In a recent ruling, the Income Tax Appellate Tribunal ( ITAT ) SMC-‘A’ Bench, Bangalore, remanded an ex-parte decision passed by the Commissioner of Income Tax (Appeals) [CIT(A)] back for reconsideration, citing a violation of natural justice principles. The assessee/ appellant, M/s Innovior Advisory Pvt. Ltd., filed an appeal challenging the CIT(A)’s decision regarding their 2018-19 assessment.
Before the tribunal, the appellant, represented by Shri Deepak Chopra, CA, contended that the CIT(A) had dismissed their appeal without considering material evidence or hearing their submissions due to their non-appearance. The central point of the appeal was against the assessment made under Section 143(3) of the Income Tax Act 1961 ( ITA ), in which the Assessing Officer ( AO ) rejected the company’s method of valuing its shares using the Discounted Cash Flow ( DCF ) method. Instead, the AO adopted the Net Asset Value ( NAV ) method, leading to an upward adjustment of ₹87,27,212 under Section 56(2)(viib) of the tax statute, citing the shares had been issued at a higher value than their fair market price.
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The CIT(A), on the other hand, upheld the AO’s decision, but the appeal was dismissed ex-parte as the assessee had failed to appear for three consecutive hearings on 13th March 2023, 17th April 2023, and 23rd April 2024. According to the assessee’s legal team, the notices were sent to their old auditor’s email address, causing the non-receipt of hearing notifications, and therefore the non-appearance was neither deliberate nor intentional. They argued that this amounted to a breach of natural justice, as their submissions were not considered on merit.
The respondent, represented by Shri Ganesh R. Ghale, Standing Counsel for the Revenue, supported the orders passed by the lower authorities and urged the tribunal to dismiss the appeal.
The ITAT bench, presided by Mr Waseem Ahmed, Accountant Member, and Mr Soundararajan K., Judicial Member, noted that the CIT(A) had scheduled three hearings within two months and dismissed the case based on the appellant’s absence. The tribunal accepted the explanation provided by the assessee’s counsel and held that the CIT(A)’s decision to proceed ex-parte without proper opportunity for the appellant was hasty.
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In result, the ITAT ruled that the ex-parte order of the CIT(A) be set aside and directed the case to be remanded for fresh consideration. The CIT(A) was instructed to decide the appeal on merits after providing the assessee with a reasonable opportunity to be heard. The ITAT’s decision underscores the importance of natural justice in the appeals process, stressing that all parties must be given fair opportunities to present their case.
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