The Pune bench of the Income Tax Appellate Tribunal (ITAT) held that the Income-tax Act is a welfare legislation and even principles of natural justice demands that the taxpayer/assessee should be heard as far as reasonably possible.
The assessee is proprietor of S.V. Enterprises. The assessee is engaged in the business of construction. During the year under consideration, the assessee has derived income under the head „income from business or profession‟, „income from capital gains‟ & „income from other sources‟.
During the year under consideration, the assessee had shown large increase in his capital account and on verification, it was noticed by the AO as per Schedule No.A of capital account that there is an addition of Rs. 1,00,24,373/- to the capital account of the assessee.
The assessee was asked to explain the source of such increase in capital account and in response thereof, the AR of the assessee submitted documents relating to sundry creditors and also furnished details of unsecured loans.
AR of the assessee during the assessment proceedings explained introduction of capital but could not explain introduction of Rs.70.00 lakhs and another opportunity was given to the assessee to submit confirmation in case of randomly selected creditors and unsecured loans. AR of the assessee had attended on 26/12/2017 and submitted few more confirmations of sundry creditors from whom unsecured loans were taken.
For the balance confirmations, AR accepted the fact that Rs.70.00 lakhs is the income which was not offered for taxation and the same was directly added to the capital account. Hence, amount of Rs.70.00 lakhs introduced in the capital account was treated as unexplained investment and added to the total income of the assessee by the AO.
It was seen from the order of the NFAC that once the appeal was transferred to NFAC, various notices under section. 250 were issued to the assessee. There were at least 4 opportunities given to the assessee and all the notices were duly served on the registered email ID of the assessee.
Thereafter, on 01/11/2022 another opportunity was also provided to the assessee which was duly delivered also on the registered email ID of the assessee, but in all these hearing opportunities given to the assessee, he failed to avail the benefit in compliance of natural justice and eventually, the NFAC was left with no alternative, but to pass an order ex-parte considering the assessment order.
After hearing both the parties, the Tribunal observed that before the AO, the assessee was unable to furnish any evidence regarding the sudden increase in the capital account and it is also on record that for certain amount, which is the disputed amount in this case, it was also accepted from the assessee‟s side by his AR that this amount of Rs.70.00 lakhs is the income which was not offered for taxation and the same was directly added to the capital account.
The bench was of the considered view that the rights and liabilities of the parties herein are yet to be decided substantially by the NFAC, who had only relied on the materials/documents on record, but the assessee was not able to provide his submissions before the NFAC.
The two member bench consisting of R.S Syal (Vice President) and Partha Sarathi Chaudhary (Judicial member) held that Income-tax Act is a welfare legislation and even principles of natural justice demands that the taxpayer/assessee should be heard as far as reasonably possible, therefore one final opportunity is provided to the assessee and in view thereof, the bench set aside the order of the NFAC and remanded the matter back to its file for re-adjudication as per law complying with the principles of natural justice.
At the same time, the assessee was directed to represent his case on merits by filing all relevant details/documents before the NFAC. Thus the appeal was allowed.
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