Facts of the Case

The appellant/assessee, Kanti Commercials Pvt. Ltd., filed an appeal challenging the order dated 18.01.2023 passed by the Income Tax Appellate Tribunal (ITAT). The dispute arose from an addition of ₹1,90,00,000 made under Section 68 of the Income Tax Act, 1961 on account of alleged unexplained share capital/share premium.

Initially, the Commissioner of Income Tax (Appeals) [CIT(A)] vide order dated 29.03.2018 deleted the addition. However, the ITAT reversed the CIT(A)'s decision and ruled in favour of the Revenue, relying upon a prior judgment in ITO vs Blessings Commercial Pvt. Ltd..

A critical aspect noted was that the assessee was not represented before the Tribunal when the matter was considered and decided.

Issues Involved

  1. Whether the ITAT erred in deciding the appeal without providing an opportunity of hearing to the assessee.
  2. Whether reliance on a third-party judgment without allowing rebuttal violates principles of natural justice.
  3. Whether the addition under Section 68 concerning share capital/share premium was justified without proper adjudication.

Petitioner’s Arguments (Assessee)

  • The assessee contended that it was not represented before the ITAT and was not given an opportunity to address the reliance placed on the judgment in Blessings Commercial Pvt. Ltd.
  • It was argued that the Tribunal passed the order without granting a fair hearing, thereby violating principles of natural justice.
  • The assessee emphasized that it was deprived of the opportunity to rebut the findings or distinguish the relied-upon case law.

Respondent’s Arguments (Revenue)

  • The Revenue supported the Tribunal’s decision, stating that the reliance on the judgment in Blessings Commercial Pvt. Ltd. was valid.
  • However, the Revenue fairly conceded before the High Court that the assessee was not represented before the Tribunal.
  • It was acknowledged that no hearing took place between the date when the reliance was noted and the date of the final order.

Court Order / Findings

  • The High Court observed that the assessee was not given an opportunity to deal with the judgment relied upon by the Tribunal.
  • It noted that no hearing occurred between 13.12.2022 and the passing of the impugned order on 18.01.2023.
  • The Court held that this amounted to a violation of principles of natural justice.

Final Order

  • The impugned ITAT order was set aside.
  • The matter was remanded back to the Tribunal for fresh adjudication.
  • The Tribunal was directed to decide the case on merits after granting proper opportunity of hearing to the assessee.
  • The Court clarified that it had not examined the merits of the case.

Important Clarification

  • The High Court emphasized that procedural fairness is fundamental and cannot be compromised.
  • Even if reliance is placed on existing case law, parties must be given a fair opportunity to respond.
  • The remand does not imply any conclusion on the correctness of the Section 68 addition.

Section Involved

  • Section 68 – Income Tax Act, 1961
    Pertains to unexplained cash credits, including share capital and share premium, where the assessee must establish identity, creditworthiness, and genuineness of transactions.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60803112023ITA6032023_130543.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.