ITAT sets aside Rs. 1.55 Crore Unexplained Investment Addition, Orders Fresh Assessment due to denial of Fair Hearing [Read Order]

In a recent ruling, the Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) set aside the addition of Rs. 1.55 crore as an unexplained investment and directed a fresh assessment due to procedural lapses and denial of a fair hearing.

In this case, the assessing officer ( AO ) made an addition of Rs. 1.55 under Section 69 of the Income Tax Act, 1961, as unexplained investments in immovable property. It is to be noted that the proceedings before the AO were ex parte, as the assessee’s tax consultant failed to file responses to the notices issued by the AO. Instead, the consultant only raised grievances on the tax portal without addressing the department’s queries.

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It was contended by the assessee’s counsel that the final assessment order was passed without considering the merits.

Although the assessee appealed before the Commissioner of Income Tax (Appeals) [CIT( A )], it was dismissed ex parte.

The assessee’s counsel submitted that there was a huge mistake on the part of the tax consultant of the assessee, who instead of filing written replies to queries made by the AO was only raising grievances on the tax portal of the assessee.

The counsel on behalf of the assessee contended that the assessee was an illiterate farmer and if an opportunity was given, the assessee would promptly comply with all the notices and explain the source of investment in the property under question.

The bench accepted the procedural lapses on the part of the tax consultant and recognized the need to provide the assessee with a fair opportunity to present his case.

The ITAT comprising Siddhartha Nautiyal ( Judicial Member ) and Annapurna Gupta (  Accountant Member  ) held that the principles of natural justice were violated and restored the matter to the AO for de-novo consideration.

The tribunal allowed the assessee’s appeal for statistical purposes.

To Read the full text of the Order CLICK HERE

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