CHERRIE GEMS PRIVATE LIMITED ,ROORKEE V. COMMISSIONER OF INCOME TAX(APPEALS), NFAC, DELHI

ITA 98/DDN/2023

AI Insights

The case involves Cherrie Gems Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), NFAC, New Delhi, concerning the Assessment Year 2017-18. The primary issues were the taxability of a cash deposit of Rs.19,79,000 during the demonetization period and the computation of income at 8% of gross business receipts. The Assessing Officer had completed the assessment ex parte under section 144 of the Income Tax Act, 1961, due to non-compliance by the assessee, treating the cash deposit as unexplained and taxing it under section 69A r.w.s. 115BBE of the Act. The CIT(A) dismissed the appeal ex parte due to non-prosecution without adjudicating on merits. The Tribunal noted the procedural lapses and remitted the matter back to the AO for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473112 (ITAT-DEHRADUN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Premkumar Arjundas Luthra HUF, MARC Laboratories Ltd. in ITA No. 2731, 2732, 2733, 2730, 2734 & 2735/DEL/ 2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMAR PAL SINGH
• Keywords: Set aside; Business income; Opportunity of being heard; Principle of natural justice
• Section: 144; 142(1); 69A

Judgement Text

" Page 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC’: NEW DELHI BEFORESHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.98/DDN/2023, A.Y. 2017-18 Cherrie Gems Pvt. Ltd. D-3, Shri Ram Apartments, Ashok Marg, Ram Nagar, Roorkee, Uttarakhand PAN: AADCC6205F Vs. Income Tax officer, Ward 1(3)(4),Roorkee Income Tax Office, Civil Lines, Roorkee Uttarakhand (Appellant) (Respondent) Appellantby None Respondent by Sh. Amar Pal Singh, Sr. DR Date of Hearing 12/02/2025 Date of Pronouncement 12/02/2025 ORDER PER AVDHESH KUMAR MISHRA, AM This appeal for the Assessment Year (hereinafter, the ‘AY’) 2017-18 filed by the assessee is directed against the order dated 24.10.2023 passed by the Commissioner of Income Tax (Appeals), NFAC, New Delhi [hereinafter, the ‘CIT(A)’]. 2. Following grounds have been raised in this appeal: “1. That on the facts and circumstances of the case and in law, the appellate order dated 24.10.2023 ['the impugned order'] passed under section 250(6) w. r. t. section 144 of the Income Tax Act, 1961 [the 'Act'] by the Commissioner of Income Tax, ITA No.98/DDN/2023 Cherrie Gems Pvt. Ltd. Page 2 (Appeals), National Faceless Appeal Centre (NFAC), Delhi [the 'Ld. CIT'], is erroneous, based on surmises, preconceived notions, incorrect facts and incorrect application of law. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law in treating no return filed by the appellant through the return was filed on 23.04.2019 declaring NIL income vide Ack. No. 466441231230419 dt. 23.042019 and same was valid return under the provision of the Act. 3. That on the facts and circumstances of the case, Ld.CIT(A) has erred in law and on facts in making above additions without giving an adequate opportunity of being heard and not observing the principle of natural justice. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law in confirming the action of Ld. AO in making disallowance of cash deposit of Rs 19,79,000 into bank during demonetization period since this amount has been deposited out of sale proceeds of jewelry and garments. 5. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in the addition made by the Ld. AO solely on the basis of adhoc addition at the rate of 8 percent assuming the estimated net profit of Rs.11,11,679/- on total bank deposits of Rs.1,38,95,988/- without pin pointing the discrepancy found in the books of accounts. 6. The above grounds are without prejudice to each other. Your appellant craves leave to add, to amend, to delete and/ or to modify all or any of the fore going ground(s) of appeal.” 3. We are tasked to decide two issues; (i) taxability of cash deposit of Rs.19,79,000/- in the bank account during demonetization period and (ii) computing income @ 8% of gross business receipts. ITA No.98/DDN/2023 Cherrie Gems Pvt. Ltd. Page 3 4. The relevant facts giving rise to this case are that the Assessing Officer (hereinafter, the ‘AO’), based on the information that the assessee who deposited substantial cash (more than a Crore) in his bank accounts during the relevant year was a non-filer of the Income Tax Return (hereinafter, the ‘ITR’); issued notice under section 142(1) of the Income Tax Act, 1961 (hereinafter ‘Act’) for filing the ITR and explain the source of huge cash deposits and credits in the bank accounts. The assessee had deposited cash of Rs.19,79,000/- during the demonetization period and cash of Rs.95,13,494/- during non-demonetization period of the relevant year. Besides this, the assessee’s bank account also got credited by the sum of Rs.43,82,494/- through banking channels. Since, the assessee did not ensure any compliance of any statutory notices during the course of assessment proceedings; therefore, the AO has no option except to complete the assessment ex parte under section 144 of the Act. The AO held cash deposit during demonetization period as unexplained and taxed the same under section 69A r.w.s. 115BBE of the Act. The AO further held that cash deposits and credit entries aggregating toRs.1,38,95,988/- during non- demonetization period of the relevant year were nothing but business receipts. Consequentially, he worked out the income of Rs.11,11,679/- @ 8% of Rs.1,38,95,988/- and taxed the same. Accordingly, the assessment was completed at income of Rs.30,90,680/-. Aggrieved, the assessee filed ITA No.98/DDN/2023 Cherrie Gems Pvt. Ltd. Page 4 appeal before the CIT(A). However, he did not succeed as there was consistent non-compliance as detailed in Para 4.2 of the impugned order. Resultantly, the appeal was dismissed ex parte. 