Sarvesh Faujdar vs ACIT

Per Raj Kumar Chauhan, Judicial Member:

The appeal o f the assessee is dir ected against the order dated 30.09.2025 of ld. Commissioner of Income Tax (Appeals)-30, New Delhi [here inafter referred to as the “CIT(A)”] passe d u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] where in the best judgme nt Assessment Order u/s 144 of the Act dated 31.03.2025 was confir med and the addition made therein were upheld.

The facts in brief as culled out from the. A search and seizure action u/ s 132 of the Act was co nducted on 21.03.2024. at the premises of M/s Shree Kanhaiya Ji Trading Company which is a proprietorship of Mr. Pramod Faujdar, husband of assessee and M/s Nikhil Trading Company which is a proprietorship of Mr s. Sarvesh Faujdar, wife of Sh. Pr amod Faujdar. As per election-based cash transaction report (CTR) received by the department, it was reported that cash amount to Rs. 298 crores (approximate ly) had been withdrawn in the third quar ter i.e. October to December for the financial year 2023-24 from the bank account of M/ s Shree Kanhaiya Ji Trading Company (owned by husband of the assessee). During the course of se arch proceeding, the statement o f Mrs. Sarvesh Faujdar (assessee before us) was recorded u/s 1 32(4) of the Act wherein she infor med that she was not aware about the facts of accounts and financial affairs of the proprietorship concern as the same were maintained by Mr. Pramod Faujdar (her husband) Stateme nt of Mr. Pramod Faujdar was also recorded and on the basis of information received from him was noticed that the assessee has been engaged in providing accommodation entries in lieu o f commission @ 2.5%. It is further noticed by the Assessing Officer that the assessee has shown total sales of goods of Rs.37,58,87,444/- in her ITR for A.Y . 2023-24. Therefore, in absence of any satisfactory reply/documentary evidence, 2.5% of above amount of Rs. 37,58,87,444/- remained unexplained income of the assessee. Accordingly addition of Rs.93,97,186/- was mad e u/s 69A of the Act. Similarly, further addition of Rs.11 ,04,784 /- was made on account of bogus sales commission. Further addition of Rs.1 ,16,880/- was made on account of disallowance of salary & wages and Rs.2,19,367/- on the basis of disallowance of rent alo ng with disallowance of inter est of Rs.3,68 ,528/-. Further the additio ns were made r .w.s. 1 15BBE of the Act and penalty proceedings were separate ly initiated.

Aggrieved by the said Assessment Order, assessee filed appeal before the ld. CIT(A) who has dismissed it o n the ground that no material which may contradict the observation of the Ld . AO has been filed either before the AO or before the ld. C IT(A) and the assessee has miserably failed to prove the genuineness of the transactio ns carried out by her and according ly, appeal was dismisse d.

Aggrieved by the impug ned order of the ld. CIT(A), assessee filed appeal before us and r aised the fo llowing grounds of appeal:

We have heard the ld. AR and the ld. DR and examined the re cord. Ld. AR at the outset submit ted that it is an admitted case that asse ssee being wife of Mr. Parmod Faujdar was not aware of the financials and acco unts of the proprietorship concern in her name because all the financial and legal accounts of her proprietorship concern were being looked after and maintained by her husband, Mr. Pramod Faujdar. It is further argued that Mr. Parmod Faujdar remained in judicial custody in Maharashtra in RCC No. 1566/2024, C.R. No. 59/2024 u/s 406, 419, 420, 465, 468, 471 r.w.s. 34 of the IPC fro m 16.10.2024 till 01.01.2026 whe n he was granted bail vide order dated 01.01.2026 passed by the court JMFC, Belapur. Copy of the order on bail dated 15.10.2025 and 01.01.2026 has been filed on re cord during the argument. It is argued that during the assessment proceeding as well as during the appellant proceedings, the appellant could not made proper submissions in the abse nce of her husband who was in judicial custody and as such the assessment order was passed u/s 144 and subsequently, the appellate order has also been passed an appeal has been also dismissed by the ld. CIT(A) becuase assesse e being wife of a person who was in judicial custody could not represe nt her case and the necessary docume nts co uld not be filed as it was her husband who was privy to all the financials and accounts matter o f the proprietorship co ncern allegedly owned by her. It is therefore submitted that the principle of natural justice has not been followed and assessee requir es to be giv en effective opportunity of hearing which was possible only in the presence of her husband to provide the financial and other acco unts details during the asse ssment proceeding as well as during the appellate proce eding, b ut the same could not be produced as he being in judicial custody at the relevant time or at the time of passing of the assessment order dated 31.03.2025 and the first appellate order dated 30.09.2025. It is therefore submitted that the impugned order be set aside and the matter may be restored to the file of the AO with the directio n to give effective opportunity of hear ing to the assessee for producing necessary documents/material in support of her case.

