Case Commentary: Vrahattakar Seva Sahakari Sameeti, Maryaditya vs. National Faceless e-Assessment Centre (ITA No. 121/JAB/2023)
Introduction
The Income Tax Appellate Tribunal (ITAT), Jabalpur Bench, in its order dated 15/05/2026, addressed a significant issue concerning the validity of ex-parte assessment and appellate proceedings conducted during the COVID-19 pandemic. The case of Vrahattakar Seva Sahakari Sameeti, Maryaditya vs. National Faceless e-Assessment Centre (ITA No. 121/JAB/2023, AY 2018-19) highlights the delicate balance between procedural compliance and the principles of natural justice. The Tribunal, comprising Vice President Shri Kul Bharat and Accountant Member Shri G.D. Padmahshali, allowed the appeal for statistical purposes, setting aside the ex-parte orders and remanding the matter for de novo assessment. This commentary delves into the facts, legal reasoning, and implications of the decision, emphasizing the duty of appellate authorities to ensure fair proceedings when evidence is absent.
Facts of the Case
The assessee, Vrahattakar Seva Sahakari Sameeti, Maryaditya, is a cooperative society engaged in the wholesale trading of agricultural produce and financial intermediary services. For the Assessment Year (AY) 2018-19, the assessee filed its return of income on 30/03/2019, declaring nil income after claiming a deduction under Chapter VI-A of the Income Tax Act, 1961 (the Act) for ₹5,74,188/-. The case was selected for complete scrutiny via a notice under Section 143(2) dated 28/09/2019. Despite multiple opportunities, including notices under Section 142(1) on 29/01/2020, 06/03/2020, and 24/08/2020, and a “no-response” letter on 09/10/2020, the assessee failed to comply. Consequently, the Assessing Officer (AO) completed the assessment ex-parte under Section 144 read with Section 143(3), (3A), and (3B) on 26/04/2021. The AO denied the Chapter VI-A deduction and made additions: (1) interest of ₹68,83,156/- paid to outsiders was disallowed under Section 69C, and (2) unexplained expenses of ₹27,09,879/- were also brought to tax under Section 69C. Aggrieved, the assessee appealed to the National Faceless Appeal Centre (NFAC), which dismissed the appeal ex-parte. The assessee then approached the ITAT.
Reasoning of the ITAT
The Tribunal’s reasoning centered on the procedural deficiencies in both the assessment and appellate stages. The key points are as follows:
1. Admitted Non-Compliance and COVID-19 Impact:
The assessee’s Authorized Representative (AR), Mr. Ayush Gupta, candidly accepted that the ex-parte proceedings were attributable to the assessee’s failure to comply. However, he argued that the COVID-19 pandemic disrupted the assessee’s operations, displacing necessary support and facilities, which prevented effective compliance. The Tribunal noted that the assessment order itself was passed during the pandemic outbreak, and the assessee had submitted additional evidence before the NFAC without complying with Rule 46A of the Income Tax Rules, 1962. This factual position led the Tribunal to accept the plea for remand.
2. Lack of Evidence in Proceedings:
The Tribunal observed that neither the assessment nor the first appellate proceedings involved any evidence or submissions. The assessee’s non-cooperation constrained the tax authorities to proceed ex-parte. The Tribunal emphasized that the proceedings did not determine the rights and liabilities of the parties conclusively due to the absence of evidence. This lack of material was a critical factor in deciding to remand the case.
3. Judicial Precedents on Remand:
The Tribunal relied on two key judicial precedents:
– CIT vs. Jansampark Advertising & Marketing (P) Ltd. (2015, 231 Taxman 384 (Del)): The Delhi High Court held that when an assessment is completed in the absence of evidence or submissions, the appellate authority is duty-bound to remit the case for proper verification and fresh assessment.
– Sharda Domestic Fuels (P) Ltd. vs. State of MP (2013, 32 Taxmann.com 416 (MP) & 59 VST 176 (MP)): The jurisdictional High Court laid a similar ratio, emphasizing the need for remand when proceedings lack evidence.
Respectfully following these precedents, the Tribunal set aside the impugned order and remanded the matter to the AO for verification of issues in the light of evidence and for framing a fresh assessment. The Tribunal explicitly stated that it was not commenting on the merits of the case.
4. Duty of Appellate Authorities:
The Tribunal underscored that the NFAC, as the first appellate authority, should have remitted the case for proper verification instead of dismissing the appeal ex-parte. The additional evidence submitted by the assessee before the NFAC was admitted without complying with Rule 46A, further highlighting procedural irregularities. The Tribunal’s decision reinforces the principle that appellate authorities must ensure that assessments are based on cogent evidence, especially when the assessee’s non-compliance is attributable to extraordinary circumstances like the pandemic.
Conclusion
The ITAT’s decision in this case is a pragmatic application of natural justice principles. By allowing the appeal for statistical purposes and remanding the matter for de novo assessment, the Tribunal provided the assessee an opportunity to present evidence and explanations that were previously unavailable due to COVID-19 restrictions. The ruling aligns with the judicial trend that procedural lapses should not lead to substantive injustice, particularly when the assessee’s failure is not willful but due to force majeure. The case serves as a reminder that tax authorities must balance strict compliance with fairness, especially in ex-parte proceedings. The AO is now directed to conduct a fresh assessment, considering the assessee’s evidence and submissions, ensuring that the rights of both parties are properly adjudicated.