Facts of the Case

The assessee did not file a return of income for Assessment Year 2017-18. The Income Tax Department received information that the assessee had purchased an immovable property for a consideration of ₹26,60,000. Accordingly, the case was reopened under section 147 of the Income-tax Act, 1961 after issuance of notice under section 148.

Despite issuance of statutory notices, the assessee neither responded nor filed the return of income. During assessment proceedings, the assessee submitted that the consideration for the property was paid in cash partly by his late father and partly by himself over different years. The Assessing Officer, on the basis of information received under section 133(6) from one of the sellers, concluded that the entire amount of ₹26,80,000 was paid by the assessee during the relevant year. As the assessee failed to substantiate the source of such cash payments, the amount was treated as unexplained investment under section 69 and added to income. The assessment was completed under section 147 read with section 144.

Issues Involved

  1. Whether the addition of ₹26,80,000 under section 69 for unexplained investment in immovable property was justified.
  2. Whether the ex-parte appellate order passed by the NFAC without granting proper opportunity violated principles of natural justice.
  3. Whether the assessee deserved another opportunity to explain the source of investment.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that proper opportunity was not granted during the assessment and appellate proceedings and that statutory notices were not effectively served. It was further argued that the addition under section 69 was made without properly appreciating the facts and circumstances of the case and without allowing the assessee to explain the source of investment supported by evidence.

Respondent’s (Revenue’s) Arguments

The Department relied upon the assessment order and the ex-parte appellate order of the NFAC, contending that the Assessing Officer had correctly made the addition under section 69 and that no interference was warranted.

 Court Order / Findings

The Tribunal observed that there was complete non-compliance on the part of the assessee during the first appellate proceedings and that the NFAC had dismissed the appeal ex-parte. However, considering the overall facts and circumstances, the Tribunal held that the assessee deserved one more opportunity to present his case. Accordingly, the matter was restored to the file of the NFAC with a direction to adjudicate the appeal on merits after granting proper opportunity of hearing. The appeal was allowed for statistical purposes.

Important Clarification

The Tribunal clearly cautioned that the assessee must fully comply with the notices and directions issued by the NFAC during the set-aside proceedings. Failure to do so would entitle the NFAC to pass an order in accordance with law based on the material available on record, even on an ex-parte basis.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770627681_MOHAMMADGHUFRANKAUSHAMBIVS.ITO25KAUSHAMBI.pdf  

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