The ld. DR on the other hand opposed the submissions of the ld. AR and while relying upon the order of the lower authorities state d that the assessment order has been passed by giving sufficient opportunity and it is the assessee who has failed to submit the necessary details. It is also submitted that the appeal has been rightly dismissed by ld. CIT(A) and the assessee has failed to submit the necessary details even before the ld. CIT(A) and therefore, the appeal is liab le to be dismissed.

We have conside red the rival submissions and examined the record. Admittedly, the asse ssment order is passed u/s 144 of the Act as the assessee has failed to present its case effectively. The reason for not presenting the case effectively are that it w as her husband who was looking after the financial and accounts matters of the proprietor ship concern allegedly owned by her and he was in jud icial custod y during the relevant time.

The ld. CIT(A) has recorded that no evidence of transport, scope, register, delivery, challe nge or payment trail has been furnished even before t he AO. The assessee only filed incomplete documents and failed to substantiate genuineness of the transaction. It was further observed that a genuine trad ing concern would have detailed stock recor ds, transport bills, confir matio n from parties and VAT/GST compliances, but none were produced in this case . We have further noticed that in para number 8.3 of the impug ned order, the ld. CIT(A) has observed that when the multiple pieces of evidence are availab le, no n-cross examinatio n of one individual does not vitiate the proceedings and further that the assessee never requested for cross examination of either before AO or before him {CIT(A)}. In para number 8.4 of the impugned order, it is observed that “at both assessme nt and appellate stage”, the assessee has no t furnished a single invoice , stock proof or party confirmation to prove genuineness of the transaction. The appellant has not show n that any actual money was received as genuine trading margin. In such a situation, the presumption that turnover represents accommodation entr ies remains unchallenged. In para number 9.3 of the impugned order, it is observed that despite being given opportunity, the assessee did no t produce any buyer, confirmation, transportation, proofs or banking trail to establish that the sale s were genuine. No explanation has been offered even in appellant proceeding . The silence of the assessee reinforces the AO's conclusion that there were bogus sales.

Having been recorded the observation of the ld. CIT(A), the que stion before us is whethe r the assessee w as justified in her claim that she could not effectively represent before the ld. AO as well as before the ld. CIT(A) because her husband was in judicial custody from 16.10.2024 till 01.01.2026. The docume ntary pro of regarding her husband being remained in judicial custody has bee n filed before us and no thing has been submitted on behalf of the Revenue that the said documents regarding the husband of the assessee being in jail were false or fabricated. It is also noticed by us that at the very beginning of the assessment p roceeding , the assessee has made clear to the assessing authorities that she was not aware of any financial or accounts matter o f the proprietorship concern in her name as it is her husband who is looking after all the affairs.

In these facts and circumstances, we are satisfied that the assessee has bee n prevented by effectively presenting her case during the assessme nt procee ding as well as during the appellate pro ceeding because she being w ife of Mr . Pramod Faujdar could not prese nt the material as it was her husband who was looking after the financial and accounts affairs and other ad ministrative matters of the proprietorship concern and he being in judicial custody at the relevant/ crucial time has resulted into ineffective representation of the assessee during the assessment proceeding as well as during the appellant proceeding. Since, her husband being in jail was beyond the control of the assessee and it is a common factor that assessee being a woman was dependent for running the affairs of her proprietorship concer n on her husband who was allegedly looking after the entire affairs of the proprietorship concerned in her name. No thing has been brought to our no tice that the submissions made by the assessee in that regard were false or fabricated.

For the above reasons, we are of the consideration opinion that the principle of natural justice has no t been followed during the assessme nt proceedings as well as during the appellate proceedings because of the fact that husband of the assessee was in jail during the crucial period thus preventing her from presenting her case effectively and she was no t able to produce necessary documents or made necessary submissions and has suffered the impugned order as we ll as the assessment order. For these reasons, we are of the considered opinion that the impugned order is not sustainable and therefore needs to be restored to the file of the AO for deciding the same afresh after giving effective opportunity of hearing to the assessee who shall present her case before the AO within a period of 60 days of this order. For these reasons, the grounds raised in the appe al are allowed in the above manner.

In the result, the appeal o f the assessee is allo wed for statistical purposes.