Facts of the Case

The assessee filed his return declaring income of ₹10,48,170. The Assessing Officer received information that the assessee had jointly purchased immovable property at Tignauta, Naini, Allahabad with his brother for ₹33,82,000 (including stamp duty), which was not reflected in the balance sheet.

Reassessment proceedings were initiated under section 147 by issuing notice under section 148. The assessee filed a return in response declaring the same income as originally reported. However, due to non-response to subsequent notices, the Assessing Officer completed an ex-parte assessment under sections 147/144/144B, making several additions including:

  • ₹16,91,000 under section 69 (unexplained investment)
  • ₹12,25,500 under section 56(2)(vii)(b) (difference between stamp value and purchase consideration for assessee’s share)
  • ₹13,91,805 under section 68 (unexplained loan)
  • ₹1,69,643 disallowance of interest
  • Additional unexplained investment of ₹17,12,295

Issues Involved

  1. Whether reassessment proceedings are sustainable where notice under section 148 is alleged not to have been served.
  2. Whether multiple additions relating to property purchase and loans can be sustained without examining books and explanations.
  3. Whether stamp duty valuation difference can be taxed under section 56(2)(vii)(b) without proper opportunity.
  4. Whether dismissal of appeal ex parte violates principles of natural justice.

Petitioner’s Arguments

The assessee contended that he never received the notice issued under section 148 and therefore could not participate in reassessment proceedings. It was further argued that both the assessment and appellate orders were passed ex parte without granting reasonable opportunity of hearing.

  • The investment in property was duly recorded in books
  • The addition based on stamp duty value was notional and unjustified
  • Loans were received from identifiable persons assessed to tax
  • Interest disallowance was made on presumptions without verification

Respondent’s Arguments

The Departmental Representative did not object to remanding the matter to the Assessing Officer for fresh consideration.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that both the assessment order and the appellate order had been passed ex parte and that the assessee claimed non-receipt of notice under section 148. Considering the magnitude of additions and the need for factual verification, the Tribunal held that the assessee deserved one more opportunity to present his case.

Accordingly, the entire matter was restored to the file of the Assessing Officer with directions to provide adequate opportunity to produce evidence and explanations regarding property purchase, loans, and related issues. The assessee was cautioned to cooperate fully during the set-aside proceedings; otherwise, the Assessing Officer would be free to decide the matter on available material.

Important Clarification

The Tribunal did not adjudicate the merits of the additions but emphasized that substantial tax liability arising from reassessment cannot be sustained without providing effective opportunity of hearing. Ex-parte orders, particularly where service of notice is disputed, are liable to be set aside in the interest of natural justice.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771066603_SHAKEELHUSSAINALLAHABADVS.ACITNFACDELH.pdf

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