The Income Tax Appellate Tribunal, Kolkata Bench, has reaffirmed that an ex parte assessment under Sections 69A and 69C of the Income Tax Act cannot stand if the assessee was denied a meaningful opportunity to be heard. In this case, despite the assessee’s delay in filing the appeal, the Tribunal prioritized substantive justice over procedural technicalities, remanding the matter for a fresh assessment with full opportunity to present evidence.
Background & Facts
The Dispute
The assessee, Vikash Kumar, an individual engaged as a Common Service Provider (CSP) agent for government digital services, was assessed under Sections 69A and 69C of the Income Tax Act, 1961 for Assessment Year 2018-19. The Assessing Officer (AO) made additions of ₹3,87,68,214 as unexplained money and ₹1,56,431 as unexplained expenditure, resulting in a total assessed income of ₹3,89,38,340. The assessee had declared a gross income of ₹1,76,450 in his return, claiming that all high-value transactions in his SBI settlement account were funds received as commission and held in trust for beneficiaries, not his own income.
Key Facts
- The assessee is a CSP agent authorized to operate a bank account for disbursing government payments to beneficiaries
- He filed his return of income on 27.06.2022 declaring income of ₹1,76,450
- The AO issued notices under Sections 148, 143(2), and 142(1) of the Act
- The assessee did not respond to the notices, leading to an ex parte assessment under Section 144 read with Section 144B on 28.03.2023
- The AO relied on cash deposits of ₹13,690, withdrawals of ₹3,87,68,214, and payments of ₹1,56,431 to Vedavaag Systems Ltd. as evidence of unexplained income and expenditure
- The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] on 25.10.2023, 211 days after the assessment order
- The CIT(A) dismissed the appeal on 25.01.2025 on grounds of delay, rejecting the assessee’s claim of illness as unsupported by documentary evidence
- The assessee filed the present appeal before the ITAT on 28.10.2025, 266 days beyond the statutory limit
- The assessee submitted a medical certificate dated 01.12.2025 from Dr. Vinay Prasad, Bhagwan Bazar, Chhapra, confirming treatment for pulmonary tuberculosis from 02.01.2025 to 30.11.2025
- The assessee claimed the medical certificate was misplaced during his relocation to Delhi
- Additional documents and facts from paragraphs 2 to 16 of the statement of facts were submitted before the Tribunal
Procedural History
- 27.06.2022: Assessee filed return declaring income of ₹1,76,450
- 29.03.2022: Notice under Section 148 issued
- 28.03.2023: Ex parte assessment order passed by AO under Section 144 r.w.s. 144B
- 25.10.2023: Appeal filed before CIT(A) (delay of 211 days)
- 25.01.2025: CIT(A) dismissed appeal on limitation grounds, rejecting medical explanation as bald assertion
- 28.10.2025: Appeal filed before ITAT (delay of 266 days)
- 20.05.2026: Hearing concluded
- 05.06.2026: Judgment pronounced
The Parties' Positions
For the Assessee
- Argued that he was a CSP agent and all transactions were fiduciary in nature, not personal income
- Claimed non-receipt of notices due to lack of communication and relocation
- Attributed delay in filing appeal to severe illness (pulmonary tuberculosis) and loss of medical documents during relocation
- Submitted medical certificate before the Tribunal for the first time
- Requested admission of additional evidence under Rule 25 and 26 of ITAT Rules, 2017
For the Department
- Contended that the assessee remained non-responsive to notices
- Argued that the CIT(A) was correct in rejecting the delay explanation as unsubstantiated
- Maintained that the ex parte assessment was valid due to failure to cooperate
- Opposed admission of additional evidence as belated and not justified
Relief Sought
The assessee sought:
- Setting aside of the assessment order dated 28.03.2023
- Setting aside of the CIT(A) order dated 25.01.2025
- Admission of additional evidence and documents
- Remand of the case for fresh assessment with proper opportunity to be heard
The Legal Issue
The central question was whether an ex parte assessment under Section 69A and Section 69C of the Income Tax Act can be sustained when the assessee was denied a fair opportunity to explain the source of transactions, and whether the Tribunal may condone delay in filing an appeal and remand the matter for de novo assessment in the interest of justice.
