DEEPAK KUMAR PROP. M/S URVI ENTERPRISES MANDIGOBINDGARH,MANDI GOBINDGARH V. THE ASSESSMENT UNIT NFAC DELHI JAO THE INCOME TAX OFFICER WARD-2 MANDI GOBINDGARH, MANDI GOBINDGARH

ITA 103/CHANDI/2025

AI Insights

The case involves Deepak Kumar, the proprietor of M/s Urvi Enterprises, who appealed against the orders of the Income Tax Officer (ITO) and the Commissioner of Income-tax (Appeals) (CIT(A)). The ITO had completed an ex parte assessment for the Assessment Year 2022-23, disallowing a significant amount of purchases due to their unverifiability and adding it to the assessee's income. The CIT(A) dismissed the appeal for non-prosecution as the assessee failed to respond to notices. The Tribunal found that the assessee was not adequately represented due to issues with email communications and granted a final opportunity to present his case, emphasizing the importance of substantial justice over procedural lapses.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835363 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2022-2023
• Appeal Filed On: 20-01-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANAV BANSAL
• Assessee Lawyers: ROHIT GARG; C.A VIRTUAL
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Reasonable cause; Corroborative evidences; Unexplained cash credit; Recovery proceedings
• Section: 144; 142(1); 68; 133(6); 37

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 103 /Chd/ 2025 िनधाŊरण वषŊ / Assessment Year : 2022-23 Deepak Kumar Prop. M/s Urvi Enterprises Kacha Dalip Nagar,Mandi Gobindgarh बनाम The ITO Ward -2 Mandigobindgarh ˕ायी लेखा सं./PAN NO: DBCPK4460A अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Rohit Garg, C.A (Virtual) राजˢ की ओर से/ Revenue by : Shri Manav Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 22/01/20226 उदघोषणा की तारीख/Date of Pronouncement : 11/02/2026 आदेश/Order PER LALIET KUMAR, J.M: This appeal is directed against the order of the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, passed under section 250 of the Income-tax Act, 1961, dt. 22/11/2024 whereby the appeal of the assessee was dismissed at the threshold on account of non-prosecution. The assessee has also challenged the assessment order dated 21.03.2024 passed by the Assessing Officer under section 144 read with section 144B of the Act for the Assessment Year 2022-23. 2. Briefly stated, the assessee is an individual who filed his return of income declaring total income of Rs.4,58,400/-. The case was selected for scrutiny under CASS on the basis of risk parameters indicating high liabilities vis-à-vis low income and substantial purchases from suppliers who were either non-filers or had filed non-business returns. Statutory notices under sections 143(2) and 142(1) of the Act were issued through the faceless assessment system. However, despite multiple opportunities granted, the assessee did not Printed from counselvise.com 2 file any reply or furnish any details. Consequently, the assessment was completed ex parte under section 144 of the Act. 3. During the course of assessment proceedings, the Assessing Officer examined the return of income, GSTR-1 data available on the Insight Portal, and third-party information. It was noticed that the assessee had declared purchases aggregating to Rs.41,76,55,696/- (approximately Rs.44 crores) from 18 parties. Many of these parties were found to be non-filers of income-tax returns, had filed non-business returns, or their GST registrations were found to be inactive. 4. In order to verify the genuineness of these purchases, the Assessing Officer issued notices under section 133(6) of the Act to the said parties. The outcome of such verification revealed that most of the parties did not respond to the notices; in certain cases, notices could not be served due to insufficient or incorrect addresses; and in at least one case, the party categorically denied having any transaction with the assessee. Physical verification through the Verification Unit also failed to establish the existence or genuineness of the suppliers. Simultaneously, the assessee failed to furnish any documentary evidence such as purchase bills, delivery challans, transportation details, e-way bills, stock registers, or linkage of purchases with corresponding sales. 