2025 (8) TMI 1330 - AT - Income Tax

Appeal allowed for statistical purposes where AO reopened under s.147, disallowed s.10AA deduction without considering portal evidence

Euro Jewles Versus The DCIT, Circle – 1 (1) (1), Surat

ITAT treated the appeal as allowed for statistical purposes. The AO reopened assessment u/s 147, disallowed deduction u/s 10AA based on statements u/s ... Reopening of assessment u/s 147 - deduction u/s 10AA on basis of statements recorded u/s 132(4) wherein it was established that assessee was beneficiary of accommodation entries from two concerns by obtaining bogus purchase bills and, further assessee also failed to prove genuineness of such purchases - HELD THAT:- AO has passed the order u/s 144 r.w.s.147 of the Act due to non-compliance by the assessee. CIT(A) had also observed that the appeal of assessee was liable to be dismissed due to non-prosecution. Subsequently, he confirmed the addition on merit because the assessee did not file any written submission or evidence in support of the grounds of appeal. Assessee has filed paper book and submitted that details in respect of seven items were submitted before the AO and CIT(A). He has filed screenshot of e-filing portal of Department in support of filing of some details during the assessment proceedings u/s 147 of the Act. Assessee had made partial compliance of the details called for by the AO. However, even these part details were not considered by AO. AO should have verified these details and thereafter called for further details, if he needed any clarification or further evidence - CIT(A) has also passed an ex parte order without considering the facts discussed above. For statistical purposes, the appeal of the assessee is treated as allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal should condone a one-day delay in filing the appeal under section 253(3) where the delay was neither deliberate nor due to negligence. 2. Whether the Commissioner of Income-tax (Appeals) erred in dismissing the appeal for non-prosecution without adjudicating the ground challenging the validity of proceedings under section 148. 3. Whether the Commissioner of Income-tax (Appeals) and Assessing Officer properly adjudicated the claim for deduction under section 10AA where the assessment was reopened and additions were made on account of alleged bogus purchases. 4. Whether the Assessing Officer was justified in making an addition under section 69C on the basis that purchases were from a bogus concern, in circumstances where the assessee submitted documents and partial compliance which were not considered. 5. Whether ex parte orders passed by the Assessing Officer (under section 144 read with section 147) and by the Commissioner (for non-prosecution) require setting aside and remand where material filed by the assessee (albeit incompletely) was not considered. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of One-Day Delay Legal framework: Statutory time limit for filing appeal under section 253(3) is strict, but the Tribunal has jurisdiction to condone delay in appropriate circumstances. Precedent treatment: Authorities commonly allow condonation where delay is innocuous, not deliberate, and interests of justice favor admission. Interpretation and reasoning: The Tribunal found the one-day delay to be neither negligent nor deliberate. Having heard both parties on the preliminary issue, the Tribunal exercised discretion to condone the delay in the interest of justice. Ratio vs. Obiter: Ratio - discretion to condone short, inadvertent delays where no prejudice shown; not an obiter remark. Conclusion: Delay of one day condoned and appeal admitted for hearing. Issue 2 - Failure to Adjudicate Ground Challenging Section 148 Proceedings Legal framework: Re-opening of assessment under section 147/148 must be subjected to adjudication on merits; appellate authorities must consider grounds raised against validity of re-opening and provide a speaking order. Precedent treatment: Administrative and judicial authorities require that appeals not be dismissed solely for non-appearance where material issues require adjudication, particularly when some material has been filed electronically. Interpretation and reasoning: The CIT(A) dismissed the appeal for non-prosecution relying on prior case law, yet the assessee had made partial filings (e.g., return in response to notice, audit report screenshots, other documents). The Tribunal observed that CIT(A) did not consider these materials or adjudicate the section 148 challenge on merits before confirming additions. Ratio vs. Obiter: Ratio - appellate authority must consider available material and adjudicate substantive grounds (including validity of re-opening) before dismissing for non-prosecution; not mere obiter. Conclusion: CIT(A)'s dismissal without adjudication on the section 148 ground was erroneous; matter remanded to AO for fresh adjudication after affording opportunity to be heard. Issue 3 - Claim for Deduction under Section 10AA in Re-assessment Legal framework: Deductions under section 10AA are allowable subject to conditions and may be disallowed if purchases or transactions shown to be bogus or accommodation entries; burden of proof lies on the assessee to establish genuineness. Precedent treatment: Revenue relied on decisions holding disallowance justified where accounting entries found to be accommodation entries and genuineness not proved. Interpretation and reasoning: The Tribunal did not decide the entitlement to section 10AA on merits because AO and CIT(A) passed ex parte orders without considering the partial documentary material submitted by the assessee. The Tribunal held that AO should examine the materials already filed and call for further clarification if needed rather than proceed ex parte. Ratio vs. Obiter: Obiter as to merits of section 10AA claim - Tribunal refrained from adjudicating substantive entitlement, directing fresh consideration instead. Conclusion: Deduction claim under section 10AA to be adjudicated afresh by AO after considering documents and providing hearing; no final conclusion at this stage. Issue 4 - Addition under Section 69C for Bogus Purchases Legal framework: Section 69C permits additions where payments or investments are explained inadequately; when purchases are alleged to be from bogus concerns, revenue must establish that entries are accommodation entries and assessee failed to prove genuineness. Precedent treatment: Revenue cited decisions upholding additions where statements under section 132(4) and other material established accommodation entries; courts have sustained additions where assessee failed to rebut evidence of benami or bogus transactions. Interpretation and reasoning: The AO made addition u/s 69C via an order under section 144 r.w.s. 147 due to non-compliance. However, the Tribunal found that the assessee had furnished some documents (invoices, bank statements, audit report screenshots) which were not considered. The Tribunal emphasized that AO should verify the submitted material, seek further clarification, and only then determine whether purchases are bogus; blanket ex parte addition was inappropriate. Ratio vs. Obiter: Ratio - where partial relevant material is on record and not examined, AO cannot validly make a conclusive addition under section 69C without affording opportunity to the assessee and conducting necessary verification; not mere obiter. Conclusion: Addition under section 69C set aside for fresh adjudication by AO after considering submitted documents and affording opportunity to explain; no final finding on genuineness. Issue 5 - Validity of Ex Parte Orders and Requirement of Speaking Orders Legal framework: Orders under section 144 and appellate dismissals for non-prosecution must still satisfy the requirement of a speaking order and principled consideration of available material; procedural fairness requires notice and opportunity to be heard before adverse ex parte orders where documents have been filed. Precedent treatment: Authorities permit ex parte action for non-compliance, but courts have set aside ex parte orders where the assessee had made material filings that were ignored and no opportunity to explain was afforded. Interpretation and reasoning: Both AO and CIT(A) passed ex parte orders without considering the partial compliance by the assessee. The Tribunal concluded that the AO should have examined the uploaded documents, called for further details if necessary, and issued a speaking order; similarly, CIT(A) should not have dismissed the appeal without considering the paper filings. In the interest of justice, the Tribunal remitted the matter for fresh adjudication and directed that sufficient opportunity of being heard be afforded. The assessee was directed to cooperate and not seek adjournments without valid reasons. Ratio vs. Obiter: Ratio - procedural fairness mandates that authorities consider material on record and issue speaking orders; failure to do so warrants remand; not obiter. Conclusion: Ex parte orders of AO and CIT(A) set aside; matter restored to AO for fresh adjudication with direction to consider submitted documents, call for further clarification if necessary, and pass a speaking order after affording adequate opportunity of hearing.