Facts of the Case

The assessee, Islander Housing Project Private Limited, is a private limited company which did not file its return of income for Assessment Year 2020-21. The Assessing Officer noticed substantial cash deposits and withdrawals in the assessee’s current bank accounts maintained with SBI and IDBI Bank. It was further observed from GST returns that total sales of ₹4,95,63,577 were reported and from TDS statements that cash withdrawals of ₹1,55,80,500 were made. Based on these details, the Assessing Officer reopened the assessment under Section 147 and issued notice under Section 148 on 28.02.2024. Due to non-compliance by the assessee to notices issued under Section 142(1) and show cause notices, the assessment was completed ex parte under Sections 147 read with 144B by estimating undisclosed business income at 10 percent of the turnover and making an addition of ₹49,56,358.

Issues Involved

Whether the CIT(A) was justified in dismissing the appeal ex parte without adjudicating the grounds on merits, whether sufficient opportunity of being heard was granted to the assessee, and whether the matter required restoration for fresh adjudication in the interest of natural justice.

Petitioner’s Arguments

The assessee submitted that the appeal before the CIT(A) was dismissed without granting proper opportunity of hearing. It was contended that the ex parte dismissal caused serious prejudice and resulted in miscarriage of justice. The assessee requested that one final opportunity be granted to substantiate its case before the appellate authority and to place relevant material on record.

Respondent’s Arguments

The Revenue supported the orders passed by the Assessing Officer and the CIT(A) but did not object to the matter being restored for fresh adjudication if the Tribunal deemed it fit in the interest of justice.

Court Order / Findings

The ITAT Kolkata observed that the CIT(A) dismissed the appeal ex parte merely on account of non-compliance and upheld the assessment without examining the merits of the additions made by the Assessing Officer. The Tribunal held that such an approach is not justified in law, particularly when additions are made on estimated basis. In the interest of substantial justice and fair play, the Tribunal held that the assessee should be provided one more opportunity to present its case. Accordingly, the order of the CIT(A) was set aside and the matter was restored to the file of the CIT(A) for fresh adjudication in accordance with law after affording reasonable opportunity of being heard and permitting the assessee to file supporting documents.

Important Clarification

The Tribunal clarified that appellate authorities are required to adjudicate appeals on merits and cannot dismiss appeals solely for non-compliance. Where assessments are framed ex parte and income is estimated, principles of natural justice mandate that the assessee be given adequate opportunity to explain and substantiate its case.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The ex parte order passed by the CIT(A) was set aside and the matter was restored to the file of the CIT(A) for fresh adjudication on merits after granting reasonable opportunity of being heard to the assessee and directing due cooperation in the proceedings.

Source Link- https://itat.gov.in/public/files/upload/1767683358-MBT8HW-1-TO.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.