Denial of Fair Opportunity and Inadequate Evidence Examination: ITAT Restores Matter to AO [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT)restored the matter to the Assessing Officer (AO) after finding that the Commissioner of Income Tax (Appeals)[CIT(A)] had denied the assessee a fair opportunity to present evidence and had failed to adequately examine the provided documents.

Jignesh Shah,appellant-assessee,filed his return of income for Assessment Year 2022-23 on 31/12/2022, declaring Rs.64,87,610/- as total income. The case was selected for scrutiny, and multiple notices were issued between 01/06/2023 and 07/03/2024. Despite several reminders, the assessee failed to provide complete information and did not submit crucial documents like loan confirmations and cash deposit reconciliations.

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The AO treated cash deposits of Rs.64,25,000/- as unexplained under Section 69A due to lack of reconciliation. Credit card payments of Rs.3,74,148/- were initially proposed for higher addition but later corrected and treated as unexplained under Section 69C. The assessee also failed to confirm unsecured loans of Rs.17,20,96,112/- and could not substantiate them, leading the AO to treat the entire amount as unexplained money under Section 69A of the Act.

As a result, the assessed income was determined at Rs.18,53,82,870/-. Interest was levied under Sections 234A, 234B, 234C, and 234D, and penalty proceedings were initiated under Section 271AAC. The assessment was concluded due to the appellant’s non-compliance.

The assessee appealed before the CIT(A), who dismissed the appeal ex-parte due to non-compliance and failure to provide necessary documents despite multiple opportunities. The assessee claimed the cash deposits of Rs.64,25,000/- were from earlier bank withdrawals, but the CIT(A) upheld the AO’s addition under Section 69A, citing lack of proper reconciliation.

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Regarding credit card payments of Rs.3,74,148/-, the assessee argued the AO misquoted the amount, but the CIT(A) rejected this and sustained the addition under Section 69C. For unsecured loans of Rs.17,20,96,112/-, the assessee cited financial distress but failed to substantiate the creditors' identity, creditworthiness, and genuineness, leading the CIT(A) to uphold the addition under Section 69A of the Act.

The CIT(A) noted the assessee had only sought adjournments and failed to provide substantial explanations. He concluded that the burden of proof remained unmet, confirming all additions and dismissing the appeal.

The assessee aggrieved by the decision of CIT(A) appealed before the tribunal.

The tribunal found that the CIT(A) passed an ex-parte order without addressing the assessee’s arguments and only repeated the AO’s findings. The assessee had requested more time on 17.08.2024, due to the Vivad Se Vishwas Scheme 2024, but this request was ignored, denying a fair hearing.

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The assessee provided necessary documents like bank statements and books of accounts, but the AO did not properly examine them. The cash deposits of Rs.64,25,000/- were rejected without reconciliation, and the credit card payment of Rs.3,74,148/- was misstated in the SCN. The addition of Rs.17,20,96,112/- for unsecured loans was made without checking their origin. The assessee’s request for more time and a virtual hearing was also ignored.

The two member bench comprising T.R.Senthil Kumar (Judicial Member) Makarand V.Mahadeokar (Accountant Member) concluded that the assessment was unfair and set aside the CIT(A)’s order, directing the AO to reconsider the case after giving the assessee a proper chance to submit evidence.

In short,the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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