Facts of the Case

The assessee was subjected to assessment proceedings that resulted in an ex-parte order due to alleged failure to comply with statutory notices issued by the Assessing Officer. The assessment was completed under best judgment provisions, and various additions were made, including those relating to cash credits treated as unexplained income under Section 68.

During appellate proceedings, the assessee sought to furnish documentary evidence explaining the transactions and sources of funds. However, the CIT(A) declined to admit the documents as additional evidence under Rule 46A and confirmed the additions without undertaking further verification.

Aggrieved by the confirmation of additions, the assessee filed an appeal before the ITAT.

Issues Involved

  1. Whether an ex-parte assessment without effective opportunity of hearing is legally sustainable.
  2. Whether additions under Section 68 can be upheld without examining supporting evidence.
  3. Whether the CIT(A) was justified in refusing admission of evidence under Rule 46A.

Petitioner’s Arguments (Assessee)

  • Adequate opportunity to present the case was not provided during assessment proceedings.
  • Evidence produced before the CIT(A) was essential for determining the correct tax liability.
  • Additions were made without proper inquiry or verification of facts.
  • Denial of opportunity violated principles of natural justice.

Respondent’s Arguments (Revenue)

  • The assessee failed to comply with statutory notices during assessment proceedings.
  • The Assessing Officer was justified in completing the assessment based on available material.
  • The CIT(A) correctly applied Rule 46A in rejecting additional evidence.

Court Order / Findings (ITAT Allahabad)

  • The assessment was completed ex-parte without full consideration of the assessee’s explanation.
  • The CIT(A) refused to admit evidence without properly evaluating whether sufficient cause existed for earlier non-production.
  • Additions were confirmed without detailed factual examination.

 Important Clarification

  • Fair opportunity of hearing is fundamental in tax proceedings.
  • Ex-parte assessments must still adhere to principles of natural justice.
  • Additions under Section 68 require proper verification of identity, creditworthiness, and genuineness.
  • Appellate authorities may admit evidence where necessary to do justice.
  • Remand is appropriate where procedural fairness is compromised.

Link to download the order –

https://itat.gov.in/public/files/upload/1628140483-ITA%20No.%20122%20of%202019%20Amit%20Kumar.pdf

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