Ex-Parte Section 69A Assessment Remanded to AO for Fresh

Ex-Parte Section 69A Assessment Remanded to AO for Fresh Hearing Subject to Assessee Paying Costs

Issue

Whether an ex-parte reassessment order treating cash deposits and withdrawals as unexplained money under Section 69A should be set aside and remanded for fresh consideration when the assessee failed to respond to notices before both the Assessing Officer and the Appellate Authority.

Facts

The assessee, an individual, did not file an income tax return for Assessment Year 2017–18.
Reassessment proceedings were initiated based on information showing cash deposits of Rs. 3.08 crores and cash withdrawals of Rs. 4.71 lakhs in the assessee’s bank account.
Despite multiple notices issued by the Assessing Officer (AO), the assessee did not respond, resulting in a best judgment ex-parte reassessment under Section 144/147.
The AO treated the aggregate amount of Rs. 3.12 crores as unexplained money under Section 69A.
On appeal before the CIT(A), three hearings were scheduled, but the assessee only sought adjournments and failed to submit written arguments or evidence, leading to an ex-parte dismissal.
The assessee subsequently appealed before the Tribunal seeking an opportunity of hearing.

Decision

Orders Set Aside in Interest of Justice [Matter remanded]: The Tribunal held that since both the assessment before the AO and the appeal before the CIT(A) were passed ex-parte due to the assessee merely seeking adjournments, one final opportunity ought to be granted in compliance with the principles of natural justice.
Remand Subject to Costs: The orders of the lower authorities were set aside, and the matter was remanded back to the Jurisdictional Assessing Officer for fresh adjudication on merits.
Conditional Relief: The remand was made conditional upon the assessee paying a cost of Rs. 10,000 for failing to participate in earlier proceedings.

Key Takeaways

Natural Justice Over Technical Defaults: Courts and tribunals lean toward deciding tax matters on merits rather than ex-parte dismissals, provided the assessee is willing to cooperate upon remand.
Cost Imposition for Non-Compliance: Unreasonable delays and failure to respond to statutory notices during assessment and first appeal may attract monetary costs as a condition for remanding the matter.
Fresh Opportunity to Explain Cash Deposits: Remand enables the taxpayer to present documentary evidence regarding the source of bank cash deposits and withdrawals before the Assessing Officer.

IN THE ITAT SURAT BENCH

Madhubhai Shambhubhai Sojitra

Income-tax Officer

T.R. Sentil Kumar, Judicial Member
and Ratnesh Nandan Sahay, Accountant Member

IT Appeal No. 1251 (SRT) of 2025
[Assessment year 2017-18]

JULY 6, 2026

Akshay M. Modi, CA for the Appellant. Mukesh Jain, CIT DR for the Respondent.

ORDER

T. R. Senthil Kumar, Judicial Member.- This appeal is filed by the Assessee as against the ex-parte appellate order dated 03.09.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the re-assessment order passed under section 147 r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18.

2. Brief facts of the case are, the assessee is an individual has not filed return of income u/s 139(1) of the Act for the AY 2017-18. Information received by the Department that the assessee made cash deposit of Rs.3,07,54,760/- in his Bank account maintained with ICICI Bank and also made cash withdrawal of Rs.4,70,804/- and the total financial transaction was Rs.3,12,25,564/-. Since the assessee has not filed return of income, the assessment was reopened by issuing notice u/s. 148A of the Act. The assessee failed to response, which has resulted in passing order u/s 148A(d) of the Act and issued notice u/s 148 of the Act on 28.03.2024. Inspite of various notices issued u/s 142(1) of the Act, the assessee failed to make reply, which has resulted in passing ex-parte assessment order and making addition of Rs.3,12,25,564/- as unexplained income u/s. 69A of the Act and subject to taxation u/s. 115BBE of the Act.

3. Aggrieved against the re-assessment order, assessee filed appeal before ld. CIT(A), who has given three opportunities of hearing on 05.01.2025, 20.05.2025 and 08.08.2025. The assessee asked for two adjournments, however, not filed any written submission, which has resulted in passing ex-parte appellate order confirming the demand raised by the AO.

