Facts of the Case

The assessee was subjected to assessment proceedings which culminated in an ex-parte order due to alleged non-compliance with statutory notices. The Assessing Officer made multiple additions, including those relating to unsecured loans, unverifiable expenses, sundry creditors, and low household withdrawals.

During appellate proceedings, the assessee sought to furnish supporting evidence to substantiate the claims. However, the CIT(A) treated such documents as additional evidence and declined to admit them under Rule 46A, without conducting further inquiry or granting effective opportunity to explain the case.

Issues Involved

  1. Whether ex-parte assessment without effective opportunity of hearing is legally sustainable.
  2. Whether the CIT(A) was justified in refusing to admit evidence under Rule 46A.
  3. Whether additions can be upheld without examining the nature and timing of liabilities and expenses.

 Petitioner’s Arguments (Assessee)

  • Adequate opportunity to present the case was not provided during assessment proceedings.
  • Evidence furnished before the CIT(A) was crucial for determining the correct tax liability.
  • Some liabilities and loans pertained to earlier years and were wrongly considered as income of the current year.
  • The appellate authority failed to exercise powers to conduct necessary inquiries.

 Respondent’s Arguments (Revenue)

  • The assessee did not comply with notices issued during assessment proceedings.
  • The Assessing Officer was justified in completing the assessment on the basis of available material.
  • The CIT(A) correctly rejected additional evidence under Rule 46A due to lack of sufficient cause

 Court Order / Findings (ITAT)

  • The assessment was completed ex-parte without full consideration of the assessee’s explanation.
  • The CIT(A) declined to admit evidence without adequately evaluating whether sufficient cause existed for earlier non-production.
  • Essential factual aspects, such as whether loans and creditors related to earlier years, were not examined.

Important Clarification

  • Fair opportunity of hearing is fundamental to tax adjudication.
  • Ex-parte assessments must still adhere to principles of natural justice.
  • Appellate authorities have powers to admit evidence when necessary to do justice.
  • Additions cannot be sustained without proper factual verification.
  • Remand is appropriate where procedural fairness has been compromised.

Link to download the order –

https://itat.gov.in/public/files/upload/1630575644-ita%20no.%2040%20ITA%2083%20And%20CO%20No.%207%20in%20ITA%20No.%2040%20Amit%20Kumar%20Gupta.pdf

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