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Facts
The assessee challenged an ex-parte order by the NFAC/CIT(A) for AY 2016-17, arguing a violation of natural justice. The CIT(A) dismissed the appeal stating non-compliance, despite the assessee having made submissions to the Assessing Officer (AO). The AO had also made an addition under Section 92CA without first issuing a draft assessment order under Section 144C(1).
Held
The Tribunal found that the CIT(A) erred in dismissing the appeal ex-parte without adequately considering the assessee's prior submissions to the AO and without issuing a show cause notice. It held that the assessee was denied a fair opportunity to be heard and that the assessment order might be invalid due to the lack of a draft assessment order. The case was remanded to the AO for a de novo assessment.
Key Issues
Whether the CIT(A) violated principles of natural justice by passing an ex-parte order. Whether the AO erred by not issuing a draft assessment order under Section 144C(1) before making a final assessment order under Section 143(3) involving an adjustment under Section 92CA.
Sections Cited
Section 92CA, Section 144C(1), Section 143(3), Section 92E
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR
ORDER DR. MITHA LAL MEENA, A.M.: This appeal is filed by assessee against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as NFAC/ CIT(A)] dated 30.01.2024 with respect to Assessment Year 2016-17 challenging therein the order passed by the Ld. CIT(A) ex-parte in violation of principles of natural justice.
Grounds of Appeal
are as under:
1. The order passed by Ld. AO is bad in law as well as on facts.
1.
2. Under the facts and circumstances of the case the Ld. AO has erred in referring matter to TPO for determination of ALP of Specified Domestic Transactions contrary to the CBDT guidelines ignoring that the appellant Asst. Year: 2016-17 has duly furnished report of an accountant in prescribed Form No. 3CEB as specified under section 92E.
1. 3. Under the facts and circumstances of the case the Ld. AO has grossly erred by not passing Draft assessment order under section 144c1 before making final assessment order under section 143(3) of the I.T. Act as the same contains an addition of Rs. 22390614/- under section 92CA of the Act. The Ld. A.O. straight forward passed order under section 143(3) of the IT Act which has deprived the appellant of its right to refer the matter for reference before Dispute Resolution Panel under section 144(c)(15)(b)(i) regarding adjustment in ALP. Order passed under section 143(3) on 28.12.2019 by Assessing Officer without prior passing of draft assessment order under section 144(c)(1) of the Act is totally illegal, unconstitutional, unjudicious, Arbitrary and void because the same has been passed violating the provision of section 144(c) of the Act. The order passed by Ld. AO is barred by limitation also.
1. 4. Under the facts and circumstances of the case the Ld. AO has grossly erred in making addition of Rs. 22390614/- under section 92CA(3) of the IT Act for adjustment in ALP for payment of goods, salary and interest to relative and associates enterprises with whom specified domestic transaction had taken place.
1. 5. Under the facts and circumstances of the case the Ld. AO has grossly erred in confirming ex-parte order of TPO passed under section 92CA(3) of the Act. TPO not only ignored the TP report filed by the appellant but also erred by adopting TNMM method for determination of Arms Length Price instead of CUP or cost plus method as adopted by the appellant.
1. 6. Under the facts and circumstances of the case the Ld. AO has grossly erred by making addition of Rs. 105984/- considering profit on sale of Vehicle as part of income ignoring that the same has rightly been Asst. Year: 2016-17 deducted from the WDV of Vehicle as block of assets did not cease to exist. Ld. AO incorrectly computed profit on sale of Vehicle as business income.
7. Under the facts and circumstances of the case the Ld. AO has grossly erred by making lumsum addition of Rs. 300000/- from the balances of sundry creditors without any specific finding but simply on surmises and conjecture concluded that few creditors not named could not be verified for want of complete details or communication address.
The appellant craves leave add to or amend any ground of appeal at any time.
Having heard both the sides and perused the material on record, we find that the ld. CIT(A) has merely stated that several notices were issued to the assessee to call for ground wise written submission and response along with supplementary documentary evidences in support of grounds of appeal as per Para 6.4 Page 7 of the impugned order. He has further observed that since the appellant has not furnished cogent documentary evidences in support of grounds of appeal and that the appellant did not bother to file any submission/explanation. Accordingly, he presumed that the appellant is no longer interested to continue the appeal proceedings. The Ld. CIT(A) has been of the view that fact mentioned in Form 35 cannot be considered in absence of any supporting document and submission.
Asst. Year: 2016-17 4. It is noted that the detailed submissions filed by the assessee before the Assessing Officer which are duly reproduced in Para 2 of assessment order. It is seen that the AO has also mentioned that there was non-compliance to the notices issued by the AO through post-office and that so cause notice was remained non-completed with however, at the same time the Assessing Officer has stated in the assessment order that “I have gone through the submissions of the assessee and after verification of material on record, no interference is being made on this account. It is seen that the AO has also reproduced part of the submissions made by the assessee during the course of assessment proceedings in the second last page of the assessment order but the AO has further mentioned that he was being not satisfied with the reply of the assessee furnished, however the AO did not mention the reason why he was not satisfied with submission furnished by the assessee during the assessment proceedings except mentioning mismatch income/receipt credited to Profit and Loss A/c.
We find that the Ld. CIT(A) has not referred any of the observations made by the AO and the reply filed by the assessee before the AO and not even made any reference to the facts to decide the appeal on merits of the case by way of granting adequate opportunity of being heard to the assessee.
Asst. Year: 2016-17 6. In our view, the rejection of appeal by the ld. CIT(A) merely stating that non-compliance on the part of the assessee and that the assessee is not interested in perusing the appeal cannot be approved in absence of corroborative documentary evidences to prove that how the assessee was not interested in perusing its appeal when he has made adequate compliances during the assessment proceedings. It is also noted that the ld. CIT(A) has not issued a so cause notice to the assessee while coming to the adverse conclusion in rejecting the appeal of the assessee ex-parte in gross violation of principles of natural justice.
In view of the principle of natural justice, the assessee deserves one more opportunity of being heard before the Assessing Officer to make fresh submissions along with documentary evidences in support of its claim. The AO directed to grant adequate opportunity of being heard to the assessee and considering the submissions furnish by the assessee during the assessment proceedings and may be furnished in the fresh assessment proceedings and pass de novo the assessment in accordance with law along with adjudicating the legal issue raised by the assessee. The assessee shall cooperate before the de novo assessment proceedings before the AO.
In the result, the appeal is allowed for the statistical purpose.
Order pronounced in the open court on 26/02/2026.