Facts of the Case

A search and seizure operation under section 132 of the Income-tax Act, 1961 was conducted on 02.07.2018 in the case of the Hari Om Rastogi Group, wherein the assessee was also covered by the warrant of authorisation. Three separate appeals pertaining to Assessment Years 2015-16, 2018-19 and 2019-20 were filed against ex-parte or adverse orders passed by the Commissioner of Income Tax (Appeals).

For AY 2015-16, the assessment resulted in an addition of ₹3,50,000, and the appeal before the CIT(A) was dismissed ex-parte due to non-submission of written submissions.
For AY 2018-19, after issuance of notice under section 153A, the return filed by the assessee was treated as invalid solely on account of non-e-verification, and an addition of ₹5,00,000 was made under section 69 based on a DVO report alleging unexplained investment in renovation of property.
For AY 2019-20, despite filing revised return, the assessment resulted in substantial additions and the appeal before the CIT(A) was dismissed for non-prosecution.

Aggrieved, the assessee approached the Income Tax Appellate Tribunal.

 

Issues Involved

  1. Whether ex-parte appellate orders passed without providing reasonable opportunity are sustainable in law.
  2. Whether a return can be treated as invalid solely due to non-e-verification, being a technical default.
  3. Whether additions based on a DVO report can be sustained without adequate opportunity to rebut.
  4. Whether the matters deserved to be remanded for fresh adjudication.

 

Petitioner’s Arguments

The assessee contended that the appeals were dismissed ex-parte without granting adequate opportunity of being heard, violating principles of natural justice. For AY 2018-19, it was submitted that treating the return as invalid merely due to non-e-verification was a technical lapse and should not result in substantive adverse consequences. The assessee also challenged the reliance on the DVO report without granting an effective opportunity to explain the source of investment or to rebut the valuation.

 

Respondent’s Arguments

The Revenue relied on the orders of the lower authorities, contending that the assessee failed to comply with statutory notices and did not discharge the onus of explaining the source of investment or furnishing supporting evidence before the appellate authority.

 

Court Order / Findings

The Income Tax Appellate Tribunal observed that for Assessment Years 2015-16 and 2019-20, the appeals were dismissed ex-parte by the CIT(A) without effective adjudication on merits. The Tribunal held that such dismissal without granting reasonable opportunity is not sustainable.

For Assessment Year 2018-19, the Tribunal noted that the return was treated as invalid only due to failure of e-verification, which constituted a technical default. The addition of ₹5,00,000 was made on the basis of a DVO report, and although the assessee challenged the report, no effective opportunity was granted to substantiate the claim with evidence.

Accordingly, the Tribunal set aside the appellate orders for all three assessment years and remanded the matters back to the file of the CIT(A) with a direction to pass fresh appellate orders after providing reasonable opportunity of being heard to the assessee. The assessee was also directed to produce documentary evidence in support of his claims.

 

Important Clarification

The Tribunal clarified that technical lapses such as non-e-verification of return should not, by themselves, defeat substantive rights of the assessee without due adjudication. Ex-parte dismissal of appeals and additions based on valuation reports must conform to principles of natural justice. All appeals were allowed for statistical purposes

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1770878998_HARIOMRASTOGIFATEHPURVS.ACITCENTRALCIRCLEALLAHABAD2.pdf 

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