Loading judgment…
Facts
The assessee preferred an appeal against an ex-parte order passed by the Ld. CIT(A) for AY 2018-19. The assessee contended that due to the Covid-19 pandemic, key persons were quarantined and unable to attend assessment proceedings, and their adjournment requests were not considered by the AO and CIT(A).
Held
The Tribunal held that the assessee did not get a proper opportunity before the AO, violating principles of natural justice. Relying on the Supreme Court's decision in Tin Box Company Vs. CIT, it was decided that the assessment order must be made after giving the assessee a reasonable opportunity.
Key Issues
Whether the assessee was denied a proper opportunity of being heard before the AO and CIT(A) leading to a violation of natural justice.
Sections Cited
144, 68, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI S RIFAUR RAHMAN, AM
O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 27.09.2023 for the assessment year 2018-19.
2. At the outset, the Ld. AR of the assessee pointed out that the impugned order of the Ld. CIT(A) is an exparte order; and he also pointed out that the AO has passed the order u/s 144 of the Income Tax Act, 1961 (hereinafter “the Act”) i.e. Best judgment assessment. According to the Ld. AR, the assessee was unable to attend before the AO inter-alia on account of Covid-19 Pandemic and for the following reasons as under: - i. “For, A. Y. 2018-2019, Appellant received Notice u/s 142(1) dtd 22/12/2020 requiring the Appellant to submit the details contained therein by 6/1/2021. 2 A.Y. 2018-19 Crystal City Mall Pvt. Ltd ii. On 31/12/2020 Mr Mukesh Doshi, major shareholder of the Appellant as well as father in law of Kina Doshi who is the Director of the Company, was tested positive for Corona and was admitted to Hospital on 5/1/2021. iii. Kina Doshi looked after the taxation aspects of the Appellant as per the aid and advice of Mr Mukesh Doshi. As she was staying with Mr Mukesh doshi, she was also quarantined. As a result, the Notice u/s 142(1) dtd 22/12/2020 could not be complied. iv. Mr Mukesh Doshi was discharged on 18/1/2021 but was required to remain at home and take oxygen for 15-16 hours a day. Due to poor health of Mr Mukesh Doshi the entire family including Kina Doshi were busy with taking due care of Mr Mukesh Doshi. As a result, the reminder Notice dated 21/1/2021 i.e. within 3 days of discharge and received by email could not be complied. v. Thereafter, Notice dated 23/2/2021 was received by the Appellant to respond within 7 days. Appellant on 1/3/2021 requested time for 15 days to compile all the details. However, the adjournment request was not responded to and ultimately assessment order u/s 144 was passed on 19.03.2021 making addition of unsecured loans u/s 68 of Rs.55,09,30,012/- and disallowance of miscellaneous expenses Rs.9,525/-.”
3. Before the Ld. CIT(A), the assessee had filed additional evidences since it could not file the same before the AO due to the reason stated above. Even though, the Ld. CIT(A) called for remand report from the AO, it was not provided by AO. Despite the omission on the part of AO to give remand report in respect of additional evidence filed by assessee, the Ld. CIT(A) hurriedly passed the impugned Appellate Order without considering the adjournment application filed by the assessee. Therefore, according to the Ld. AR, there was violation of the natural justice by the Ld. CIT(A) as well as by AO; and since no proper opportunity was granted by AO during the 3 A.Y. 2018-19 Crystal City Mall Pvt. Ltd assessment proceedings, he prayed that the matter may be restored to the file of the AO for denovo assessment.
The Ld. DR does not want us to give the assessee one more innings.
We have heard both the parties and perused the records. From the sequence of events (supra), it is noted that the key person of the assessee Mr Mukesh Doshi and Shri Kina Doshi (directors) could not attend the assessment proceeding since it was in the midst of Covid- 19, Pandemic and they were quarantined. Even though this fact was brought to the notice of the AO, still, the AO proceeded to pass the Best judgment assessment u/s 144 of the Act without hearing the assessee. Therefore, we are of the opinion that the assessee did not get proper opportunity before the AO. Therefore, relying on the decision of the Hon’ble Supreme Court in the case of Tin Box Company Vs. CIT (249 ITR 216) (SC) wherein the Hon’ble Supreme Court held that if the assessee didn’t get proper opportunity before the AO, then, the assessment has to be restored to the AO’s file for denovo assessment. The Hon’ble Supreme Court observed as under: - “It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus :
We will straightway agree with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard.
4 A.Y. 2018-19 Crystal City Mall Pvt. Ltd That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.
Two questions were placed before the High Court, of which the second question is not pressed. The first question reads thus:
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee ?"
In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the assessee.
The appeals are allowed. The order under challenge is set aside. The assessment orders, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.”
Since we have found in the present case that AO has not given proper opportunity to the assessee before framing assessment order, 5 A.Y. 2018-19 Crystal City Mall Pvt. Ltd we relying on the aforesaid decision of the Hon’ble Supreme Court in the case of Tin Box Company (supra) set aside the impugned order of the Ld. CIT(A) and remand the matter back to the file of the AO and direct him to frame the assessment de-novo after hearing the assessee in accordance to law. The assessee is at liberty to file documents/material/written submission before the AO to substantiate its return of income. And we also direct the assessee to be diligent before the AO during the assessment proceedings.
In the result, the appeal of the assessee is allowed for statistical purposes.