In a recent case, The Income Tax Appellate Authority (ITAT) of Delhi set aside the Ex Parte order given by the Commissioner of Income Tax (Appeals) [ CIT(A) ].
The appellant/assessee, K & S Fincon Private Limited, appealed against the Ex Parte Order by CIT(A) which upheld an addition of Rs. 1,25,28,168/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act 1961 (ITA), which is a clause that is intended to guarantee that individuals/ business entities reveal their income and assets openly without discrepancies.
In the Assessment Year 2012-13, the AO had received information regarding the assessee from the Deputy Director of Income Tax (Investigation) [ DDIT (Inv)], Faridabad suggesting that there is bogus expense of Rs 1,25,28,000/- made towards Softech Enterprises for bogus concerns. Therefore, a statutory notice was issued to the assessee under Section 148 of ITA, to which the assessee responded by filing a return declaring total income at Rs. 1,36,562/-.
During the assessment, the assessee didn’t respond to the statutory notices with questionnaire issued by the AO. The AO completed the assessment under Sections 144/147 of ITA at Rs. 1,26,64,664/- by adding Rs. 1,25,28,000/-, treating the same as accommodation entry under Section 68 of ITA. Aggrieved, the assessee appealed against the AO’s decision before the CIT(A), who dismissed the appeal and affirmed the AO’s order. Aggrieved again, the assessee appealed against this before the tribunal.
Before the Tribunal, the assessee contended that the addition was made without giving the assessee an adequate opportunity to present their case, as no physical notice of hearing was served by the Income Tax First Appellate. It was further submitted that only an email of the notice was sent to the legal consultant of the assessee, who unfortunately passed away. and after his death his staff failed to verify the notice received on his email and hence the same could not be replied.
The respondent, CIT(A), opposed the assessee’s contentions and submitted that the assessee had been thoroughly negligent in pursuing its case.
After hearing the arguments of both the appellant and respondent, The Bench of Mr. Khul Bharat and Mr Avdhesh Kumar Mishra observed that the assessee’s case was dismissed ex parte without affording the assessee an adequate opportunity of hearing.
The bench considered the totality of the facts of the case and concluded that to serve the interests of natural justice, the CIT(A)’s order should be set aside. In light of the observation made, the tribunal directed to restore the matter to file of First Appellate Authority for fresh decision after affording adequate opportunity of being heard to the assessee.
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