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Facts
The assessee, a real estate developer, challenged an assessment order for AY 2017-18 that included additions for depreciation disallowance, unexplained cash credit (unsecured loans), cessation of liability, and unsupported expenses. The National Faceless Appeal Centre (NFAC) partly confirmed these additions ex-parte as the assessee allegedly failed to adduce evidence despite multiple notices.
Held
The Tribunal found that both the Assessing Officer and NFAC failed to consider crucial evidence submitted by the assessee and that the opportunities provided were insufficient and unreasonable, amounting to a denial of natural justice. Citing judicial precedents, the Tribunal set aside the impugned order and remanded the case to NFAC for de-novo verification of all issues after granting the assessee three effective opportunities for hearing.
Key Issues
Whether the assessment and first appellate proceedings were conducted in accordance with principles of natural justice by providing adequate and reasonable opportunity to the assessee to furnish evidence regarding various disallowances and additions.
Sections Cited
253(1), 250, 143(3), 32(1), 68, 41(1), 37(1), 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PANAJI BENCH, GOA
Before: HON’BLE SHRI PAVANKUMAR GADALE & SHRI G. D. PADMAHSHALI
Appearances Assessee by : Mr Vinesh Pikale [‘Ld. AR’] Revenue by : Mr Deshmukh Prakash [‘Ld. DR’] Date of conclusive Hearing : 03/06/2025 Date of Pronouncement : 18/06/2025 ORDER PER G. D. PADMAHSHALI; This appeal is filed by the assessee u/s 253(1) of the Income-tax Act, 1961 [‘the Act’] challenges the orders dt. 11/03/2024 passed by the National Faceless Appeal Centre, Delhi [‘Ld. NFAC’] u/s 250 of which in turn arises out of assessment order dt. 31/12/2019 passed u/s 143(3) of the Act by the Asstt. Commissioner of Income Tax, Circle-2(1), Panaji Goa [‘Ld. AO’] for assessment year 2017-18, [‘AY’]. ITAT-Panaji Page 1 of 7 Surajdatta Sagun Morajkar Vs ACIT AY: 2017-18 2. Briefly stated facts of borne out of the case records are that; 2.1 The assessee is an individual governed by the provisions of section 5A of the Act was for the year under consideration engaged in the business of real estate development and construction in the name & style of ‘Sun Estate Developer’ and also a partner in M/s ‘SM Venture.’ The assessee filed his return of income on 30/03/2018 declaring total income at ₹4,47,72,090/- which was subjected to scrutiny and the consequential assessment order u/s 143(3) of the Act was passed by the Ld. AO wherein following additions were made namely; (i) disallowance of depreciation u/s 32(1) of the Act for ₹12,34,116/- (ii) unsecured loan from aggrieved parties amounting to ₹1,57,20,000/- as unexplained cash credit u/s 68 of the Act. (iii) cessation of liability ₹20,24,184/- u/s 41(1) of the Act, and (iv) disallowance of unsupported/unexplained expenses debited to profit & loss account u/s 37(1) of the Act ₹1,74,928/-. The Aggrieved assessee unsuccessfully contested the substantial additions in an appeal before the Ld. NFAC. ITAT-Panaji Page 2 of 7 Surajdatta Sagun Morajkar Vs ACIT AY: 2017-18 3. Further aggrieved by the impugned order the assessee is in appeal on as many as four grounds which are inconsonance with rule 8 of ITAT-Rules, 1963 hence the reproduction thereof is disposed of. However it shall suffice to state that, these grounds collectively directed against the actions of tax authorities in not considering the evidence is placed before them in support of claims made.
We have heard the rival party’s submissions on the limited issue of non-consideration of evidences and subject to rule 18 (supra), perused the material placed on record and considered the facts of the case in the light of settled position of law.
