ITAT quashes Impugned Additions imposed in “Injudicious Manner”, reprimands Lack of Requisite Care [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) expressed strong dissatisfaction with the careless conduct of the Faceless Assessing Officer (AO) and the Faceless Commissioner of Income Tax (Appeals) [CIT(A)]. The bench, comprising Judicial Member Amit Shukla and Accountant Member Girish Agrawal, criticized the arbitrary and injudicious manner in which the addition was imposed on the assessee.

The assessee did not file his return of income u/s.139. From the AIMS information available on the system, ld. Assessing Officer noted that assessee had entered into certain financial transactions during the year whereby total income under the Act exceeds the maximum amount which is not chargeable to income tax in view of the Assessing Officer.

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During the assessment, the assessee submitted two detailed responses, both acknowledged in the AO’s order. In the first submission dated 03.03.2022, the assessee provided an explanation of his legal practice, along with a complete set of financial documents including the computation of income, balance sheet, profit and loss account, and a breakdown of interest and other income as reflected in Form 26AS. The balance sheet disclosed an advance payment of ₹3,23,94,000 to Orbit Construction for a flat purchase, which was reduced by a refund of ₹19,45,213 received during the year.

In his second submission, the assessee elaborated on the credits in Form 26AS and reconciled them with the income reported in the return filed in response to the notice under Section 148. He clarified that the addition made by the AO amounted to twice the gross income reported in Form 26AS. Despite these detailed representations, neither the AO nor the CIT(A) gave due consideration to the submissions or assessed the case on its merits in accordance with the law.

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The Tribunal observed that had the authorities exercised the necessary caution and applied their quasi-judicial/judicial discretion appropriately, it would have been evident that neither the initiation of reassessment proceedings nor the resulting addition was justified. A judicious approach would have prevented unnecessary litigation, thereby saving time, resources, and shielding the assessee from undue harassment.

The Tribunal further noted that the assessments and appeal proceedings lacked thoughtful consideration, reflecting a failure to uphold the duties entrusted to the tax authorities. In the present case, the assessee had not filed a return of income under Section 139 of the Income Tax Act. Based on information available in the AIMS system, the AO observed that the assessee had undertaken certain financial transactions during the year, leading the AO to conclude that the assessee’s total income exceeded the taxable threshold.

Consequently, the ITAT remanded the matter to the Jurisdictional Assessing Officer (JAO) for limited verification of the assessee’s claims and directed the JAO to pass a fresh order in accordance with legal provisions. The Tribunal also observed that the assessee must be given a fair opportunity to present his case and substantiate his claims.

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At the same time, the tribunal bench advised the assessee to be diligent in attending hearings and to avoid seeking adjournments unless justified by compelling reasons, to ensure timely resolution of the matter.

To Read the full text of the Order CLICK HERE

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