ITAT Sets Aside Best Judgment Assessment u/s 144, Orders Fresh Hearing Noting Prior Grant of S.11 Exemption [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), set aside a best judgment assessment order passed under Section 144 of the Income Tax Act, 1961, against the assessee, noting the prior grant of exemption under Section 11 to the Trust for the previous assessment year.

Coming to the facts of the present case, for the assessment year 2018-19, the assessee trust, Weaker Section and Tribal Rehabilitation Charitable Trust, Coimbatore, faced an ex parte order from the National Faceless Appeal Centre (NFAC).

The First Appellate Authority (FAA) had dismissed the Trust's appeal in limine due to non-compliance with notices, without adjudicating the substantive issues. The Trust, represented by Advocate Shri S. Sridhar, argued that the delay in filing the appeal and the non-response to notices were due to their lack of familiarity with the electronic regime of income tax proceedings and the Managing Trustee's health issues.

The Tribunal condoned the delay of 429 days, accepting these reasons as sufficient cause.

The assessee’s counsel submitted that the FAA had dismissed the appeal solely for non-compliance, without examining the merits, and that the assessment itself was completed on a best judgement basis under Section 144, denying the Trust exemption under Section 11 of the Income Tax Act.

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The Revenue’s counsel submitted that there was no violation of natural justice.

The ITAT, by relying on the decision of the Madras High Court case of Southern Steel Industries vs. AAC (CT) [1996] 101 STC 273, reached the conclusion that the FAA lacked jurisdiction to dismiss an appeal for non-compliance without addressing the merits.

The bench observed that the assessment was not completed on best judgment basis under 144 of the Act by denying exemption under 11 of the Act. The bench noted that for the previous assessment year, 2017-18, a scrutiny assessment under Section 143(3) of the Income Tax Act was carried out, giving the benefit of Section 11 of the Income Tax Act.

The ITAT set aside the FAA's order and remitted the matter back to AO for fresh adjudication.

The ITAT comprising George George K (Vice President) and S.R. Raghunatha (Accountant Member) allowed the assesse’s appeal for statistical purposes.

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