We note that, during the course of assessment proceedings the Ld. AO called upon the appellant assessee to adduce evidences to prove; (1) usage of fixed assets exclusively for business (2) identification, creditworthiness & genuineness of unsecured loan obtained from three parties viz; (a) M/s Indira Constructions (b) Charu Chawla and (c) RK Rangan (3) outstanding credit balance payable ITAT-Panaji Page 3 of 7 Surajdatta Sagun Morajkar Vs ACIT AY: 2017-18 not ceased to be payable to three vendors viz; (a) Ankush Warang (b) M/s BBM Contractors & (c) Gregary Desouza etc., and (4) genuineness of site expenses claimed to have been incurred for the purpose of business. The appellant failed to adduce necessary, cogent and convincing material on record to prove that; (1) identified fixed assets are indeed utilised for the business exclusively and not for personal use, (2) the loan transactions are genuine as they were obtained from identified persons who’s creditworthiness is established with evidences (3) outstanding balances have note cessed to be payable and (4) site expenses debited to profit and loss account are duly supported by third party evidences and are genuine. In the event, the Ld. AO made the additions and the assessment u/s 143(3) of the Act for the want of evidences. When the matter travelled in first appeal, the Ld. NFAC served as many as three notices dt. 01/08/2023, 29/02/204 & 08/03/2024 however none of these notices were attended by the appellant. In the event the Ld. NFAC proceeded ex-parte and culminated the appellate proceeding by partly confirming the disallowance ITAT-Panaji Page 4 of 7 Surajdatta Sagun Morajkar Vs ACIT AY: 2017-18 towards depreciation & site expenses and echoed the reasons of the Ld. AO in making the balance two additions made towards; (i) unexplained cash credit and (ii) cessation of outstanding balances payable etc.
However, we also note from the record that, during the course of assessment proceedings the Ld. AO vide latest notice dt. 28/12/2019 called upon the appellant to adduce material evidences in relation to impugned issues which was replied by the appellant vide written submission letter dt. 28/12/2019 accompanying therewith certain key evidences. These written submission and evidences however through oversight skipped the attention of the Ld. AO. Further these submissions have not been considered by the Ld. NFAC while dealing with the appeal as those were absent & the assessment was framed without their consideration. Further certain balance confirmations from outstanding creditors and loan parties have found been obtained post culmination first appellate proceedings, thus tax authorities hardly had any benefit of considering while framing respective assessment and adjudicating impugned addition on appeal. ITAT-Panaji Page 5 of 7 Surajdatta Sagun Morajkar Vs ACIT AY: 2017-18 7. From the impugned orders on the other hand, we also observed that, the notices issued by both the tax authorities one after another instantaneously with less than a reasonable period of fifteen days to comply & produce requisite details are capable of suggesting that these were paper opportunity granted to create audit trail and not with an intent to seek real compliance. May these unreal opportunities & namesake instances may be through oversight or owning to last minute rush, but certainly were unreasonable thus defeated the natural justice.
In view of ratio laid in ‘CIT Vs Panna Devi Saraogi’ [1970, 78 ITR 728 (Cal.)] the opportunity of being heard should be real, reasonable and effective, the same should not be for namesake, it should not be a mere paper opportunity. The absence of real opportunity render the proceedings irregular, thus deserves to be set-aside. In the case of ‘Smt. Ritu Devi Vs CIT’ [2004] 141 Taxman 559 (Mad.), it was held that, time of just few days granted to assessee to furnish reply was also held as denial of real opportunity and therefore proceedings are to be set-side. ITAT-Panaji Page 6 of 7 Surajdatta Sagun Morajkar Vs ACIT AY: 2017-18 9. In present case, admittedly neither during the course of assessment proceedings nor in appellate proceedings the appellant could lay all the material evidences in support of his claims made in the return of income. Further certain evidences which came to light posthumous of passing impugned orders and thus brought in present appeal with an application u/r 29 (supra) also necessitates de-novo verification of impugned issues. In view thereof, without commenting on merits of the case, we set-aside the impugned order for its remand the file of the Ld. NFAC with a direction to deal with all the issue as per form No 35 de- novo and pass a speaking order u/s 250(6) of the Act preferably in three effective opportunities of hearing.
The appeal in result stands allowed for statistical purposes. In terms of rule 34 of ITAT Rules, 1963 the order pronounced in the open court on date mentioned herein before.