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Facts
The assessee, a real estate company, purchased land for Rs. 70,00,000/- during AY 2009-10. The Assessing Officer (AO) initiated reassessment proceedings under section 147/144 based on information from a search in another case. The assessee remained non-compliant, leading to an ex-parte assessment order treating the investment as unexplained.
Held
The Tribunal held that the addition was made based on the statements of sellers which were not provided to the assessee, nor was an opportunity for cross-examination granted, violating principles of natural justice. However, the assessee's non-compliance during assessment proceedings was also noted.
Key Issues
Whether the addition made on the basis of undisclosed third-party statements without providing an opportunity for cross-examination is sustainable? Whether the assessee's non-compliance during assessment warrants penalties or costs?
Sections Cited
132, 144, 147, 148, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first-appeal dated 13.06.2025 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 22.12.2016 passed by learned ITO-5(3), Indore [“AO”] u/s 144 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2009-10, the assessee has filed this appeal on following grounds:
2. The background facts leading to present appeal are such that the assessee is a company incorporated on 10.07.2008, engaged in real estate business. The AO received an information gathered by authorities of department in a search conducted u/s 132 on 23.11.2012 in case of M/s IBD Group of Bhopal that the assessee purchased a land for Rs. 70,00,000/- (registered value – Rs. 30,00,000/-, fair market value – Rs.
Page 3 of 7 46,32,000/-) during the previous year 2008-09 relevant to AY 2009-10 under consideration (this is the first year of assessee’s existence). On the basis of such information, the AO issued notice dated 29.03.2016 u/s 148 to assessee in order to make assessment u/s 147. However, the said notice remained non-complied by assessee. The AO thereafter issued notice u/s 142(1) and show-cause notice u/s 144 which also remained non-complied by assessee. Thus, finding non response from assessee, the AO ultimately passed ex-parte assessment-order u/s 144 assessing the investment of Rs.
70,00,000/- as unexplained investment of assessee. Aggrieved, the assessee carried matter in first-appeal but did not get any relief. Now, the assessee has come before us in next appeal.
The Ld. Authorised Representative (“Ld. AR”) for the assessee drew our attention to para 4.2 of the assessment order to submit that the impugned addition of Rs. 70,00,000/- has been made on the basis of statements of three persons, being the joint sellers from whom the assessee had purchased the land. It was contended that copies of such statements were never provided to the assessee during the assessment proceedings. It was further submitted that although the assessee subsequently obtained copies of the said statements after completion of assessment, no opportunity of cross-examination of the said persons was ever afforded to the assessee.
Accordingly, relying upon Ground No. 3(ii), the Ld. AR prayed that the matter be restored to the file of the Ld. AO for de novo adjudication after granting an effective opportunity of cross-examination. The Ld. AR also Page 4 of 7 submitted that the assessee shall duly avail such opportunity and extend full cooperation to the Ld. AO.
The Ld. Departmental Representative (“Ld. DR”), though not opposing the prayer of the assessee for restoration, submitted that the assessee had remained non-compliant during the assessment proceedings, which constrained the Ld. AO to complete the assessment ex-parte and make the impugned addition. It was, therefore, submitted that while restoring the matter, appropriate directions may be issued to ensure strict compliance by the assessee and, if deemed fit, reasonable cost may also be imposed.
We have heard the rival submissions and perused the material available on record. It is observed that the impugned addition of Rs. 70,00,000/- has been made by the Ld. AO primarily on the basis of statements of the alleged sellers of land. However, it is an undisputed position that such statements were neither furnished to the assessee during the course of assessment proceedings nor any opportunity of cross- examination of those persons was afforded. It is a settled proposition of law that any material used against the assessee must be confronted to it and effective opportunity of cross-examination must be provided, failing which the addition cannot be sustained in law due to violation of principles of natural justice. At the same time, we also note that the assessee remained non-compliant during the assessment proceedings despite issuance of statutory notices, which resulted in the ex-parte assessment u/s 144 of the Act. Therefore, the assessee cannot be absolved of its responsibility in not Page 5 of 7 properly participating in the assessment proceedings. Considering the totality of facts and circumstances of the case, in the interest of justice, we deem it appropriate to restore the matter to the file of the Ld. AO for de novo adjudication. The Ld. AO is directed to provide copies of all statements and material proposed to be relied upon and afford reasonable opportunity of cross-examination of the concerned persons to the assessee. The assessee is also directed to cooperate fully and not to seek unwarranted adjournments failing which the AO shall be at liberty proceed in accordance with law.
However, we find that the assessee is a company and not an individual and there are non-compliances by assessee at AO level without adequate reasoning. Therefore, in order to offset the revenue’s efforts in dealing assessee’s case, we impose a cost of Rs. 10,000/- to be paid by assessee to Income-tax Department through appropriate challan. The assessee shall submit a copy of duly paid challan to AO during the proceeding of fresh adjudication and shall not claim any credit or refund of such payment.
Resultantly, this appeal is allowed for statistical purpose, subject to payment of cost by assessee as mentioned above.
Order pronounced in open court on 10/04/2026