5. In this factual backdrop, the Assessing Officer recorded the following findings, which are reproduced herein for the sake of completeness: “From the facts discussed hereinabove, it is evident that the assessee has made purchases aggregating to Rs.41,76,55,696/- from the aforesaid 18 parties. However, the assessee has failed to make any compliance to the notices issued under section 142(1) of the Income-tax Act, 1961 and has not furnished any documentary evidence or explanation to substantiate the genuineness of the said purchases. During the course of assessment proceedings, notices under section 133(6) of the Act were issued to the said parties to verify the transactions entered into by the assessee. It is observed that no compliance was made by most of the parties. In certain cases, notices could not be served due to incomplete or incorrect addresses, while in other cases, despite service of notices, no reply was received. In one instance, the party categorically denied having any business dealings with the assessee. Further, verification through the Verification Unit also failed to establish the genuineness of the transactions. Printed from counselvise.com 3 The assessee has not produced any supporting evidence such as purchase bills, delivery challans, transportation details, lorry receipts, e-way bills, stock registers or any other documentary evidence to prove that the goods were actually purchased and physically delivered to the assessee. The assessee has also failed to establish the linkage between the purchases made and the corresponding sales effected during the year. In view of the above facts and in the absence of any corroborative evidence, it cannot be accepted that the purchases made from the aforesaid 18 parties are genuine. The assessee has thus failed to discharge the onus cast upon him to prove the genuineness of the expenditure claimed. Accordingly, the books of account of the assessee are rejected. Considering the facts of the case and following the settled judicial principle that in cases of non-genuine or unverifiable purchases the profit element embedded therein is to be brought to tax, an amount equal to 12.5% of the total purchases amounting to Rs.41,76,55,696/-, i.e., Rs.5,22,06,962/-, is disallowed under section 37 of the Income-tax Act, 1961 and added to the total income of the assessee.” 6. Apart from the above, the Assessing Officer also noticed that the assessee had shown current liabilities amounting to Rs.1,89,386/- in the balance sheet but failed to furnish any evidence to substantiate the same. Accordingly, the said amount was treated as unexplained cash credit under section 68 of the Act. The assessment was thus completed determining the total income at Rs.5,28,54,478/-. 7. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). However, it is noted that the assessee did not file any submissions during the appellate proceedings as well. The CIT(A) recorded a categorical finding that notices were duly issued on the email address furnished by the assessee himself in Form No. 35. The contention of the assessee that notices were not received due to a different email address was rejected, and the appeal was dismissed for non-prosecution. 8. We have heard the rival submissions and perused the material available on record. Before us, the assessee filed an application for admission of additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, contending that both the assessment proceedings as well as the first appellate proceedings were completed ex parte and that he was prevented by sufficient and reasonable cause from producing the relevant Printed from counselvise.com 4 evidences before the lower authorities. The assessee submitted that he is an individual engaged in trading activities and was largely dependent upon his accountant for handling income-tax compliances. It was explained that the email ID [e-mail] , which was available on the income- tax records, was created and operated by the said accountant, who subsequently left the services of the assessee after the closure of business activities during the relevant year. According to the assessee, after the departure of the accountant, he neither had access to the said email ID nor knowledge of its password, resulting in non-response to the statutory notices issued during the course of assessment proceedings. 9. The assessee further stated that although another email ID, namely [e-mail] , belonged to him, the same had not been actively used for several years, and access thereto was also not readily available. It was submitted that the assessee became aware of the ex parte assessment only upon receiving telephonic communication from the Department in the first week of August 2024 in connection with recovery proceedings. Thereafter, the assessee immediately contacted his counsel, updated his profile on the income-tax portal and changed the primary and secondary email IDs to [e-mail] and [e-mail] , respectively. 10. It was further contended that while filing Form No. 35 before the Ld. CIT(A), the updated email IDs were duly mentioned therein; however, the notices issued by the Ld. CIT(A) were sent to the old email IDs rather than to the email addresses provided in the appeal form, resulting in non- participation in the appellate proceedings and the consequent dismissal of the appeal for non-prosecution. In support of the application for admission of additional evidence, the assessee submitted that the evidence now sought to be filed is vital and goes to the root of the matter. 