ITAT Gives Taxpayer a Costly Second Chance; Rs.10,000 Fine for Negligence, Orders Fresh Hearing on Unexplained Cash Deposits [Read Order]

The Income Tax Appellate Tribunal ( ITAT ) Surat has granted a fresh assessment opportunity to an individual while imposing a cost of Rs. 10,000 for his non-cooperation with the income tax authorities.

Gauravkumar Manilal Patel from Tapi, appellant-assessee, had not filed his income tax returns for Assessment Years 2012-13 and 2013-14. The case was initiated after the Non-filers MonitoringSystem (NMS) flagged him for high-value transactions. The Assessing Officer (AO) found cash deposits totaling Rs. 52,99,059 in his Dena Bank account for AY 2012-13 and Rs. 55,07,890 for AY 2013-14.

As the assessee failed to respond to multiple statutory notices, the AO passed ex-parte orders, making additions under Section 69A for unexplained money and levying various penalties. The Commissioner of Income Tax (Appeals) upheld these orders, noting the appellant's consistent non-compliance and failure to provide explanations or documents.

Before the ITAT, the assessee’s counsel argued that the CIT(A) had passed an order on August 14, 2024, the same day as a scheduled hearing, without waiting for a submission they intended to upload.

The counsel contended that the cash deposits were from his client's legitimate business as a mobile recharge distributor for Uninor, operating as 'Keshari Nandan Enterprises,' and that his income was below the taxable limit. The Departmental Representative, however, highlighted the appellant's history of ignoring notices and requested the appeals be dismissed.

The ITAT bench comprising Pawan Singh (Judicial Member) and Bijayananda Pruseth(Accountant Member) acknowledged the assessee's significant negligence and non-cooperation with both the AO and the CIT(A).

However, they found a specific flaw in the appellate process: the CIT(A) had issued a notice for a hearing on August 14, 2024, but passed the final order at 3:17 PM on that very same day without explicitly acknowledging this notice in the order. Citing the fundamental principles of natural justice, the tribunal decided this warranted a final opportunity for the assessee to present his case, albeit with a cost for his past conduct.

Consequently, the bench set aside the CIT(A)'s order on the additions and remanded the matter back to the AO for a fresh assessment. The assessee was directed to pay a cost of Rs. 10,000 to the ‘District Legal Services Authority, Surat’ within three weeks and to cooperate fully with the new proceedings.

The penalties under sections 271(1)(c) and 271F were also quashed, giving the AO liberty to re-initiate them if needed after the fresh assessment. However, the tribunal upheld a penalty of Rs. 10,000 under section 271(1)(b) for one instance of non-compliance in AY 2012-13 and reduced a similar penalty for AY 2013-14 to Rs. 10,000.

In conclusion, the appeals were allowed in part for statistical purposes.

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