2014 (4) TMI 783 - AT - Income Tax

Tribunal overturns CIT(A) decision, emphasizes fair opportunity for appellant

Mrs. Thresia P. Johny Versus The Asst. CIT(23) (3), Mumbai

Mrs. Thresia P. Johny Versus The Asst. CIT(23) (3), Mumbai - TMI Issues involved:1. Proper opportunity not given by CIT (A)2. Best judgment assessment under section 144 of the Act3. Partial confirmation of addition by CIT (A)4. Disallowance of expenses by CIT (A)5. Addition on account of alleged low withdrawal/drawing6. Revisiting the CIT (A) orderAnalysis:1. Proper opportunity not given by CIT (A):The appeal was filed against the order of CIT(A)-34, Mumbai, for the assessment year 2006-07. The appellant contended that the CIT(A) erred in passing the order under section 250 of the Income Tax Act without providing a proper opportunity to be heard, breaching the principles of natural justice. The appellant argued that the action of the CIT(A) was illegal and against the law. The Tribunal found merit in the appellant's argument and directed the AO to grant a reasonable opportunity to the assessee for fresh examination and conclusion, allowing the ground raised by the assessee for statistical purposes.2. Best judgment assessment under section 144 of the Act:The appellant challenged the best judgment assessment made by the AO under section 144 of the Act. The Tribunal noted that the AO had disallowed all loans and assets without examining the assessee's books of accounts. The appellant, being a professional interior designer, provided various papers and evidence during the appellate proceedings. The Tribunal found errors in the CIT(A)'s findings and directed a revisit by the authorities for a fresh examination. The AO was instructed to provide a reasonable opportunity for the assessee to present all relevant papers and evidence in support of their claim.3. Partial confirmation of addition by CIT (A):The CIT(A) partly confirmed the addition made by the AO regarding the source of investment in various assets. The appellant argued that the source of investment was duly explained during the appellate proceedings, and the CIT(A) failed to consider relevant evidence. The Tribunal found that the CIT(A) erred in taking into account irrelevant considerations and ignoring cogent evidence brought by the appellant. The Tribunal held that no such addition was warranted in the given circumstances and in law.4. Disallowance of expenses by CIT (A):The CIT(A) confirmed the disallowance of expenses on an ad hoc basis, amounting to a certain percentage out of labor charges, telephone expenses, and conveyance/traveling expenses. The appellant contended that no such disallowances were justified in the facts and circumstances of the case. The Tribunal agreed with the appellant, stating that the disallowances were not warranted in law or in the given situation.5. Addition on account of alleged low withdrawal/drawing:The CIT(A) confirmed the addition made by the AO on account of alleged low withdrawal/drawing during the year. The appellant argued that no such addition was justified based on the facts and circumstances of the case. The Tribunal concurred with the appellant, stating that the addition was not warranted in law or in the given situation.6. Revisiting the CIT (A) order:Overall, the Tribunal allowed the appeal of the assessee for statistical purposes, directing a revisit of the CIT(A) order by the AO. The Tribunal emphasized the importance of providing a proper opportunity for the assessee to present their case and evidence, ensuring a fair examination of the issues raised in the appeal.This comprehensive analysis highlights the key issues raised in the judgment and the Tribunal's findings and directions regarding each issue.