5. Before us, none appeared on behalf of the assessee. 6. We have heard Sr. Departmental Representative (hereinafter, the ‘Sr.DR’) and have perused the material available on the record. We take note of the fact that the Ld. CIT(A) has dismissed the appeal ex parte due to non- prosecution and has not adjudicated the case on merits. Further, the AO has also completed the assessment ex parte under section 144 of the Act. Moreover, the Ld. CIT(A) has not decided each ground of appeal after discussing the issues in detail and his reasons for agreeing with the assessment order. As per provisions of section 250(6) of the Act, the CIT(A) is obliged to dispose of the appeal in writing after stating the points for determination and to then pass an order on each of the points which has arisen for his consideration. The CIT(A) is further obliged to state the reason for his/her decision on each such point of determination. The CIT(A) is duty-bound to dispose of the appeal through a speaking order on merits on all the points for determination including each ground of appeal. It is evident from the perusal of section 251(1)(a), 251(1)(b) and Explanation of section 251(2) of the Act that the CIT(A) is required to apply his/her mind to ITA No.98/DDN/2023 Cherrie Gems Pvt. Ltd. Page 5 all the issues arisen from the order before him/her, whether or not these issues have been raised by the assessee before him/her. 7. Section 251(1)(a) of the Act provides that while disposing of an appeal against assessment order, the CIT(A) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1)(b) of the Act provides that in disposing of an appeal against an order imposing a penalty, the CIT(A) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty. On cumulative consideration of the provisions of section 250(6) of the Act read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) of the Act and Explanation of section 251(2) of the Act, it is concluded that the CIT is not empowered to dismiss the appeal for non- prosecution of appeal and is obliged to dispose of the appeal on merits. In this regard, the finding of the Delhi Bench in the case of MARC Laboratories Ltd. in ITA No. 2731, 2732, 2733, 2730, 2734 & 2735/DEL/ 2022 is worth mentioning here, wherein it has been held as under: “5. We straightway refer to Section 250(6) of the Act which enjoins that the CIT(A) shall state the points for determination before it and the decision shall be rendered on such points along with reasons for the decision. Thus, it is incumbent upon the CIT(A) to deal with the grounds on merits even in ex parte order. In view of Section 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non-prosecution. This view is also taken by the Hon'ble Bombay High Court in case of CIT vs. Premkumar Arjundas Luthra HUF, (2017) 291 CTR 614 (Bom.). A ITA No.98/DDN/2023 Cherrie Gems Pvt. Ltd. Page 6 bare glance of the order of the CIT(A) shows that CIT(A) has not addressed itself on various points placed for its determination at all and dismissed the appeal of assessee for default in non- appearance. Needless to say, the CIT(A) plays role of both adjudicating authority as well as appellate authority. Thus, the CIT(A) could not have shunned the appeal for non- compliance without addressing the issue on merits. 6. In the totality of the circumstances, we consider it just and expedient to restore the matter back to the CIT(A) in the larger interest of justice with a view to enable the assessee to avail proper opportunity for disposal of appeal by the CIT(A) on various points. The assessee is cautioned to extend full co- operation to the CIT(A) without any demur, failing which, the CIT(A) shall be at liberty to conclude the appellate proceedings in accordance with law. Hence, the order of the CIT(A) appealed against, is set aside and all the issues raised in the impugned appeal are restored back to the file of the CIT(A) for fresh adjudication in accordance with law after giving reasonable opportunity of hearing to the assessee.” 8. In view the above facts, discussions, observations and in the interest of justice, we find it fit that this case requires to be decided afresh by the AO. Therefore, without offering any comment on merit of the case, we deem it fit to set aside the impugned order and remit the matter back to the file of the AO for de-novo consideration and passing the assessment order afresh after providing adequate opportunity of being heard to the appellant /assessee. The appellant/assessee, no doubt, shall ensure compliance and cooperate in fresh assessment proceedings. Accordingly, we ordered so. ITA No.98/DDN/2023 Cherrie Gems Pvt. Ltd. Page 7 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in open Court on 12thFebruary, 2025 Sd/- Sd/- (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:12/02/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(Appeals) 5. Sr. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "