PIYUSH JAIN,DELHI vs. INCOME TAX OFFICER, ITO, NEW DELHI

The brief facts as culled out from the order of the authorities below are that the assessee is engaged in proprietor- ship business of all kinds of fabrics in the name and style of

Aggrieved by the assessment order, the assessee filed an appeal before the ld. CIT(A) who has dismissed the same observing that the assessee has failed to submit necessary details in response to the notice issued by the AO as he merely furnished the balance sheet and P & L Account but no explanation and necessary evidence was provided with respect to the source of the amount of cash deposited. It was further observed that the assessment order was passed ex-parte u/s 144 of the Act. Hence, the ld. CIT(A) dismissed the appeal on the ground that there was no satisfactory explanation given to the Assessing Officer who was justified in invoking section 69A because mere existence of an audited account does not by itself prove the genuineness of the transactions recorded therein unless the same are supported by the verifiable documentary evidence.

Aggrieved by the impugned order the assessee is in appeal has raised the following grounds of appeal:

We have heard the ld. AR and for the assessee and the ld. DR of the Revenue.

The ld. AR at the outset, submitted that the assessment order was passed u/s 144 of the Act without affording effective opportunities of hearing to the assessee and also without rejecting the books of the assessee which contained sufficient explanation for deposit of cash during the demonetization period. It is further argued that even the ld. CIT(A) has failed to note the said discrepancy of the assessment order and has upheld the same, which has resulted into miscarriage of justice. It is submitted that the impugned order as well as assessment order needs to be set aside by restoring the matter to the file of the AO with the direction to decide a fresh after giving opportunity to the assessee to present necessary materials and submissions, the source of cash deposit during the demonetization period and in the interest of justice, an effective opportunity of hearing should be granted to the assessee for proving its case before the AO.

The ld. DR on the other hand, opposing arguments made on behalf of the assessee, while relying on the impugned order as well as assessment order, submitted that the assessee himself has failed to furnish the necessary documents despite 8 opportunities given by the ld. AO, who was then constrained to

We have considered the rival submissions and had examined the record. Opportunity of hearing to the assessee during the assessment proceedings is not a mere formality but a mandatory requirement of principles of natural justice. We have examined the assessment order to find out whether the effective opportunity of hearing is given which is sine-qua-non of quasi- judicial order passed by the Assessing Officer. In para no. 2 of assessment orders are that extracted earlier by us in the beginning of the order would show 8 opportunities of hearing having been given by issuing of notice u/s 143(2) twice and notice u/s 142(1) sixteens but the assessee is stated to have filed only part response in response of notice dated 14th March, 2019 u/s 142(1) of the Act. It is observed by the Assessing Officer in para no. 3 in that regard as extracted below:

From the above extracts of the assessment order, it is evident that the said order has been passed ex-parte, in the absence of necessary materials having not been furnished by the assessee in support of his claim to prove the source of cash deposited during the demonetization period. It is to be noticed that the subsequent to the notice dated 14th March, 2019 in respect to which allegedly part response was filed by the assessee, three more notices were also issued u/s 142(1) of the Act on 26th April, 2019, 24th June, 2019 and 8th April, 2019. It is observed that no response was filed by the assessee. On perusal of the material on records, there is nothing to conclude the said notices were even served on the assessee or received by the assessee. We are not satisfied that the said notices have been proved to have been received by the assessee so as to conclude that effective opportunity of hearing has been granted to the assessee to file material/evidence in support of his claim/case.

We have also examined the impugned order passed by the ld. CIT(A). Even the ld. CIT(A) has not afforded any opportunities to the assessee to file the requisite documents before him as para 7.2.3 to 7.3.4 of the impugned order extracted below would make it clear that the effective opportunities of hearing has been granted to the assessee neither by the AO nor by the ld. CIT(A).

For the above discussion, we are of the considered opinion that the impugned order has been passed while upholding the assessment order without following the principles of natural justice, because the effective opportunities of hearing which is mandatory requirement before passing the order of quasi-judicial authorities has not been given. For these reasons, the impugned order is set aside by restoring the matter to the file of the AO for deciding the issue by conducting the de-novo assessment proceedings after affording effective opportunity of hearing to the assessee. The assessee is also directed to file the necessary documents/materials before the Assessing Officer within 60 days from this order.

The appeal of the assessee is allowed for statistical purposes.