2014 (12) TMI 555 - AT - Income Tax

Tribunal restores appeal, emphasizes natural justice principles. Assessee advised compliance & representation.

The Tribunal allowed the appeal for statistical purposes, restoring the issue to the file of the CIT(A) with directions to decide the case in accordance ... Violation of section 250 – Breach of principles of natural justice - Prayer for adjournment on the date of hearing duly received or not - Held that:- No one was present on behalf of the assessee at the time of hearing however considering the material available on record and after hearing the revenue, it was considered appropriate to restore the issue back to the file to the CIT(A) - the right to be heard is an important right to which a party who is faced with an adverse view is entitled to. “Audi alteram partem” is one of the most famous and celebrated Rule of Natural Justice - The principles of natural justice are those which have been laid out by the Courts as being the minimum protection of the rights of an individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights - The underlying principle of natural justice evolved under the common law is to check arbitrary exercise of power by the State or its functionaries. Also in A.K.Kraipak –vs- Union of India [1969 (4) TMI 103 - SUPREME COURT] it has been held that the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice - the assessee has been represented through his counsel has repeatedly sought an adjournment - the assessee should not suffer on account of the fault of the counsel and considering the plea raised by the assessee before the Tribunal the matter is to be remitted back to the CIT(A) to decide the matter in accordance with law after giving the assessee a reasonable opportunity of being heard – Decided in favour of assessee. Issues Involved:1. Violation of Provisions of Section 250 of the Income Tax Act.2. Breach of principles of natural justice.3. Disallowance of improvement cost and transfer expenses.4. Disallowance of interest paid on house loan as cost of acquisition.5. Non-compliance and repeated adjournment requests by the assessee.Issue-wise Detailed Analysis:1. Violation of Provisions of Section 250 of the Income Tax Act:The assessee challenged the action of the CIT(A) on the grounds that the order was dismissed summarily without granting an opportunity of hearing or deciding on merits, thus violating Section 250 of the Act. The Tribunal noted that the right to be heard is a fundamental right and emphasized the principle of 'audi alteram partem,' which mandates that no one should be condemned unheard. The Tribunal highlighted that the principles of natural justice require fair play in action at every stage.2. Breach of Principles of Natural Justice:The assessee contended that the assessment of Rs. 1,23,23,870/- was a breach of natural justice, as their request for adjournment was received but not considered. The Tribunal reiterated that the rules of natural justice aim to secure justice and prevent miscarriage of justice. The Tribunal cited the case of A.K. Kraipak vs. Union of India, emphasizing that these rules cannot be sacrificed for administrative convenience.3. Disallowance of Improvement Cost and Transfer Expenses:The AO disallowed the improvement cost of Rs. 53,98,500/- and transfer expenses of Rs. 2,00,000/- claimed by the assessee due to the lack of documentary evidence. The Tribunal noted that the AO concluded these expenses were claimed to reduce taxable income without proper substantiation.4. Disallowance of Interest Paid on House Loan as Cost of Acquisition:The AO also disallowed Rs. 25,30,650/- claimed as interest paid on a house loan as part of the cost of acquisition for calculating capital gains. The Tribunal observed that the assessee failed to provide documentary evidence to substantiate the claim of transfer expenses and other disallowances such as vehicle, telephone, and Diwali expenses.5. Non-compliance and Repeated Adjournment Requests by the Assessee:The CIT(A) provided multiple opportunities for the assessee to comply, but the assessee repeatedly sought adjournments and failed to make submissions or attend hearings. The Tribunal noted that the assessee's representatives were fully authorized to act on behalf of the assessee, and there was no valid reason for the continuous non-compliance. The Tribunal cited the case of CIT vs. B.N. Bhattacharya, emphasizing that preferring an appeal means more than formally filing it but effectively pursuing it.Conclusion:The Tribunal, considering the material on record and the principles of natural justice, restored the issue back to the file of the CIT(A) with directions to decide the case in accordance with the law after providing a reasonable opportunity of being heard to the assessee. The Tribunal cautioned the assessee to ensure full and proper compliance and representation in the proceedings. The appeal was allowed for statistical purposes, and the order was pronounced on January 3, 2014.