Facts of the Case

The assessee was subjected to assessment proceedings in which the Assessing Officer completed the assessment ex-parte, allegedly due to non-compliance with statutory notices. Additions were made to the returned income based on the material available on record.

In first appeal, the Commissioner of Income Tax (Appeals) disposed of the matter without effectively considering the assessee’s submissions or granting meaningful opportunity of hearing.

Issues Involved

Whether assessment and appellate orders passed ex-parte, without providing adequate opportunity to the assessee, are sustainable in law.

Petitioner’s (Assessee’s) Arguments

  • The assessment was completed without providing reasonable opportunity to produce evidence and explanations.
  • The appellate authority failed to adjudicate the issues on merits.
  • The orders violated principles of natural justice.
  • The assessee was willing to comply and substantiate claims if given proper opportunity.

Respondent’s (Revenue’s) Arguments

  • Statutory notices were issued but not complied with by the assessee.
  • The Assessing Officer was justified in completing the assessment under best judgment provisions.
  • The orders were passed based on available records and within statutory powers.

Court Order / Findings (ITAT Decision)

The ITAT Allahabad Bench held:

  • Proper adjudication requires granting reasonable and effective opportunity of hearing.
  • Orders passed ex-parte without examination of evidence on merits cannot be sustained.
  • Denial of opportunity amounts to violation of principles of natural justice.

Accordingly, the Tribunal:

  • Set aside the assessment as well as appellate orders on the disputed issues
  • Remanded the matter to the Assessing Officer for fresh adjudication
  • Directed that adequate opportunity of hearing be provided to the assessee

Important Clarification

  • Best judgment assessments under Section 144 must still adhere to fairness and due process.
  • Appellate authorities are required to pass reasoned and speaking orders.
  • Remand ensures fair reconsideration and does not constitute relief on merits.

Link to download the order - https://itat.gov.in/public/files/upload/1611138861-72%20Alld%202019%20Rajni%20Gupta.pdf

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