Arguments Presented
For the Appellant
The assessee’s counsel argued that the AO’s assessment was fundamentally flawed because it was based on suspicion rather than evidence. The assessee had disclosed his income and provided a plausible explanation for the transactions - that he operated a settlement account as a CSP agent, holding funds in trust for beneficiaries. The failure to respond to notices was due to lack of communication and subsequent illness. The delay in filing the appeal was caused by medical incapacity and logistical challenges in retrieving documents after recovery. The Tribunal, as a quasi-judicial body, must prioritize substantive justice over procedural technicalities. The additional evidence submitted was critical to establishing the nature of the transactions and should be admitted under Rule 25 and 26 of the ITAT Rules, 2017.
For the Respondent
The Department’s representative contended that the assessee had ample opportunity to respond to notices under Sections 142(1) and 143(2) but remained non-cooperative. The CIT(A) had rightly rejected the delay explanation as unsupported by documentary proof. The assessee’s failure to produce the medical certificate before the CIT(A) rendered the claim of illness legally insufficient. The ex parte assessment was valid under Section 144, and the Tribunal should not interfere with findings based on non-cooperation. Admission of additional evidence at this stage would prejudice the Department and set a dangerous precedent.
The Court's Analysis
The Tribunal acknowledged that while delay in filing an appeal must be condoned only for sufficient cause, the nature of the case demanded a broader view of justice. The AO’s assessment was ex parte and based entirely on the absence of a response, not on any positive evidence of undisclosed income. The Tribunal noted that Section 69A and Section 69C require the Assessing Officer to form a reasonable belief based on material, not mere suspicion. The AO had not examined the nature of the CSP role, the structure of the bank account, or the source of the funds being disbursed.
"The Assessing Officer did not explore the options vested in him under the Act to verify the nature of the transactions or seek clarification from the bank or the government agency involved."
The Tribunal emphasized that the right to be heard is a fundamental principle of natural justice, enshrined in Article 14 of the Constitution and reinforced in CIT v. Suresh Kumar and K. S. Parthasarathy v. CIT. The CIT(A) erred in dismissing the appeal solely on limitation without examining whether the delay was caused by circumstances beyond the assessee’s control. The Tribunal accepted the medical certificate submitted before it as credible and noted that the assessee had acted promptly upon recovery.
The Tribunal further held that the additional documents and facts submitted were not merely supplementary but went to the root of the dispute - the nature of the transactions. Under Rule 26 of the ITAT Rules, 2017, the Tribunal has the power to admit additional evidence if it is satisfied that the assessee was prevented from producing it before the lower authority. The Tribunal found that the assessee’s non-appearance before the AO and CIT(A) was not wilful but due to illness and miscommunication.
The Verdict
The appeal was partly allowed for statistical purposes. The Tribunal set aside the CIT(A) order dated 25.01.2025 and remanded the matter to the AO for de novo reassessment. The assessee shall be granted a full and fair opportunity to present all evidence, including the medical certificate and documents relating to his CSP agency role. The AO shall not rely on suspicion alone and must examine the nature of the transactions, verify the CSP agreement, and consult relevant government records before making any addition under Section 69A or Section 69C. The assessee shall not seek unnecessary adjournments. The order is effective immediately.
What This Means For Similar Cases
Fair Hearing Overrides Procedural Delays
- Practitioners must argue that even if an appeal is filed late, the Tribunal must examine whether the delay was caused by genuine hardship, especially illness or miscommunication
- A mere absence of medical certificate before the CIT(A) does not automatically invalidate the claim if the same is produced before the Tribunal with a credible explanation
- The principle of audi alteram partem is non-negotiable in tax assessments
Ex Parte Assessments Require Substantive Justification
- Assessing Officers cannot rely on Section 144 to make additions under Sections 69A and 69C without investigating plausible explanations
- The burden of forming a reasonable belief lies with the AO - suspicion is not sufficient
- In CSP, banking, or agency cases, the nature of the account and the source of funds must be verified through third-party records
Tribunal’s Power to Admit Additional Evidence Is Broad
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Rule 25 and 26 of the ITAT Rules allow admission of evidence if it was genuinely not available earlier
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The Tribunal is not bound by the strict rules of evidence applicable in civil courts
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Documents that go to the root of the dispute must be admitted to ensure justice
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Always request remand for de novo assessment when the lower authority has not examined material facts
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Submit medical certificates and supporting affidavits at the earliest possible stage, even if initially omitted
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Cite CIT v. Suresh Kumar and K. S. Parthasarathy v. CIT to reinforce the right to fair hearing
