Facts of the Case

The assessee was subjected to assessment proceedings wherein the Assessing Officer completed the assessment ex-parte due to non-appearance and alleged non-compliance by the assessee. Various additions were made, including on account of low household withdrawals, unverifiable expenses, unsecured loans, and sundry creditors.

During appellate proceedings, the assessee attempted to produce evidence in support of his claims. However, the CIT(A) treated the documents as additional evidence and declined to admit them under Rule 46A. The appellate authority also did not conduct further inquiry or provide effective opportunity to substantiate the claims.

Aggrieved, the assessee filed an appeal before the ITAT along with cross-objections.

Issues Involved

  1. Whether ex-parte assessment without adequate opportunity is sustainable in law.
  2. Whether the CIT(A) was justified in rejecting evidence under Rule 46A without proper consideration.
  3. Whether additions can be sustained without examining whether liabilities pertain to earlier years or current year.

Petitioner’s Arguments (Assessee)

  • Adequate opportunity of being heard was not provided during assessment proceedings.
  • The evidence produced before the CIT(A) was essential for proper adjudication and should have been admitted.
  • Some additions related to old liabilities and not to the year under consideration.
  • The appellate authority failed to exercise powers to conduct further inquiry.

Respondent’s Arguments (Revenue)

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

Court Order / Findings (ITAT)

  • The assessment had been completed ex-parte.
  • The CIT(A) declined to admit evidence without adequately examining whether sufficient cause existed.
  • No clear findings were recorded on crucial aspects such as whether loans and creditors were old or fresh.
  • Adequate opportunity of hearing had not been effectively granted.

 Important Clarification

  • Principles of natural justice are fundamental to tax proceedings.
  • Ex-parte assessments must still ensure reasonable opportunity to the taxpayer.
  • Appellate authorities possess powers to admit evidence where necessary for justice.
  • Additions cannot be sustained without proper factual examination.
  • Remand is appropriate where procedural fairness is compromised.

 Link to download the order –

https://itat.gov.in/public/files/upload/1630575582-ita%20no.%2040%20ITA%2083%20And%20CO%20No.%207%20in%20ITA%20No.%2040%20Amit%20Kumar%20Gupta.pdf

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