessee has prayed that the delay in filing this appeal be condoned , and the appeal be heard on merits. The ld. Sr. DR objected to the condonation of delay. After Going through the contents of the condonation application , affidavit filed and other materials on record, I condone the delay of 539 days in filing this appeal belatedly beyond the time prescribed u/s 253(3) , and proceed to adjudicate this appeal on merits in accordance with law. When substantial justice is pitted against the technicalities , the Courts will lean towards advancement of substantial justice, unless malice is at writ large or there is negligence on the part of the litigant. I do not find any malice or negligence on the part of the assessee in filing this appeal belatedly. Reliance is placed on the decision of the Hon’ble Supreme Court in the case of Collector , Land Acquisition, Anantnag v. Mst. Katiji & Ors. 1987(2) SCC 107.

Brief facts of the case are that the assessee filed his return of income declaring income of Rs. 2,87,470/-. The information in the form of suspicious banking transactions in the case of the assessee was collected by Revenue during the assessment proceedings in the case of Shri Mohan Lal(PAN ANFPL4622F) for assessment year 2017-18. During the aforesaid assessment proceedings in the case of Shri Mohan Lal, it was noticed that the assessee had deposited substantial cash in the bank accounts of Mr. Mohan Lal during the whole year including demonetization period. It transpired that the PAN and bank accounts of Mr. Mohan Lal used to make huge cash deposits , and then transfer of the different amounts through credit transfer entries to final beneficiaries., as on most of the days , the credit transfer was done on the same day when the huge cash deposits were made. It further transpired that Mr. Mohan Lal was a person of limited means. The modus operandi was that cash was deposited in the bank accounts of Mr. Mohan Lal, and then give credit entries to other parties. It further transpired that there was a transfer entry of Rs. 40,00,000/- from bank account of M/s Shiv Shakti Cotton Company (entity where PAN of Mr. Mohan Lal was used) to M/s Kumar Enterprises of the assessee, on 08.04.2016.Proceedings u/s 147/148 were initiated against the assessee, Notice u/s 148 was issued. The assessee did not file return of income in response to notice u/s 148 nor there was any response/reply from the assessee. Statutory notices u/s 142(1) were issued to the assessee from time to time by the AO during the course of reassessment proceedings, but the assessee did not responded to the said notices. The AO issued SCN dated 18.03.2022 to the assessee, which was also not replied with by the assessee. The AO framed best judgment reassessment against the assessee wherein additions to the income of the assessee to tune of Rs. 40,00,000/- was made by the AO by invoking provisions of Section 68 of the 1961 Act read with Section 115BBE of the 1961 Act.

Aggrieved , the assessee filed first appeal with ld. CIT(A). During Appellate Proceedings, the Ld. CIT(A) issued as many as four notices to the assesse , but on three occasions the assessee sought adjournment , and on one occasion there was no response from the assessee. Thus, the assessee did not submitted any response/reply before ld. CIT(A), which led to the dismissal of the appeal of the assessee by Ld. CIT(A) ex-parte by upholding the reassessment order passed by the AO vide order dated 12.07.2024, mainly on the grounds that the assessee has not submitted any reply/response to the notices issued by ld. CIT(A) during appellate proceedings.

Still aggrieved , the assessee has filed second appeal with the Tribunal. At the outset, the Ld. Counsel for the assessee submitted that the Ld. CIT(A) has passed an ex-parte appellate order without discussing the issues in hands on merits. It was submitted that even legal/jurisdictional grounds raised by the assessee were also not adjudicated by ld. CIT(A). It was prayed that if one opportunity is provided, the assessee will comply with the notices and submit necessary replies/response.

