Loading judgment…
Facts
The assessee filed an appeal against the order of the CIT(A)/NFAC for AY 2012-13. The AO initiated reassessment proceedings u/s 148 and made additions for rental receipts, disallowance of interest expenditure, and interest income. The CIT(A) dismissed the appeal for non-prosecution.
Held
The Tribunal held that the assessment proceedings were vitiated due to lack of a mandatory notice u/s 143(2) and the CIT(A)'s disposal of the appeal without adjudicating grounds was not in accordance with law.
Key Issues
Whether the assessment order is liable to be quashed for procedural defects like lack of notice u/s 143(2) and breach of natural justice. Whether the CIT(A) rightly dismissed the appeal for non-prosecution without merits.
Sections Cited
250, 148, 147, 144, 69C, 143(2)
AI-generated summary — verify with the full judgment below
सुनवाई की तारीख/Date of Hearing : 09/04/2025 उदघोषणा की तारीख/Date of Pronouncement : 21/04/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/ NFAC, Delhi dt. 12/03/2024 pertaining to Assessment Year 2012-13. 2. In the present appeal Assessee has raised the following grounds:
1. That on the facts, circumstances and legal position of the case, Worthy CIT(A), NFAC in Appeal No. CIT (A), Chandigarh-2/10884/2019-20 has erred in passing order dtd. 12.03.2024 in contravention of provisions of S. 250 of the Income Tax Act, 1961 (hereinafter referred to as "Act").
2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the actions of Ld. AO in initiating, continuing and then concluding the impugned assessment u/s 148 r.w.s. 147/144 and hence the impugned assessment order deserves to be quashed. 3. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition of Rs. 27,56,748/- made by the Ld. AO by erroneously holding the rent receipts as undisclosed income of the appellant. 4. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition of Rs. 56,18,640/- made by Ld. AO u/s 69C by erroneously holding the interest paid on bank loan as unexplained expenditure.
2 5. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition of Rs. 17,192/- made by Ld. AO by erroneously holding the interest income as undisclosed income of the appellant.
That on facts, circumstances and legal position of the case, the impugned order passed by the Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been passed without affording reasonable opportunity of being heard to the appellant.
7. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal
on or before the disposal of the same.
3. In this case, the Ld. AO initiated reassessment proceedings by issuing notice u/s 148 of the Income Tax Act, 1961, alleging escapement of income. The assessee filed its return of income on 13.11.2019 in response to the notice, declaring a loss of Rs. 37,545/-.
4. During the reassessment proceedings, the Assessing Officer completed the assessment under Section 144 read with Section 147 of the Income Tax Act, as per the order dated 05.11.2019. The assessment primarily resulted in the following additions: an amount of Rs. 27,56,748/- was added by treating rental receipts as undisclosed income; a disallowance of interest amounting to Rs. 56,18,640/- was made, which was treated as unexplained expenditure under Section 69C; and a sum of Rs. 17,192/- was added on account of interest income being treated as undisclosed.
5. In the appeal filed before the Ld.. CIT(A), the assessee raised several grounds challenging the assessment order. It was contended that no valid notice under Section 143(2) of the Income Tax Act was issued, rendering the assessment procedurally flawed. The assessee further argued that no proper opportunity of being heard was provided during the assessment proceedings. Additionally, it was submitted that the additions made were unwarranted, as the income in question was duly disclosed and subject to tax deduction at source (TDS). The disallowance of interest expenditure was also challenged on the grounds that it was unjustified and inconsistent with the treatment accorded in earlier assessments. Lastly, the assessee contended that the assessment order was cryptic in nature and had been passed in violation of the principles of natural justice.
3 6. However, the Ld. CIT(A) observed that the assessee did not effectively prosecute the appeal. Notices were issued but there was either no compliance or only adjournment requests without submissions. Citing non- prosecution and relying on certain High Court and Tribunal decisions, the Ld. CIT(A) dismissed the appeal and confirmed the additions made by the AO.
Before us, the Authorised Representative (AR) for the assessee submitted that the order passed by the learned CIT(A) was ex parte and had been issued without providing the assessee with a sufficient and reasonable opportunity to be heard. It was further submitted that the assessee was prevented by reasonable cause from making detailed submissions before the lower authority. In light of these circumstances, the AR requested that the assessee be granted one more opportunity to present its case and that the matter be remanded back to the file of the lower authorities for fresh consideration on merits.
On the other hand, the Learned Departmental Representative (DR) supported the order issued by the lower authority. authorities and opposed the prayer for remand. authorities.
We have heard the rival contentions and perused the material available on record.
It is an admitted fact that the assessment was completed under Section 144 read with Section 147 of the Income Tax Act, allegedly without the issuance of a notice under Section 143(2). The assessee had requested the reasons recorded for reopening the assessment, but these were reportedly not furnished. Furthermore, the assessee raised a categorical grievance regarding a breach of natural justice at both the assessment and appellate stages. In addition to the above, the assessee has raised fundamental jurisdictional challenges, apart from those related to the merits of the case.
In our considered opinion, the assessee's grievance deserves consideration. The lack of issuance and service of a mandatory notice u/s 4 143(2) vitiates the legal assessment proceedings. Further, the disposal of appeal by CIT(A) summarily on the ground of non-prosecution, without adjudicating the jurisdictional and factual grounds, is also not in accordance with law.
In view of the above, we deem it fit to set aside the orders of the lower authorities. Accordingly, the matter is restored to the file of the Assessing Officer for de novo adjudication after affording a reasonable opportunity of hearing to the assessee.
However, considering the assessee's non-cooperation before the lower authorities, we impose a cost of Rs.2,000/- (Rupees Two Thousand only) on the assessee, to be deposited in the PM CARES Relief Fund within a period of two months from the date of receipt of this order. The assessee shall furnish proof of such deposit before the Assessing Officer during the course of proceedings.
In the result, the appeal of the assessee is allowed for statistical purposes.