11. The additional evidence includes copies of the return of income, audit report in Form Nos. 3CB and 3CD along with financial statements, GST Printed from counselvise.com 5 returns in Forms GSTR-1, GSTR-3B, GSTR-9 and GSTR-9C, purchase registers, details of eighteen parties doubted by the Assessing Officer, ledger confirmations from certain suppliers and copies of purchase bills. It was pleaded that there was no deliberate or intentional default, and reliance was placed on various judicial precedents to contend that additional evidence should be admitted in the interest of substantial justice. 12. The Ld. AR further submitted that the assessee is ready and willing to cooperate with the Department and prayed that the matter may be restored either to the file of the Assessing Officer or the Ld. CIT(A) for fresh adjudication after granting due opportunity of being heard. 13. During the course of hearing, the Bench specifically required the Ld. AR to demonstrate the genuineness of the purchases aggregating to approximately Rs.44 crores. At this stage, the Ld. AR fairly submitted that the documents presently placed on record are not complete in all respects and that, on the basis of the material currently available, the assessee would not be in a position to conclusively establish the genuineness of the impugned purchases, however given further time the assessee would be able to prove his case. 14. The Ld. AR also drew our attention to Form No. 35 filed before the Ld. CIT(A), wherein the primary and secondary email IDs were mentioned as [e-mail] and [e-mail] . It was pointed out that the notices issued by the Ld. CIT(A) were sent to the old email ID [e-mail] . The assessee placed on record the profile details from the income-tax portal showing that the email IDs were last updated on 21.12.2024. However, we note that the order of the Ld. CIT(A) was passed on 22.11.2024 and that the notices were also issued on the email IDs [e-mail] and [e-mail] . There is no categorical denial by the assessee that the email ID [e-mail] does not belong to him. Thus, the plea regarding non-service of notices does not inspire full confidence. Printed from counselvise.com 6 15. We have carefully considered the orders of the lower authorities and the submissions made before us. It is an admitted position that the assessee did not extend due cooperation during the course of the assessment proceedings and that the suppliers failed to respond to the notices issued under section 133(6) of the Act. Before the Tribunal, the assessee has sought indulgence for filing certain documents and, for this purpose, has moved an application for admission of additional evidence. In the said application, the assessee has disclosed reasonable cause explaining the non-filing of such documents before the lower authorities. 16. At the same time, we note that the Assessing Officer, in the facts and circumstances of the case, has not disallowed the entire purchases but has estimated the profit element at 12.5% on the alleged unverifiable purchases, which is a reasonable and judicially recognised approach consistently adopted in similar cases. We further observe that the appeal before the Ld. CIT(A) was dismissed for non-prosecution, without adjudication on merits. Considering that the assessee is now seeking an opportunity to place additional material on record and in the interest of substantial justice, we are of the considered view that one final opportunity should be granted to the assessee. 17. Accordingly, in the interest of justice, we set aside the order of the Ld. CIT(A) and restore the matter to his file for fresh adjudication on merits, after affording due and reasonable opportunity of being heard to the assessee. However, keeping in view the repeated non-compliance and lack of cooperation on the part of the assessee at various stages, the restoration is made subject to payment of costs of Rs.50,000/-, which shall be deposited by the assessee in the Poor Patient Relief Fund, PGI, Chandigarh, within 30 days from the date of receipt of this order. Proof of such deposit shall be furnished before the Ld. CIT(A). In case of failure to comply with this direction, the Ld. CIT(A) shall be at liberty to decide the appeal on the basis of material available on record. Printed from counselvise.com 7 18. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 11/02/2026 Sd/- Sd/- क ृणवȶ सहाय लिलत क ुमार (KRINWANT SAHAY) (LALIET KUMAR) लेखा सद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟ /JUDICIAL MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "