Facts of the Case

The assessee filed his return of income for Assessment Year 2016-17 declaring a total income of ₹1,94,200. The case was selected for scrutiny under CASS. During the course of assessment proceedings, the Assessing Officer noticed a deposit of ₹10,00,000 through RTGS on 12.02.2016 and required the assessee to explain the source thereof. Due to non-response to statutory notices, the Assessing Officer treated the said amount as undisclosed income and completed the assessment under sections 144/143(3), determining the total income at ₹11,94,200. Penalty proceedings under sections 271(1)(c) and 271(1)(b) were also initiated.

 Issues Involved

  1. Whether the Assessing Officer was justified in making an addition of ₹10,00,000 deposited through RTGS as undisclosed income due to non-compliance by the assessee.
  2. Whether the assessment order was legally sustainable in view of the apparent contradiction between sections 143(3) and 144 mentioned in the order.
  3. Whether dismissal of the appeal by the First Appellate Authority for non-compliance violated the principles of natural justice.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that he was employed as a clerk drawing a petty salary and had taken a loan of ₹10,00,000 from a close friend through RTGS for the purpose of purchasing land. It was submitted that the amount was subsequently paid to the seller, who later refunded the same due to a dispute, and the refunded amount was deposited back into the bank account. The assessee further argued that the Assessing Officer erred in treating the loan amount as undisclosed income and that the assessment order suffered from internal contradiction by simultaneously invoking sections 143(3) and 144 of the Act.

 Respondent’s (Revenue’s) Arguments

The Departmental Representative submitted that the assessee was a habitual non-compliant and had failed to respond before the Assessing Officer, the First Appellate Authority, and even before the Tribunal. It was argued that no further opportunity should be granted and that the orders passed by the lower authorities deserved to be upheld.

 Court Order / Findings

The Tribunal observed that the orders passed by both the Assessing Officer and the First Appellate Authority were ex-parte due to continuous non-compliance by the assessee. However, considering the overall facts and circumstances, the Tribunal held that the assessee deserved one final opportunity to present his case. Accordingly, the order of the Addl./JCIT(A) was set aside and the matter was restored to the file of the Assessing Officer with directions to grant one more opportunity to the assessee. The appeal was allowed for statistical purposes.

Important Clarification

The Tribunal categorically cautioned that the assessee must fully comply with the directions of the Assessing Officer during the set-aside proceedings. Failure to do so would entitle the Assessing Officer to pass an order in accordance with law based on the material available on record, even on an ex-parte basis.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770627293_ANILKUMARSINGHSULTANPURVS.ITOSULTANPURSULTANPUR.pdf 

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