4. Aggrieved against the appellate order, assessee is in appeal before us raising following grounds of appeal:-

On the facts and in the circumstances of the case as well in law, CIT(A) has erred in confirming the re-assessment proceedings completed by JAO u/s 143(3) r.w.s 147 of the Act, where the notice u/s 148A(b)/148A(d) and 148 of the Act were issued by the Jurisdictional Assessing Officer (JAO) and not by the Faceless Assessing officer (FAO), as was required by the provisions of Section 151A of the Act, proceedings initiated u/s 148 of the Act is not sustainable and the order passed u/s 143(3) r.w.s 147 of the Act is bad-in-law and hence, liable to be quashed.

On the facts and in the circumstances of the case as well as in law, both the lower authorities has erred in passing ex parte order passed without considering the details on records filed by the appellant, which is in pure violation of the principles of natural justice, without jurisdiction, bad in law, illegal, invalid, arbitrary, void ab initio and hence liable to be quashed.

On the facts and in the circumstances of the case as well in law, the CIT (Appeals), NFAC has erred in confirming the order passed by the ITO, Ward 2(3)(1), Surat (for the sake of brevity The JAO) u/s 147 r.w.s. 144 of the Act by making addition of Rs. 3,12,25,564/- u/s 69A r.w.s. 115BBE of the Act, purely on misleading, misconceptual, arbitrary and perverse observations and hence, being without jurisdiction, bad in law, invalid, illegal, unwarranted of facts, is liable to be quashed or annulled in toto.

On the facts and in the circumstances of the case as well in law, both the lower authorities have grievously erred in completing the re-assessment proceedings applying the provisions of 69A of the Act treating cash withdrawals and cash deposits made during the year under assessment for the furtherance of cheque discounting business without appreciating the books of accounts, statement and explanation filed in response to the notices issued and hence, the addition made for the alleged unexplained money u/s 69A of the Act, in the absence of any evidences/materials contrary to the detailed explanations substantiated by cogent, credible and corroborative evidences, being without jurisdiction, bad in law, baseless, imaginary, arbitrary, conjectural, perverse, and purely on guess work and surmises, deserves to be deleted.

On the facts and in the circumstances of the case as well in law, the CIT (Appeals) NFAC, erred in overlooking the fact that the AO failed in recording the reasons in statutory form and hence, the entire re-assessment proceedings is bad in law and therefore, deserves to be quashed.

On the facts and in the circumstances of the case as well in law, the CIT (Appeals) NFAC, erred in overlooking the fact that the AO failed in obtaining the prior approval of Higher Authority u/s 151 of the Act and hence, the entire reassessment proceedings is bad in law and therefore, deserves to be quashed.

Your appellant further reserves his rights to add, alter, amend or modify any of the aforesaid grounds before or at the time of hearing of an appeal.

5. Ld. Counsel appearing for the assessee submitted that, if one more opportunity be given to the assessee so that he can explain the books of accounts and the cheque discounting business carried out by the assessee, thereby, the entire addition made by the AO liable to be modified or cancelled. The assessee also raised technical grounds on reopening of the assessment.

6. Per contra, Ld. CIT DR appearing for the Revenue, supported the orders passed by the Lower Authorities and strongly opposed the contention of the assessee and requested to impose heavy cost on the assessee, in the event of setting aside the matter back to the file of AO.

7. We have heard rival submissions and perused the materials available on record. It is undisputed fact that it is an ex-parte assessment before the Ld. AO as well as before the Appellate Authority, as the assessee only sought for adjournment. Now, the assessee undertakes to file all necessary details, materials and records before the Ld. JAO. In the interest of Principle of Natural Justice, we deem it fit to impose a cost of Rs.10,000/- payable by the assessee to the Income Tax Department within two weeks of receipt of the copy of this order and production on receipt for Rs.10,000/- the Lower Authority orders are hereby set aside and direct the Ld. Jurisdictional Assessing Officer to give one more opportunity of hearing to the assessee. Needless to say, the assessee should make use of this final opportunity and produce all relevant materials, evidences and documents for passing assessment order in accordance with provisions of law.

8. In the result, the appeal filed by the Assessee is treated as allowed for statistical purposes.