ITAT Delhi Restores Appeal to NFAC: Ex-Parte Dismissal Without Merit Adjudication Held Improper in Case Involving Sections 68 and 69C Additions
Case Overview
Case Name: Medway Educational Consultant Private Limited Vs AO (ITAT Delhi)
Assessment Year: 2020-21
Forum: Income Tax Appellate Tribunal, Delhi
Key Provisions Involved: Section 68, Section 69C, Section 143(2), Section 143(3), Section 144B, Section 250 of the Income Tax Act, 1961
Background and Facts of the Case
The dispute in Medway Educational Consultant Private Limited Vs AO arose from the assessment proceedings for Assessment Year 2020-21. The assessee company had filed its return of income on 22-01-2021, declaring total income of Rs. 6,83,670/-. The return came under the radar of the tax authorities primarily because the net profit disclosed therein was a strikingly low 0.33% of turnover — a figure that triggered scrutiny to verify whether the business expenditure claimed was genuine and properly supported.
Scrutiny Notice and Assessment Proceedings
Following the selection of the case for scrutiny, the Assessing Officer issued a notice under Section 143(2) of the Income Tax Act, 1961 on 29-06-2021. Thereafter, a series of statutory notices were issued at various stages of the assessment proceedings. The assessee did submit certain responses and supporting material during this phase, which the Assessing Officer considered before drawing conclusions.
Upon completion of the assessment under Section 143(3) read with Section 144B of the Act, the Assessing Officer made the following two significant additions:
- Rs. 2,00,74,294/- — treated as unexplained expenditure and disallowed under
Section 69Cof the Income Tax Act, 1961 - Rs. 35,00,000/- — treated as unexplained cash credit and added back under
Section 68of the Income Tax Act, 1961
These additions, totalling over Rs. 2.35 crores, were substantially disproportionate to the declared income of approximately Rs. 6.83 lakhs and formed the crux of the dispute.
Appeal Before the National Faceless Appeal Centre (NFAC)
Aggrieved by the assessment order dated 21-09-2022, the assessee preferred an appeal before the National Faceless Appeal Centre (NFAC), Delhi. However, despite the NFAC granting multiple opportunities to the assessee to participate in the appellate proceedings and place its submissions on record, the assessee failed to respond or appear.
As a consequence, the NFAC passed an ex-parte order dated 31-12-2024, dismissing the appeal on account of the assessee's non-participation, without examining the merits of the additions made by the Assessing Officer.
This ex-parte dismissal — rendered without any substantive adjudication of the legal issues — became the central point of challenge before the Income Tax Appellate Tribunal.