ITAT Grants Final Opportunity for Personal Hearing on Addition of Bank Credit Entries Despite Earlier Non-Cooperation on Costs [Read Order]

The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench set aside the addition of ₹1.61 crore on the ground of bank credit entries. It was held the addition was unsustainable in the absence of adequate opportunity to the assessee to be heard.

It directed the matter to be remitted to the Assessing Officer for fresh assessment subject to the payment of ₹10,000 as costs to the assessee. It allowed the appeal for statistical purposes.

The assessee is an individual.He had not filed his return for the assessment year2017-18. The Assessing Officer noticed cash deposits of ₹49.23 lakh including ₹16.13 lakh during the demonetization period. It also noticed several credit entries into the bank accounts.

As the assessee did not comply with the notices issued under Section 142(1), the AO issued him a notice under Section 144. It assessed the assessee on estimate under Section 69A. It made an addition of ₹1.61 crore.

As a result the assessee filed the appeal. The Commissioner of Income Tax(Appeals), [CIT(A)], also issued an ex-parte order confirming the addition. It was on the ground of non-appearance by the assessee.

However, the assessee’s case before the Tribunal was that the entire credit entries were mechanically treated as unexplained income without any proper verification. The assessee’s plea before the Tribunal was that he be granted a final opportunity to produce relevant documents and explanations.

However, the Revenue opposed the assessee’s plea on the ground of non-cooperation and demanded costs.

The Tribunal comprising Dr. B.R.R. Kumar [Vice President] and T.R. Senthil Kumar [Judicial Member] observed that although the assessee did not cooperate in the earlier stages, the principles of natural justice demanded a final opportunity. The Tribunal held that the addition of the entire bank credits without proper examination could not be sustained.

Accordingly, the Bench directed the assessee to deposit ₹10,000 as cost and instructed the AO to provide a fresh opportunity to examine the case on merits.

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