Facts of the Case

The assessee filed a return of income for the relevant assessment year. The Assessing Officer completed the assessment ex-parte under Section 144 of the Income-tax Act due to alleged non-compliance by the assessee. During such proceedings, additions were made, including those relating to unexplained investment, resulting in a substantial enhancement of assessed income compared to the returned income. The order of the Assessing Officer was subsequently affirmed by the Commissioner of Income Tax (Appeals).

Issues Involved

  1. Whether the ex-parte assessment made under Section 144 was justified in law and on facts.
  2. Whether the additions made, particularly relating to unexplained investment, were arbitrary and unsupported by proper evidence.
  3. Whether the assessee was denied adequate opportunity, thereby violating principles of natural justice.

Petitioner’s (Assessee’s) Arguments

  • The ex-parte assessment order was arbitrary, unjustified, and contrary to the actual facts.
  • The additions were made without proper verification or consideration of relevant material.
  • The authorities ignored explanations and circumstances of the assessee.
  • The confirmed assessed income was excessively higher than the returned income and therefore legally unsustainable. 

Respondent’s (Revenue’s) Arguments

  • The assessee failed to comply with statutory notices and requirements during assessment proceedings.
  • In the absence of cooperation, the Assessing Officer was justified in invoking Section 144.
  • The additions were based on available records and information.
  • The order of the lower authorities should be sustained.

Court / Tribunal Findings & Order

The Income Tax Appellate Tribunal examined the records and submissions of both sides. It observed that although the Assessing Officer is empowered to complete an assessment under Section 144 in cases of non-compliance, such assessment must still be fair, reasonable, and based on relevant material.

The Tribunal found that certain additions were not adequately supported and that the assessment suffered from deficiencies. Accordingly, the appeal of the assessee was partly allowed, and relief was granted to the extent considered appropriate.

Important Clarification by the Tribunal

  • Best-judgment assessment does not permit arbitrary estimation without basis.
  • Even in ex-parte proceedings, authorities must adhere to fairness and reasonableness.
  • Additions must be supported by cogent material.

Link to download the order –

https://itat.gov.in/public/files/upload/1607488953-ita%20no.%20280%20alld%202018.pdf

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