Non-Cooperation in Assessment Proceedings: Calcutta HC grants Appellant Final Opportunity to Substantiate Case under Income Tax Act

The Calcutta High Court in a recent ruling gave the appellant a final opportunity to substantiate their case of non-cooperation in assessment proceedings under the Income Tax Act 1961 ( ITA ) before the Assessing Officer ( AO )

The background of the case arose when the  Assessing Officer ( AO ) issued an assessment order against Somnath Commonsales, the assessee/appellant,  dated March 12, 2015, under Section 144 of the ITA. This section allows for a best judgment assessment when the assessee fails to cooperate in the assessment proceedings.

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Dissatisfied with the assessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)] of Kolkata. However, the assessee did not attend the hearings, leading to the dismissal of the appeal.

The assessee then appealed to the Income Tax Appellate Tribunal ( ITAT ), Kolkata. The appeal was scheduled for hearing in September 2022, but the assessee again failed to appear. Ergo, the ITAT dismissed the appeal ex parte.

The assessee later filed a miscellaneous application requesting the recall of the ex parte order, citing reasonable causes for their non-appearance. However, the ITAT rejected this application as well, considering the assessee's conduct throughout the proceedings. It was noted that even before the AO the assessee did not cooperate in the proceedings.

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Aggrieved, the assessee appealed before the High Court.

The bench of Justice TS Sivagnanam and Justice Hiranmay Bhattacharya, after examining the facts of the case, took note of the conduct of the assessee who was not diligent in prosecuting the matter and had not appeared before the Assessing Officer despite notice and also remained ex parte in the other proceedings.

However, considering the fact that the matter is an appeal under Section 260A of the Act, the bench directed the appellant/assessee to pay cost to the standing Counsel for the appellant. This direction was complied with.

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The division bench further observed that the reasons set out by the assessee for the non appearance seemed to be not wholly false and nor there is any material to show that the assessee has willfully not proceeded to appear before the Appellate authority/ Tribunal.

The bench also pointed out  that in any event, what is required to be considered is whether appropriate tax has been computed and levied upon execution of the factual position.

In result, the bench held that the matter can be remanded for fresh consideration to the AO so that the assessee would be able to place materials before the AO to substantiate their case.

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However, it was made clear that this is the final opportunity and no further indulgence would be granted to the assessee. The assessee is required to appear before the AO on the date fixed, submit documents and details called for and cooperate in the assessment proceedings.

For the above reasons, the appeal is allowed and the ITAT’s  order is set aside.

To Read the full text of the Order CLICK HERE

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