I have considered rival contentions and perused the material on record. I have observed that the assessee filed his return of income u/s 139, declaring income of Rs. 2,87,470/-. The information in the form of suspicious banking transactions in the case of the assessee was collected by Revenue during the assessment proceedings in the case of Shri Mohan Lal(PAN ANFPL4622F) for assessment year 2017-18. During the aforesaid assessment proceedings, it was noticed that the assessee had deposited substantial cash in the bank accounts of Mr. Mohan Lal during the whole year including demonetization period. It transpired that the PAN and bank accounts of Mr. Mohan Lal was used to make huge cash deposits, and then transfer the different amounts through credit transfer entries to final beneficiaries., as on most of the day credit transfer was done on the same day when the huge cash deposits were made. Thus, the modus operandi was that Mr. Mohan Lal used to deposit cash in his bank accounts and then give credit entries to other parties. It further transpired that there was a transfer entry of Rs. 40,00,000/- from bank account of M/s Shiv Shakti Cotton Company (entity where PAN of Mr. Mohan Lal was used) to M/s Kumar Enterprises of the assessee, on 08.04.2016. Proceedings u/s 147/148 were initiated by Revenue against the assessee. Statutory Notices u/s 148, 142(1) and SCN were issued by the AO to the assessee during reassessment proceedings. The assessee did not participated in the reassessment proceedings as the assessee neither filed return of income in response to notice u/s 148 nor filed any response/reply to various notices issued by the AO. This led AO to frame best judgment assessment ex-parte against the assessee, wherein additions to the tune of Rs. 40,00,000/- was made by the AO to the income of the assessee. The assessee filed first appeal with ld. CIT(A), wherein the assessee challenged the aforesaid additions as were made by the AO both on merits as well on jurisdictional/legal grounds . The assessee did not participated in the appellate proceedings. The ld. CIT(A) dismissed the appeal of the assessee ex-parte in limine without deciding the issues arising in the appeal on merits as well on legal/jurisdictional challenges raised by the assessee. The ld. CIT(A) issued as many four notices as stated in appellate order but there was no compliance by the assessee. The ld. CIT(A) simply dismissed the appeal of the assessee ex-parte by affirming the reassessment order , without deciding the issues arising in the appeal on merits as well on legal/jurisdictional grounds raised by the assessee, mainly on account of non compliance by the assessee to the four notices issued by ld. CIT(A). I have observed that the ld. CIT(Appeals) has not decided the appeal on merits, and the appeal of the assessee was dismissed ex-parte in limine without deciding the issues arising in the first appeal on merit as well legal/jurisdictional challenge raised by the assessee , by simply upholding the reassessment order, mainly on the grounds of non-compliance by the assessee to the notices issued by ld. CIT(A). The appellate order passed by ld. CIT(A) is a non speaking order passed ex-parte in limine without deciding the issue arising in the appeal on merits. The ld. CIT(A) is required and obligated to pass appellate order in compliance with the provisions of section 250(6), as ld. CIT(A) is required to pass reasoned and speaking order on merits in accordance with law. Reference is drawn to provisions of Section 250(6), wherein ld. CIT(A) has to state point for determination, his decision and reasons thereof. The ld. CIT(A) even did not made any enquiry, and not even reassessment record was called for by ld. CIT(A). No enquiry was even made by ld. CIT(A) with Shri Mohan Lal. Reference is drawn to provisions of Section 250(4).The appellate order passed by ld. CIT(A) is subject to further appeal with ITAT u/s 253. The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A. The judgment and order passed by Hon’ble High Court is also subject to challenge before Hon’ble Supreme Court. Thus, the appellate order passed by ld. CIT(A) is not a final order, as it is subject to challenge before higher appellate authority. Thus, Reasons which weighed in the minds of the adjudicating authority while adjudicating appeal on merits of the issues are cardinal as the higher appellate authority can then adjudicate appeal on the issues arising in appeal before them, based on decision and reasoning of ld. CIT(A) in deciding the issues. If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not comply with the notices issued by ld. CIT(A) in limine without adjudicating issues arising in the appeal on merits , such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6) , and also higher appellate authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits . The appellate order of the CIT(A) is clearly in violation of section 250(6) of the Act and liable to be set aside. Merely stating the reassessment order passed by AO is upheld, and that the assessee has not submitted details/documents is not sufficient. The ld. CIT(A) is not toothless as his powers are co-terminus with the powers of the AO, which even includes power of enhancement. It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A) and did not file the requisite details/documents to support his contentions. Thus, the assessee is equally responsible for its woes as the assessee did not comply with the notices issued by the AO as well ld. CIT(A). The ld. Counsel for the assessee has made statement before the Bench that if one more opportunity is provided, the assessee will come forward and submit all the details. It is stated that due to business losses and mental tensions, the assessee could not file the details/replies earlier before the authorities below. Keeping in view the entire factual matrix as culled out above in the preceding para’s of this order, it will be fair to both the parties as well in the interest of justice, that the appellate order of ld. CIT(Appeals) be set aside and the matter be remanded back to the file of ld. CIT(Appeals) for fresh adjudication after giving proper opportunity of being heard to both the parties w.r.t. the issues arising in the appeal .The assessee is directed to comply with the notice issued by ld. CIT(Appeals) during the appellate proceedings in set aside remand proceedings, otherwise ld. CIT(A) shall be free to decide the appeal ex-parte on merits in accordance with law, after complying with provisions of Section 250(6). I clarify that I have not commented on merits of the issues. Thus, the appellate order passed by ld. CIT(A) is set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication. The appeal of the assessee is allowed for statistical purposes. I order accordingly.

In the result, the appeal filed by the assessee is allowed for statistical purposes.