AO passes Ex Parte Assessment Order without considering ITR Filed in response to S. 148: ITAT directs to pass Order afresh [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) found that the Assessing Officer ( AO ) had passed an ex parte assessment order without considering the return filed by the assessee in response to the notice under Section 148 of the Income Tax Act, 1961.

Govindbhai Hirabhai Bharvad, the appellant-assessee, derived income under the heads of House Property, Capital Gain, and Other Sources. The assessee had filed his original return for assessment year ( AY ) 2015-16, declaring an income of Rs. 6,07,960/-. The  case was reopened with a notice under Section 148 on 22.03.2021 due to cash deposits of Rs. 1,37,55,000/-.

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In response, the assessee filed a return on 10.03.2022, but the AO claimed no return was filed and made a Best Judgment Assessment, adding Rs. 1,37,55,000/- as unexplained money. Due to post-Covid illness, the assessee missed notices and filed an appeal late by 104 days. The Commissioner Of Income Tax (Appeals) [CIT(A)] dismissed the appeal, refusing to condone the delay.

The assessee cited the Supreme Court judgment in Collector, Land Acquisition vs. Mst. Katiji ( 1987 ), where the Court held that "sufficient cause" under the Limitation Act should be interpreted flexibly to serve justice. The Court emphasized that delays should be condoned to prevent meritorious cases from being dismissed and stated that substantial justice should take priority over technicalities. It concluded that the judiciary's role is to correct injustice, not uphold it on technical grounds.

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The Supreme Court in N. Balakrishnan vs. M. Krishnamurthy ( 2008 ) condoned a delay of 883 days, stating that the Limitation Act aims to ensure justice, not destroy rights. The Court stressed that delays should be considered if the explanation isn’t malicious or a delaying tactic, as its role is to resolve disputes and provide justice.

The tribunal found that the AO issued an ex parte assessment order without considering the assessee’s return filed in response to the notice under Section 148. The CIT(A) dismissed the appeal, delayed by 104 days due to illness, without a hearing.

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The bench, recognizing the reasonable medical grounds for the delay, set aside the order and directed the AO to issue a fresh assessment after properly hearing the assessee. The assessee was instructed to cooperate by submitting all necessary documents.

The two-member bench comprising T.R Senthil Kumar ( Judicial Member ) and Makarand Vasant Mahadeokar ( Accountant Member ) allowed the appeal filed by the assessee.

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