Facts of the Case

The assessee, an individual trader, filed appeals against the orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2008-09 and 2009-10, as well as against the confirmation of penalty under Section 271(1)(c). The Assessing Officer had completed the assessment under Sections 144/147 by making additions based on unexplained bank deposits, estimating income at 8% of total deposits. The CIT(A) passed an ex-parte order due to non-appearance of the assessee.

Issues Involved

  1. Whether assessment completed under Section 144 without granting adequate opportunity to the assessee is sustainable.
  2. Whether ex-parte appellate orders of the CIT(A) can stand when the assessee was allegedly denied a fair hearing.
  3. Whether penalty under Section 271(1)(c) can survive when the quantum assessment itself is set aside.

Petitioner’s Arguments (Assessee)

  • The assessment was framed hastily under Section 144 without providing proper opportunity despite the limitation period available.
  • The CIT(A) passed an ex-parte order without adjudicating the grounds on merits.
  • Treating all bank credits as income was erroneous since not all deposits represent taxable receipts.
  • The action resulted in double taxation of income already disclosed as turnover.
  • Reliance was placed on the Supreme Court decision in Tin Box Company v. CIT to seek remand for fresh assessment after proper hearing.

Respondent’s Arguments (Revenue)

  • Multiple opportunities were granted, but the assessee failed to respond effectively.
  • The assessee did not produce supporting documents despite summons and recording of statement under Section 131.
  • Therefore, the Assessing Officer rightly proceeded with best-judgment assessment under Section 144.

Court Order / Findings (ITAT Allahabad)

  • The Tribunal observed that the CIT(A) had passed an ex-parte order without addressing the grounds raised.
  • The assessment was completed under Section 144 due to alleged non-participation, but the assessee claimed lack of adequate opportunity.
  • Following the Supreme Court ruling in Tin Box Company v. CIT, the Tribunal held that an assessment must be made only after granting a reasonable opportunity of being heard.
  • The impugned appellate orders were set aside, and the matter was restored to the file of the Assessing Officer for de-novo assessment in accordance with law after providing proper opportunity to the assessee.
  • Since the quantum assessment was remanded, the penalty appeal under Section 271(1)(c) was treated as infructuous, with liberty to the AO to initiate proceedings afresh if warranted.

Important Clarification

  • Non-grant of adequate opportunity violates principles of natural justice and vitiates the assessment proceedings.
  • Ex-parte orders without reasoned adjudication cannot be sustained.
  • Penalty proceedings dependent on quantum additions cannot survive if the underlying assessment is set aside.

Link to download the order -  https://itat.gov.in/public/files/upload/1698734752-78%20of%202023%20+2%20Sanjay%20Kesarwani(Assessee%20Appeal)%20SMC%20%20Quantum%20back%20to%20the%20file%20of%20the%20CIT(A)%20(Corrected).pdf

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