ITAT Slams CIT(A) for Denial of Natural Justice, Restores Unsecured Loan Addition Case to AO for Fresh Hearing [Read Order]

The Income Tax Appellate Tribunal (ITAT) Mumbai has strongly criticized the Commissioner of Income Tax (Appeals) for denying a fair hearing to a taxpayer, calling it a violation of natural justice. The tribunal ordered tax authorities to re-examine a ₹13.47 crore addition related to unsecured loans, giving the assessee a proper chance to present evidence.

Mumbai-based Gheverchand Rikhabchand Jain, a trader in shares and securities, who had taken loans from multiple parties. Tax authorities had treated these loans as bogus and added the amount to the assessee's taxable income while also disallowing ₹2.85 crore in interest payments.

The CIT(A) dismissed the appeal without properly reviewing submitted documents or granting a video-conference hearing as requested.

During ITAT proceedings, the appellant representatives argued that they had physically submitted loan documents since digital uploads were impractical, but the CIT(A) ignored them. Records showed the assessee had actively participated in remand proceedings with the Assessing Officer, contradicting the CIT(A)'s claim of non-cooperation.

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Judicial Member Narendra Kumar Billaiya and Vice President Saktijit Dey noted that dismissing an appeal without examining evidence amounts to "harassment of the taxpayer." They emphasized that authorities must follow due process, especially when substantial additions are made.

The tribunal directed the Assessing Officer to reconsider the case afresh after reviewing all documents and giving the taxpayer a fair opportunity to explain.

The fresh assessment will now allow proper scrutiny of loan documents and interest disallowance claims.

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