The Raipur Bench of Income Tax Appellate Tribunal ( ITAT ) directed the Revenue to examine tax evasion involving accommodation entries received in the guise of unsecured loans from shell companies.

Dipak Raheja, appellant-assessee, filed an appeal against the order passed by Commissioner of Income Tax(Appeals)[CIT(A)] for the assessment year 2017-18. The appeal was dismissed ex parte due to non-compliance, as the assessee failed to respond to hearing notices issued on multiple dates.

The CIT(A) noted that no submissions were made despite several opportunities, and the assessment was completed under Section 144 with an addition of ₹1.20 crore as unexplained credits under Section 68.

Before the ITAT, the assessee's counsel explained that the non-compliance was due to hearing notices being sent to the wrong email address. While the correct email provided was “ketanparmar628@gmail.com,” the notices were sent to “cnmurty2006@gmail.com,” which did not belong to the assessee. As a result, the assessee was unaware of the hearings and could not respond.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The tribunal, after reviewing the records, found that the hearing notices were indeed sent to the wrong email address, making it impossible for the assessee to respond. As a result, the CIT(A) passed an ex parte order.

Considering this, and relying on a similar decision of the ITAT Raipur Bench in the case of Brajesh Singh Bhadoria, the bench decided to grant one final opportunity to the assessee. The order of the CIT(A) was set aside and the matter was remanded for fresh adjudication, with a direction to issue future notices to the correct email address. The CIT(A) was also instructed to ensure compliance with the principles of natural justice.

However, the appellate tribunal also noted that this was not merely a case of non-compliance. The assessee had allegedly received accommodation entries disguised as unsecured loans from Kolkata based shell companies linked to known entry operators. These findings were supported by incriminating documents, statements under oath, and investigation reports, all suggesting that the assessee introduced unaccounted money into its books under a sham structure.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The two member bench comprising Partha Sarathi Chaudhury (Judicial Member) and Arun Khodpia (Accountant Member) held that while natural justice warranted one more chance to explain the case, the CIT(A) must thoroughly examine whether any fraud had been committed and whether taxes were evaded.

It stated that fraud nullifies even the protections of natural justice, citing Supreme Court rulings in Badami v. Bhali, S.P. Chengalvaraya Naidu, and McDowell & Co. Ltd., which reinforced that courts must not protect falsehood or colorable tax planning.

Accordingly, the ITAT directed the appellate authority to re-examine the facts in detail and take necessary action as per law, keeping in view the possibility of tax evasion through sham transactions.

In short, the appeal was allowed for statistical purposes.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates