Facts of the Case

The assessee, an individual engaged in the civil construction business, filed his return of income for Assessment Year 2014-15 declaring total income of ₹20,91,500. The Assessing Officer issued notices under Sections 143(2) and 142(1), in response to which the assessee furnished books of account and other details.

The assessment was completed under Section 143(3) determining total income at ₹1,02,85,599 after making an addition of ₹81,94,096 under Section 68 of the Income Tax Act.

Aggrieved, the assessee filed an appeal before the first appellate authority. The appeal was subsequently handled by the National Faceless Appeal Centre (NFAC), which dismissed the appeal ex-parte.

The assessee then approached the Income Tax Appellate Tribunal challenging the ex-parte appellate order.

 Issues Involved

  1. Whether the ex-parte dismissal of the appeal by the NFAC without granting proper opportunity was valid.
  2. Whether the addition of ₹81,94,096 under Section 68 relating to sundry creditors was justified.
  3. Whether denial of reasonable opportunity during assessment and appellate proceedings violated principles of natural justice.
  4. Whether the appeal deserved restoration for adjudication on merits.

 Petitioner’s Arguments (Assessee)

  • The assessment order determining income at ₹1,02,85,599 was unjustified and bad in law.
  • The CIT(A)/NFAC passed the appellate order ex-parte without providing adequate opportunity of hearing.
  • The Assessing Officer himself acknowledged that the matter was time-barring and therefore declined to provide reasonable opportunity.
  • The addition under Section 68 pertained to sundry creditors who were suppliers of building materials, not cash deposits.
  • Payments to such creditors were made and accepted, and closing balances were genuine.
  • Levy of penal interest under Section 234 was also unjustified.

 Respondent’s Arguments (Revenue)

The Revenue relied on the orders of the lower authorities. However, before the Tribunal, the Departmental Representative did not object to restoration of the appeal, acknowledging that the NFAC order had been passed ex-parte.

  • The appellate order of the NFAC was passed ex-parte.
  • There had been non-compliance by the assessee during appellate proceedings.
  • Nevertheless, considering the facts of the case, the assessee deserved one more opportunity to present his case.

In the interest of substantial justice, the Tribunal restored the matter to the NFAC with directions to provide a fresh opportunity to the assessee to present his case on merits.

The Tribunal also cautioned that failure to comply in the set-aside proceedings would allow the NFAC to decide the appeal on the basis of material available on record, even ex-parte.

Important Clarification

  • Ex-parte appellate orders may be set aside where reasonable opportunity of hearing has not been effectively granted.
  • Faceless appellate proceedings are equally bound by principles of natural justice.
  • Restoration of appeal does not imply acceptance of the assessee’s claims regarding Section 68 addition.
  • The assessee must cooperate fully in subsequent proceedings.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771064358_RAMDASALLAHABADVS.DCITCIRCLE1ALLAHABAD.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.