Facts of the Case

The assessee’s assessment for AY 2011-12 was reopened under Section 147 based on information regarding commodity transactions on Multi Commodity Exchange (MCX) and substantial cash deposits in a bank account. The Assessing Officer issued notices under Sections 148 and 142(1), but the assessee did not comply or furnish the required details. Consequently, the assessment was completed ex parte under Section 144 read with Section 147, resulting in additions for unexplained cash deposits and estimated income from MCX transactions.

The Commissioner (Appeals) partly reduced the estimated income from commodity transactions by applying a lower profit rate but confirmed the addition relating to cash deposits.

The Tribunal earlier dismissed the assessee’s appeal ex parte due to repeated non-appearance. Subsequently, the assessee filed a Miscellaneous Application under Section 254(2) seeking recall of the order, citing inability to appear due to COVID-19 and advanced age, and produced new evidence including FIR, charge-sheet, and court proceedings alleging misuse of the assessee’s bank account by third parties.

Issues Involved

  1. Whether the Tribunal’s ex-parte order dismissing the appeal should be recalled under Section 254(2).
  2. Whether newly produced evidence relating to alleged misuse of the bank account constitutes material evidence requiring fresh adjudication.
  3. Whether additions for unexplained cash deposits and MCX transactions were sustainable without considering such evidence.

Petitioner’s Arguments (Assessee)

  • The assessee contended that the bank account was misused by other individuals who conducted commodity transactions without his knowledge.
  • FIR and charge-sheet had been filed against the accused persons, establishing that the transactions did not belong to the assessee.
  • Due to COVID-19 restrictions and advanced age, the assessee could not present these facts earlier before the Tribunal.
  • The impugned order should therefore be recalled to consider the crucial evidence and ensure justice.

Respondent’s Arguments (Revenue)

  • The Department argued that the Tribunal had already decided the appeal on merits based on the available record.
  • Proceedings under Section 254(2) are limited to rectifying mistakes apparent on record and cannot be used to introduce new evidence.
  • The assessee had failed to produce any supporting material during assessment, appellate, or earlier Tribunal proceedings.
  • Hence, there was no error warranting recall of the order.

Court Order / Findings

  • The earlier order was passed ex parte due to repeated non-appearance by the assessee.
  • The newly produced FIR and charge-sheet were relevant and crucial evidence that had not been placed on record earlier.
  • These documents could materially affect adjudication of additions relating to cash deposits and commodity transactions.
  • In the interest of justice, the order dated 15.07.2021 was recalled to the limited extent of grounds relating to additions (Ground Nos. 4 to 10).
  • The appeal was directed to be refixed for fresh hearing on those issues.

Important Clarification

  • Recall was granted only for specific grounds concerning additions for bank deposits and MCX income.
  • The Tribunal emphasized that the new evidence constituted independent and crucial material.
  • The decision underscores the principle that substantive justice prevails over procedural technicalities, particularly where ex-parte orders are involved.

Link to download the order - https://itat.gov.in/public/files/upload/1665991535-ita%20no.%20240%20vns%202019%20and%20166%20alld%202019%20Kripa%20Shankar%20Tripathi.pdf

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