Loading judgment…
Facts
The assessee's appeal for AY 2017-18 arose from an order of the CIT(A) which upheld an ex-parte assessment by the AO. The AO had reopened the assessment based on cash deposits during demonetization and made an addition by estimating income at 8%. The CIT(A) confirmed the addition after a remand report indicated notices were not served.
Held
The Tribunal noted that both the AO and CIT(A) passed ex-parte orders without giving the assessee a proper opportunity to be heard. In the interest of natural justice, the assessee was granted another opportunity to present their case before the AO.
Key Issues
Whether the assessment and its confirmation were valid when the assessee was not afforded a proper opportunity of being heard and whether the 8% estimation of income was justified.
Sections Cited
144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2017-18 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 19.02.2025 in the matter of assessment framed by the Assessing Officer [AO] u/s. 144 of the Income-tax Act,1961 (hereinafter “the Act”) on 19.12.2019.
The A.O has reopened the assessment for the reason that the assessee has made cash deposits of Rs.34,79,000/- during demonetization period. The A.O passed assessment order ex-parte u/s. 144 of the Act and made addition of Rs.1,01,12,060/- by estimating the income @ 8% of the total deposits in the bank account.
On appeal, the Ld. CIT(A) called for remand report from the A.O. The A.O in the remand report has submitted that notices could not be served to the assessee on the given address, and concluded that the assessee did not submit any supporting books of accounts or any audit report to claim or justify net income. Accordingly, the Ld. CIT(A) confirmed the addition.
The Ld. Authorized Representative has submitted that the assessee could not produce books of accounts or could make any submission as the assessee did not receive any notices from the A.O.
The Ld. AR further submitted that the estimation of income @ 8% is excessive as net profit of the assessee in all the preceding year is around 1.09%. For this, the assessee has submitted a chart as under:
A.Y Gross Gross Profit GP Rate Net Profit NP Rate Turnover 2013-14 2,39,83,256 6,83,496 2.85% 2,83,411 1.18% 2014-15 5,75,15,717 10,45,232 1.82% 5,86,889 1.02% 2015-16 4,94,20,650 12,76,998 2.58% 5,26,824 1.07% 2016-17 5,44,34,432 16,10,347 2.96% 6,03,953 1.11% Average Net Profit Rate 1.09%
Therefore, the Ld. AR has requested that one more opportunity be granted to the assessee to substantiate his case before the A.O.
On the other hand, the Ld. Departmental Representative (DR), relied on the orders of lower authorities and submitted that the orders were passed ex-parte as the assessee has been non-compliance with the notices issued.
We have heard the rival submissions, and perused the materials available on record. It is noted that the AO and the Ld. CIT(A) have passed the orders ex-parte without giving proper opportunity to the assessee. In our considered opinion, and keeping in view the principles of natural justice, the assessee be provided with another opportunity of hearing to substantiate his case before the A.O subject to payment of costs of Rs.5,000/-. The same shall be paid by the assessee to Tamil Nadu State Legal Services Authority at Hon’ble High Court of Madras within a period of one month from the date of receipt of this order and produce the receipt before the A.O.
Accordingly, we set aside the orders passed by the A.O and the Ld. CIT(A) and remit the matter back to the file of the A.O for denovo adjudication. We also direct the assessee to appear before the A.O on the date of hearing without fail and furnish complete details for fresh consideration. In view of the above, the appeal filed by the assessee is allowed for statistical purposes only.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 15th day of July, 2025 at Chennai.