Facts of the Case

Based on specific information that the assessee had deposited ₹35,75,735 in his savings bank account with ICICI Bank Ltd., proceedings under Section 147 of the Income Tax Act, 1961 were initiated.

Statutory notices under Section 142(1) were issued requiring the assessee to explain the source of the cash deposits. However, no response was received from the assessee.

Consequently, the Assessing Officer completed the assessment under Section 144 (best-judgment assessment) and added the entire amount of ₹35,75,735 as income.

The assessee filed an appeal before the first appellate authority (NFAC), but again failed to comply with notices. As a result, the appeal was dismissed in limine for non-compliance.

The assessee then approached the Income Tax Appellate Tribunal challenging the dismissal.

Issues Involved

  1. Whether reassessment proceedings under Section 147 were validly initiated on the basis of cash deposits.
  2. Whether addition of the entire bank deposits without examining withdrawals was justified.
  3. Whether dismissal of the appeal for non-compliance without adjudication on merits was proper.
  4. Whether the assessee was denied reasonable opportunity of hearing.
  5. Whether the matter required restoration for fresh consideration.

Petitioner’s Arguments (Assessee)

The assessee contended that:

  • The assessment determining income at ₹35,75,735 was unjustified and incorrect.
  • The appellate authority decided the appeal ex-parte without providing proper opportunity.
  • The Assessing Officer considered only the credit side of the bank account while ignoring withdrawals.
  • Deposits were made from various sources, including redeposit of withdrawn funds.
  • Reasons for initiating proceedings under Section 148 were not provided.
  • Inspection of assessment records requested by the assessee was not granted.
  • Levy of penal interest was also unjustified.

Respondent’s Arguments (Revenue)

The Revenue relied on the orders of the lower authorities and emphasized that:

  • The assessee had repeatedly failed to respond to notices during both assessment and appellate proceedings.
  • Adequate opportunities had been provided but were not utilized.

Court Order / Findings (ITAT Allahabad)

The Tribunal noted that:

  • There was complete non-compliance by the assessee during appellate proceedings before the NFAC.
  • No representation or adjournment request was made even before the Tribunal at the time of hearing.

Important Clarification

  • Dismissal of appeals solely for non-compliance without adjudicating on merits may defeat principles of natural justice.
  • Even where an assessee defaults repeatedly, appellate forums may grant a final opportunity in the interest of justice.
  • Restoration does not imply acceptance of the assessee’s claims regarding unexplained deposits.
  • Assessees must cooperate in remanded proceedings to avoid adverse orders.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771229053_PRABHUNARAIANTIWARIMIRJAPURVS.ITOWARD32MIRZAPUR.pdf

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