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Facts
The appellant failed to file returns of income and provide details despite multiple opportunities, leading the AO to pass a best judgment assessment under Section 144. The CIT(A) admitted additional evidence and estimated profit at 13% without sufficient opportunity for the AO to verify. The Revenue appealed this decision.
Held
The Tribunal noted the appellant's non-compliance and the CIT(A)'s admission of additional evidence without proper verification by the AO. Principles of natural justice require the Revenue to have an equal opportunity to examine the material. Therefore, the matter is remitted back to the CIT(A).
Key Issues
Whether the CIT(A) erred in admitting additional evidence without giving the AO sufficient opportunity for verification and remand report, violating principles of natural justice. Whether the assessment order date was a technical glitch.
Sections Cited
144, 148, 46A, 147, 44AB, 69A, 69C, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Shri Narender Kumar Choudhry (JM) & Shri Omkareshwar Chidara (AM)
In the above cited appeals, the Revenue has taken common grounds of appeal and as the issue involved is the same, both the appeals are clubbed and disposed of by this common order for the sake of convenience.
1. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in admitting additional evidence contravening the provisions of Rule 46(A)(2) of the Income Tax Rules, 1962.
2. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deciding the appeal of the assessee without allowing reasonable opportunity to submit remand report violating the principle of natural justice.
Whether on the facts and in circumstances of the case, the Ld. CIT(A) has erred by not giving sufficient time to the AO for verification of additional evidences particularly when the assessment order was passed u/s. 144 of the Act due to non compliance by the assessee.
4. Whether on the facts and in circumstances of the case and in law, the 2 Nalapad Zain Apparel Exports Ld. CIT(A) has erred in deleting the addition of Rs.3,09,09,757/- and adopting the income as net profit at 20% of the gross profit of Rs. 4,16,0181/-.
The appellant craves leave to amend or alter or add a new ground which may be necessary.”
Grounds of appeal in ITA No. 5874/Mum/2024
1. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in admitting additional evidence contravening the provisions of Rule 46(A)(2) of the Income Tax Rules, 1962.
2. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deciding the appeal of assessee without allowing sufficient time to the AO to submit remand report violating the of principle of natural justice.
3. Whether on the facts and in circumstances of the case, the Ld.CIT(A) has erred by not giving sufficient time to the AO for verification of additional evidences particularly when the assessment order was passed u/s. 144 of the Act due to non compliance by the assessee.
4. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,86,72,901/- and adopting the income as net profit at 20% of the gross profit of Rs. 2,08,100/-.
5. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the addition of Rs. 1,21,98,800/- made on account of unexplained money u/s.69A of the Act.
6. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the addition of Rs.62,80,000/- made u/s 69C of the Act.”
Ld. DR has filed written submission and argued the case. His arguments and written submission and the same are taken on record while disposing of the appeal. The main ground of appeal taken by the Revenue in both the appeals is that the Ld. AO has not given proper opportunity by the Ld. CIT(A) for submitting the remand report.
2.1 From the assessment order, it is observed that four opportunities were given to the appellant by Ld. AO and final opportunity was also given on 27.1.2022 fixing the case for submitting all the details required on or 3 Nalapad Zain Apparel Exports before 3.2.2022. The Ld. AO has asked for the details regarding shipping bills for exports of value exceeding Rs. 5 lakhs which comes to Rs. 3.09 crore. Since the appellant did not file return of income in pursuance of notice under section 148 of the I.T. Act and did not file the required details, the Ld. AO has completed the assessment under section 144 of the Act, which deals with the best judgement assessment. The Ld. AO has also mentioned that the books of account were not audited as required under section 44AB of the Act. Since the total turnover exceeded the prescribed limit. As there was no response for reopening notice, and also as no details were submitted before the Ld. AO despite several opportunities given, the Ld. AO has made addition of Rs. 3.09 crore and completed the assessment.
3. Aggrieved by the assessment order, appellant filed an appeal before Ld. CIT(A). The Ld. CIT(A) has issued an enablement communication e-mail through ITBA by NFAC. The appellant has submitted certian additional evidence during the appeal proceedings and hence Ld. CIT(A) called for a remand report from the Ld. AO. From the order of Ld. CIT(A), it is observed that the Ld. AO was given time to submit report within a month. But no report was received by Ld. CIT(A) from the Ld. AO within the time given. Hence, based on the additional evidence filed, Ld. CIT(A) estimated the profit @ 13% of the total turnover.
Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before the ITAT in both the assessment years with grounds of appeal mentioned in pages No. 1 and 2 of this order.
5. Ld. DR has argued that five opportunities were given to the appellant at the time of assessment and since there was no response from the appellant, assessment was completed under section 144 of the Act. It was also submitted by the Revenue that the appellant did not comply with the law with regard to filing of return of income in pursuance of notice issued under section 147 of the Act. Since there was no compliance from the appellant, the Ld. AO was forced to complete the assessment under section 144 of the Act. Ld. DR has argued that the Ld. AO was given time of one
4 Nalapad Zain Apparel Exports month and that too only one opportunity was given to the Ld. AO. Ld. DR has argued that Ld. CIT(A) must give the Ld. AO sufficient time to verify the additional evidence, especially in case of non-cooperation by the appellant and failure to file return of income and the fact of not responding to multiple notices cannot be overlooked. Ld. DR in his written submission has mentioned that allowing the appellant to introduce additional evidence at the appellate stage without proper procedure undermines the integrity of assessment process. In view of the same, Ld. DR prayed the Tribunal to either set aside the order of Ld. CIT(A) as erroneous and unsustainable in law or in the alternative, remand the matter back to Ld. CIT(A) for fresh consideration in accordance with law issuance compliance with Rule 46A and principles of justice. In other words, Ld. DR does not have any objection to remand the matter back to Ld. CIT(A) because Ld. CIT(A) has given only one opportunity to the Ld. AO to submit remand report and as remand report was not received, Ld. CIT(A) himself has passed appellate order estimating certain percentage of turnover as the taxable income.
Ld. AR of the appellant relied on the order of Ld. CIT(A) and submitted that since the order of Ld. CIT(A) is reasonable, same may be confirmed.
While going through the assessment order of Ld. AO, it was noticed that the order was passed on 4.3.2022 whereas a hearing notice under section 142(1) was issued on 14.3.2022. The Ld. DR was asked to explain how a hearing notice can be issued after completion of the assessment. In reply to the query, the Ld. DR has asked the Ld. AO to explain the same. The Ld. AO has sent an e-mail to Ld. DR and the same was submitted to the Bench which is reproduced below :- "Please note that it is a technical glitch in ITBA system as AO order date is mentioned 04.03.2022 but the digital on order was dated 19.03.2O22 on which the order was passed, that can be noted from the Assessment order and Order sheet. The copy of the order sheet is attached herewith for reference". In proof of the same, the Ld. AO has attached the copy of order sheet of his proceedings. From this, it can be seen that the assessment order was actually passed on 19.3.2022, but not on 4.3.2022, as mentioned in the assessment order. Thus, the date mentioned as 4.3.2022 was as mere technical glitch. Hence, the hearing notice dated 14.3.2022 is well before
5 Nalapad Zain Apparel Exports passing the assessment order on 19.3.2022. The explanation furnished by Ld. AO is taken on record and no adverse inference is drawn relating to this issue.
Heard both sides, the fact remains that the appellant did not appear before the Ld. AO and file details despite several opportunities coupled with the fact that the appellant did not file even return of income in pursuance of notices issued by the Department under section 147 of the Act. In all fairness, the Revenue should have been given proper opportunity to examine all additional evidences filed before Ld. CIT(A) and appeal order should have been passed. Principles of natural justice demand that the Revenue should also be given equal opportunity with regard to the material filed before the first appellate authority, as the same was not available with the Ld. AO at the time of passing assessment order. In view of the same, matter is remitted back to the file of Ld. CIT(A) and he is directed to give reasonable opportunity to the Ld. AO and pass an appeal order afresh. The Ld. AO is also directed to furnish remand report as per direction of Ld. CIT(A) and see that the appeal proceedings are completed at the earliest.
Both Revenue’s appeals are allowed for statistical purposes.
Order pronounced in the open Court on 23/07/2025.