Facts of the Case

The assessee, M/s Kesarwani Brothers, filed an appeal against the order dated 16.12.2024 passed by the Commissioner of Income Tax (Appeals), Lucknow-3 for Assessment Year 2018-19, whereby the appeal was dismissed in limine on the ground of non-compliance.

The assessment was completed under Section 144 of the Income Tax Act vide order dated 23.04.2021, assessing total income at ₹81,45,876 as against returned income of ₹11,05,120. The Assessing Officer made an addition of ₹47,08,497 by invoking Section 145(3) and further added ₹23,32,259 on account of alleged extra gross profit on unaccounted sales.

Aggrieved by the additions and the dismissal of appeal by the CIT(A), the assessee preferred an appeal before the Income Tax Appellate Tribunal.

 Issues Involved

  1. Whether dismissal of the appeal in limine without granting adequate opportunity of hearing is sustainable in law.
  2. Whether additions made by invoking Section 145(3) and estimating gross profit were justified without proper appreciation of facts.
  3. Whether principles of natural justice were violated during assessment and appellate proceedings.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that neither the Assessing Officer nor the CIT(A) provided reasonable and effective opportunity of hearing. It was submitted that non-compliance was due to unavoidable circumstances, including serious illness caused by Covid-19 affecting the assessee’s counsel and family members.

It was further argued that the assessee maintained regular audited books of account, no excess stock was found during survey, and the gross profit rate adopted by the authorities was excessive and unjustified. The assessee prayed for restoration of the matter for fresh adjudication.

 Respondent’s (Revenue’s) Arguments

The learned Departmental Representative did not object to restoration of the matter and agreed that the case may be remanded for fresh consideration in accordance with law.

 Court Order / Findings

The ITAT observed that the appeal was dismissed in limine without granting adequate opportunity of hearing to the assessee. Considering the submissions of both sides and the agreement for restoration, the Tribunal held that the impugned order could not be sustained.

Accordingly, the ITAT set aside the appellate order dated 16.12.2024 and directed the CIT(A) to pass a de novo order in accordance with law after providing reasonable opportunity of being heard to the assessee. All grounds of appeal were treated as disposed of in accordance with the remand direction.

The appeal was partly allowed for statistical purposes.

 Important Clarification / Legal Principle

An appeal cannot be dismissed in limine without affording adequate and effective opportunity of hearing. Orders passed in violation of principles of natural justice are unsustainable and liable to be set aside with a direction for fresh adjudication.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1770871701_KESARWANIBROTHERSALLAHABADVS.DEPUTYCOMMISSIONEROFINCOMETAXCENTRALCIRCLEALLAHABAD.pdf  

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