Unexplained Expenditure Addition of ₹77.47 Crore: ITAT Sets Aside Assessment Over Natural Justice Violation [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) set aside an assessment order involving an unexplained expenditure addition of ₹77.47 crore and remanded the matter to the Jurisdictional Assessing Officer (JAO), citing a violation of natural justice.

Redex Enterprise, appellant-assessee, a partnership firm providing manpower services, filed its income tax return for the assessment year 2020-21 on February 11, 2022, declaring an income of ₹33,46,040. The return was scrutinized as the firm had made substantial purchases from suppliers who were either non-filers, had filed non-business ITRs, or showed low turnover.

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The Assessing Officer (AO) issued multiple notices, which were only partially complied with. A final show cause notice was issued on December 7, 2022, seeking compliance by December 12, 2022. The assessee requested an extension until December 24, 2022, but the AO granted time only until December 15, 2022, as the assessment was nearing its deadline.

On December 25, 2022, the assessee sought permission through the grievance portal to upload its reply dated December 21, 2022. However, before the reply could be considered, the AO passed the assessment order on December 27, 2022, adding ₹77.47 crore as unexplained expenditure under Section 69C of the Act and demanded tax accordingly.

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The assessee appealed to the Commissioner of Income Tax(Appeals)[CIT(A)] and submitted additional evidence under Rule 46A of the Income Tax Rules, 1962. However, the CIT(A) rejected the evidence, stating it was not given to the Assessing Officer earlier, and dismissed the appeal, calling the purchases non-genuine.

Aggrieved by the CIT(A) order the assessee appealed before the tribunal.

The two member bench comprising TR Senthil Kumar(Judicial Member) and Annapurna Gupta(Accountant Member) noted that the assessee was unable to upload the details before the AO by December 15, 2022, and the grievance petition was not addressed. Despite this, the AO proceeded with the assessment, violating the principles of natural justice.

It found that the CIT(A) wrongly rejected the additional evidence without proper reasons or seeking a remand report.

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To ensure fairness, the tribunal set aside the matter to the JAO to review the additional evidence, provide a proper hearing, and pass a fresh assessment order. It also directed the assessee to cooperate by submitting all necessary materials during the new proceedings.

In short,the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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