In a recent ruling, the Surat Bench of the Income Tax Appellate Tribunal ( ITAT ) held that the principles of natural justice demand the reassessment of a case if one party was not given the opportunity to be heard at first. The Tribunal held that this would uphold the interests of justice.
The assessee, Bakulbhai Durkabhbhai Domadiya, filed their income tax return for the assessment year 2017-16 on 28.09.2017, declaring a total income of Rs.8,33,350. The case was selected for scrutiny through Computer Assisted Scrutiny Selection (CASS), and various notices were issued to the assessee.
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During scrutiny, the assessing officer (AO) observed that the assessee had deposited Rs.55,10,000 in multiple accounts and provided no explanation for this activity. The assessee also did not explain his cash deposits during the demonetisation period, which were treated as unexplained money under Section 69A of the Income Tax Act 1961. The AO taxed the total income at 60% under Section 115BBE of the Act.
Displeased with the AO’s order, the assessee filed an appeal with the Commissioner of Income Tax (Appeal) [CIT(A)]. However, after the appeal, the assessee did not respond to any of the hearing notices, which led the CIT(A) to decide on the appeal ex parte based on the materials available on record. CIT(A) held that the appellant had not produced any material to counter the AO’s findings and dismissed the appeal due to noncompliance with the notice.
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In an Appeal before the Tribunal, the authorised representative (AR) of the assessee submitted that the assessee was not given adequate opportunity for hearing by the lower authorities. The AR further submitted that The assessee’s submissions dated December 23 and December 27 were not adequately considered when the AO issued an order under Section 143(3). Further, the CIT(A) violated natural justice principles by issuing five notices, the last of which was on June 23, 2023, but issuing the order under Section 250 on August 2, 2023, without giving the assessee a hearing.
The AR added that the assessee remained non-compliant before the CIT(A) due to medical issues and a lack of assistance from his Chartered Accountant. The assessee could not represent his case before the CIT(A) and held that the order passed ex parte violated the principles of natural justice and the reasons for his non-appearance were beyond his control.
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The Departmental representative for the revenue submitted that the assessee was careless during the appellate proceedings, which calls for dismissing the appeal. After hearing both parties, the tribunal held that the assessee was negligent and non-cooperative before the lower authorities and also stated that the request of the AR was for another opportunity for the assessee.
The two-member bench of the ITAT, comprising Pawan Singh (Judicial Member) and Bijayananda Pruseth ( Accountant Member), held that the principles of Natural Justice would call for giving the assessee another opportunity to be heard, asserting that the interests of justice would be met in the case the AO re-examines the issue.
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The tribunal also ordered the assessee to pay the cost of Rs. 20,000 to the credit of “Gujarat High Court Legal Aid Authority” within two weeks of the order, after which the CIT(A) order will be set aside. The matter will be remitted back to the AO for fresh assessment, and The Tribunal also directed the assessee to be more diligent and cooperate with the assessment proceedings. As a result, the appeal raised by the assessee was allowed.
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