Facts of the Case

The assessee, an individual, had originally filed a return for Assessment Year 2013-14 declaring income of ₹23,090. Subsequently, the Assessing Officer noted substantial cash deposits of ₹2,98,73,520 in the bank account, along with rental income of ₹4,92,350 and interest income of ₹71,160 during the relevant financial year. A notice under Section 148 dated 26.03.2021 was issued reopening the assessment. In response, the assessee filed a return declaring income of ₹33,091. The Assessing Officer completed the reassessment under Sections 147 read with 144B by making additions of ₹9,82,52,161 as unexplained income under Section 69A and ₹6,89,290 towards rental income, assessing total income at ₹9,89,64,541. The appeal before the CIT(A), NFAC was dismissed due to non-compliance and non-appearance. The legal representative of the deceased assessee preferred an appeal before the Tribunal.

Issues Involved

Whether the notice issued under Section 148 on 26.03.2021 for Assessment Year 2013-14 was barred by limitation, whether the extension of limitation under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applied, and whether dismissal of appeal by the CIT(A) without a speaking order and without proper opportunity was sustainable in law.

Petitioner’s Arguments

The assessee contended that the reassessment notice issued on 26.03.2021 was barred by limitation. It was further submitted that the assessment was completed ex parte due to non-receipt of proper electronic communications, as an incorrect email address was mentioned, resulting in denial of effective opportunity of hearing both before the Assessing Officer and the CIT(A). It was argued that the CIT(A) failed to adjudicate the grounds on merits and dismissed the appeal mechanically.

Respondent’s Arguments

The Revenue submitted that the reassessment notice was validly issued within the extended limitation period provided under TOLA, as the original limitation expired during the COVID-19 period and stood extended up to 30.06.2021. It was contended that the old reassessment regime applied, since the notice was issued prior to 01.04.2021, and therefore the challenge to jurisdiction was untenable. The Revenue supported the order of the CIT(A).

Court Order / Findings

The ITAT Kolkata held that the notice under Section 148 dated 26.03.2021 was valid in law, as the limitation for issuing such notice for Assessment Year 2013-14 stood extended up to 30.06.2021 under TOLA. The Tribunal rejected the assessee’s challenge to the validity of the reopening. However, the Tribunal observed that the assessment was completed ex parte and the appeal before the CIT(A) was dismissed without proper representation, partly due to incorrect communication details. It was further held that Section 250(6) mandates the CIT(A) to pass a reasoned and speaking order on merits and that an appeal cannot be dismissed merely for non-prosecution. Relying on judicial precedents, the Tribunal set aside the order of the CIT(A) and restored the matter for fresh adjudication after granting proper opportunity to the assessee and the Assessing Officer.

Important Clarification

The Tribunal clarified that while reassessment notices issued within the extended limitation under TOLA are legally valid, appellate authorities are duty-bound to decide appeals on merits by passing speaking orders in compliance with Section 250(6). Dismissal of appeals for non-prosecution without adjudication of issues violates principles of natural justice.

Final Outcome

The appeal filed by the assessee was partly allowed for statistical purposes. The validity of the reassessment notice under Section 148 was upheld, but the order of the CIT(A), NFAC was set aside and the matter was restored to the CIT(A) for fresh adjudication on merits after providing adequate opportunity of being heard to the assessee and the Assessing Officer.

Source Link- https://itat.gov.in/public/files/upload/1767179457-GfQpjW-1-TO.pdf

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