The court emphasized the necessity of fair hearing principles, ruling that dismissal without addressing an adjournment request violates natural justice, warranting case restoration.

ORDER आदेश

PER MAKARAND V.MAHADEOKAR, AM:

This appeal by the assessee is directed against the order dated 25.10.2024 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "CIT(A)"], for the assessment year 2018–19, whereby the Ld. CIT(A) dismissed the appeal ex parte and upheld the addition of Rs.14,19,70,335/- made by the Assessing Officer under section 40A(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act"] as per the order dated 14.03.2023 passed under section 147 read with section 144B of the Act.

Facts of the Case

2. The assessee an individual engaged in the trading of agricultural produce under the proprietorship concern “Amrut Trading Company”, filed his return of income for A.Y. 2018–19 on 03.06.2022 declaring total income of Rs. 4,87,991/-. The case was reopened under section 147 based on information received through the Insight Portal, particularly on the basis of a Suspicious Transaction Report (STR) which highlighted substantial cash withdrawals aggregating to Rs. 35 lakhs during the period from 10.01.2018 to 06.02.2018 from the assessee’s bank account with Bank of Baroda (A/c No. 095802000000800). These withdrawals were preceded by RTGS credits received from M/s. Murlidhar Industries Pvt. Ltd., which were withdrawn in cash on the same day.

3. During the course of reassessment proceedings, the Assessing Officer noted that the assessee had shown purchases amounting to Rs.14,24,58,326/- made in cash allegedly for procuring agricultural commodities such as Raydo and other produce. The assessee failed to submit complete books of account, purchase bills, or supporting ledgers. Only bills aggregating to Rs.26,04,914/- were furnished, with the balance purchases remaining unsupported. The Assessing Officer concluded that the cash purchases exceeded the threshold prescribed under section 40A(3), and that the assessee had not established that such payments fell within any of the exceptions provided under Rule 6DD of the Income-tax Rules, 1962.

Accordingly, the entire sum of Rs. 14,24,58,326/- was disallowed and added to the total income. The assessment was framed ex parte under section 147 read with section 144B of the Act and penalty proceedings under section 270A were separately initiated for alleged misreporting of income. Interest under sections 234A, 234B, and 234C was also directed to be levied.

4. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). During appellate proceedings, the assessee sought adjournment on 09.10.2024 requesting 15 days to file submissions and evidence. However, no adjourned date was communicated, and the appeal was dismissed ex parte on 25.10.2024. The Ld. CIT(A) upheld the entire disallowance under section 40A(3), observing that the assessee failed to prove that cash payments were made to farmers or that such transactions qualified for exemption under Rule 6DD. The order was passed without examining any materials or submissions on merits.

5. Aggrieved by the said order, the assessee is now in appeal before us raising following grounds:

1. The Ld. CIT(A), NFAC, Delhi was grievously erred in dismissing the appeal on merits by upholding the addition made by the Ld. A.O. which is not correct and bad in law. The appellant submits that the appellant had asked for the adjournment for 15 days on 09.10.2024 for furnishing his submission along with relevant documents on or before 24.10.2024. But the Ld. CIT(A) has not informed the adjournment date for the submission thereof to the appellant and in the meantime immediately on 25.10.2024 he has finalized the appeal on merits which is bad in law.

2. The Ld. CIT(A) has also erred in making addition of Rs.14,19,70,3