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Facts
The assessee filed its return of income and the case was selected for scrutiny. During the assessment, the AO added back a sum of Rs. 51,62,240/- as an unsecured loan from M/s. Richie Rich Builders, treating it as not genuine. This resulted in a revised total income of Rs. 51,24,180/-.
Held
The Tribunal held that the assessee was deprived of natural justice by the Ld.CIT(A), who passed an ex-parte order without affording adequate opportunity for hearing. Therefore, the matter was restored to the Ld.CIT(A) for de novo adjudication.
Key Issues
Whether the Ld.CIT(A) erred in dismissing the appeal without affording natural justice and adequate opportunity to the assessee.
Sections Cited
250, 143(3), 142(1), 133(6)
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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI ANIKESH BANERJEE & SHRI PRABHASH SHANKAR
O R D E R Per Shri Anikesh Banerjee (JM) : This appeal of the assessee is directed against the order of Ld. Commissioner of Income Tax, Appeal ADDL / JCIT (A) Faridabad [hereinafter called ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for the Assessment Year 2014-15, date of order 31/07/2025. The impugned Kesiki Investments Private Limited order emanated from the order of the Income-tax Officer, Ward 1(2)(2), Mumbai (in short, ‘Ld.AO’) passed u/s 143(3) of the Act dated 15/12/2016.
The assessee has raised the following grounds of appeal:-
1. That the learned Addl/JCIT (A), Faridabad has erred in law and on facts in dismissing the appeal merely on the ground of alleged non-prosecution without adjudicating the appeal on merits
2. That the learned Addl/JCIT (A), Faridabad failed to appreciate that the adjournment was sought on bonafide grounds and no deliberate default or intention to delay the proceedings can be attributed to the appellant.
3. That the order of the Addl/JCIT (A), Faridabad is violative of the principles of natural justice as it was passed without granting effective opportunity of being beard.
That the Addl/JCIT (A), Faridabad failed to consider written submissions made by the Appellant during personal hearing held on 16 January, 2019 as per hearing notice issued under section 250 of the Income Tax Act, 1961 dated 04- 01-2019 fixed by the Commissioner of Income-Appeal -5, Mumbai
5. That the Addl/JCIT(A) Faridabad ought to have adjudicated the appeal on merits based on materials available on record, even in the absence of appearance of the appellant, as held by various High Courts and ITATs.
That the learned Addl/JCIT (A), Faridabad has failed to consider that the assessment order passed by the Assessing Officer is arbitrary, bad in law and unsustainable, and should have decided the appeal on merits in the interest of justice.
The Appellant craves leave to add, alter, amend, delete, rescind, or withdraw any of the grounds of appeal mentioned hereinabove.”
The brief facts of the case are that the assessee e-filed its return of income on 28/11/2014 declaring total income of Rs. 38,064/-. The case was selected for scrutiny under CASS for limited scrutiny of the following:
Notices u/s 142(1) of the Act were issued and served on the assessee with questionnaire calling for various details and explanations. The representative of the assessee appeared in response to the notice and filed a chart of ‘trade payables’. As the notice u./s 133(6) of the Act issued to M/s Ritchie Rich Builders and Developers returned unserved by the postal authorities, the Ld.AO asked the assessee to produce the party for verification and a final opportunity of hearing was provided fixing the hearing on 09/12/2016. The assessee, however, vide letter dated 08/12/2016, submitted a reply, which has been duly incorporated at page 4 of the impugned assessment order. The relevant paragraph from page 4 of the impugned assessment order is reproduced below:- "With reference to notice u/s 133(6) of I.T. Act, 1961 issued to M/s Richie Rich Builders and Developers, Mondesire, 37, Perry Cross Road Bandra (West), Mumbat-400 050, upon enquiry it is learnt that presently they are not available there and notice may be sent to F-86/89, North Bombay CHS, Juhu Tara Road Opp. J.W. Mariott Hotel, Juhu, Bombay-400049. Further we submit that the amount of Rs.51,62,240/- is unsecured loan from M/s. Richie Rich Builders and Developers and while finalizing the accounts for FY 2013-14 was wrongly grouped under the head of Sundry Creditors is made clear that amount appearing as unsecured loan in the balance sheet of 31/03/2013 and the amount appearing in sundry creditors in the balance sheet of 31/03/2014 are one and the same. We have already furnished to you party's confirmation letter with copy of account and acknowledgement of return of income." The Ld.AO, however, did not satisfy with the explanation filed by the assessee. He, therefore, had considered the amount of Rs.51,62,240/- pertaining to M/s Ritchie Rich Builders as not genuine and added back the same to the total income Kesiki Investments Private Limited of the assessee. The Ld. AO thus computed a total income of Rs.51,24,180/- as against the returned income of Rs. (-)38,064/-. The aggrieved assessee filed appeal before the Ld. CIT(A). The Ld.CIT(A) provided the assessee with as many as 7 opportunities. The assessee, in response to the notice dated 05/05/2025, sought adjournment of hearing up to 28/05/2025. But even after elapse of 2 months, as the assessee did not appear before the Ld. CIT(A). The Ld.CIT(A) passed an exparte order, dismissing the appeal filed by the assessee. The aggrieved assessee has filed an appeal before the Tribunal.
4. We have considered the rival submissions and perused the materials placed on record. The Ld.AR appearing for the assessee submitted that the Ld.CIT(A) passed his order without hearing the assessee, therefore, natural justice was denied to the assessee. The Ld. AR prayed for restoration of appeal proceeding before the Ld. CIT(A).
The Ld. DR supported the orders of the revenue authorities. However, the Ld. DR did not raise any objection to the prayer for restoration of the matter.
6. We have given careful consideration to the submissions made by the both the parties. In our considered view, the assessee was deprived of natural justice before Ld.CIT(A). We find that adequate and reasonable opportunity was not afforded to the assessee. Accordingly, we deem it appropriate to restore the matter to the file of the Ld. CIT(A) for verification and de novo adjudication. We clarify that we have not expressed any opinion on the merits of the case, so as not to prejudice the appellate proceeding. Needless to say, the Ld. CIT(A) shall grant Kesiki Investments Private Limited the assessee a reasonable opportunity of being heard before passing a fresh order. The assessee, in turn, shall extend full cooperation and diligently participate in the set-aside proceedings.