Facts of the Case

The assessee, a private limited company engaged in real estate activities, was subjected to assessment proceedings in which the Assessing Officer made additions to income based on available material, allegedly due to inadequate compliance by the assessee.

The assessment was completed without detailed verification of the assessee’s explanations and records. The first appellate authority upheld the assessment order.

Issues Involved

Whether the assessment framed without adequate inquiry, verification, and effective opportunity of hearing is legally sustainable.

Petitioner’s (Assessee’s) Arguments

  • The assessment was completed without proper examination of books of account and supporting evidence.
  • Adequate opportunity to substantiate claims was not provided.
  • Additions were made on assumptions rather than concrete findings.
  • The order violated principles of natural justice.

Respondent’s (Revenue’s) Arguments

  • The assessee failed to fully comply with statutory notices during assessment proceedings.
  • In absence of sufficient evidence, the Assessing Officer was justified in completing the assessment based on available material.
  • The order was passed within the powers conferred under the Act.

Court Order / Findings (ITAT Decision)

The ITAT Allahabad Bench held:

  • Proper assessment requires objective verification of facts and examination of evidence.
  • Where the assessment is framed without granting effective opportunity or conducting adequate inquiry, it cannot be sustained.
  • To ensure fairness, the matter should be reconsidered by the Assessing Officer.

Accordingly, the Tribunal:

  • Set aside the orders of the lower authorities on the disputed issues
  • Remanded the case to the Assessing Officer for fresh adjudication
  • Directed that reasonable opportunity of hearing be provided to the assessee

Important Clarification

  • Best judgment or ex-parte assessments must still comply with principles of natural justice.
  • Additions cannot be sustained solely on the basis of non-compliance without proper verification.
  • Remand orders ensure fair reassessment and do not constitute final relief on merits.

Link to download the order - https://itat.gov.in/public/files/upload/1611138769-370%20H.K.%20Colonisers%20Pvt.%20Ltd..pdf

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