Facts of the Case

The assessee, Dipankar Dutta, an individual, filed his return of income for Assessment Year 2016-17 declaring total income of ₹2,64,390. Based on information received from the Investigation Wing, a statement recorded under Section 131 from the Director of M/s Sikaria Share & Stock Broking Services Pvt. Ltd. revealed that the said entity was allegedly engaged in providing accommodation entries through penny stock transactions. The assessee was identified as a beneficiary of such alleged accommodation entries amounting to ₹11,43,673 from dealings in shares such as Sesagoa, ABAN Offshore and Midfield during Financial Year 2015-16. Consequently, notice under Section 148 dated 26.03.2021 was issued. The assessee did not comply with notices issued under Sections 148 and 142(1). The Assessing Officer proceeded to frame a best judgment assessment under Section 144 and treated ₹11,43,673 along with alleged commission of ₹1,144 as unexplained cash credit under Section 68, making a total addition of ₹14,09,207. The CIT(A), NFAC dismissed the appeal ex-parte and confirmed the additions. Aggrieved, the assessee appealed before the Tribunal.

Issues Involved

Whether the CIT(A) was justified in dismissing the appeal ex-parte without adjudicating the issues on merits, whether the assessee should be granted one more opportunity to substantiate the genuineness of share transactions alleged to be accommodation entries, and whether principles of natural justice were violated.

Petitioner’s Arguments

The assessee submitted that various documentary evidences had been uploaded before the Assessing Officer, including bank passbook, income-tax return acknowledgment, ledger account in the books of the broker, details of share transactions, trade register and demat account statements. It was argued that both the Assessing Officer and the CIT(A) failed to consider these materials and dismissed the matter without examining the merits. The assessee prayed for restoration of the matter to the file of the CIT(A) for fresh adjudication.

Respondent’s Arguments

The Revenue contended that sufficient opportunities were granted during assessment as well as appellate proceedings and that the assessee failed to furnish verifiable and independent documentary evidence. It was argued that the non-cooperative conduct of the assessee justified dismissal of the appeal and confirmation of the addition under Section 68.

Court Order / Findings

The ITAT Kolkata observed that the appeal before the CIT(A) was dismissed ex-parte without adjudication on merits. While noting that the assessee had failed to properly comply before the lower authorities, the Tribunal held that in the interest of justice and to uphold principles of natural justice, one final opportunity ought to be granted. The Tribunal therefore set aside the order of the CIT(A) and remanded the matter back to his file with a direction to dispose of the appeal afresh on merits, without being influenced by the earlier order. The Tribunal also cautioned the assessee to fully cooperate in the appellate proceedings, failing which the CIT(A) would be at liberty to pass an order in accordance with law based on available material.

Important Clarification

The Tribunal clarified that while appellate authorities are justified in proceeding ex-parte in cases of persistent non-compliance, matters involving serious additions under Section 68 should ordinarily be decided on merits after granting reasonable opportunity, so as to ensure adherence to principles of natural justice.

Final Outcome

The appeal filed by the assessee was partly allowed for statistical purposes. The ex-parte order of the CIT(A) was set aside, and the matter was restored to the file of the CIT(A) for fresh adjudication on merits after granting adequate opportunity of hearing to the assessee.

Source Link- https://itat.gov.in/public/files/upload/1767263264-Cw9VUF-1-TO.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.