2017 (6) TMI 596 - AT - Income Tax

Appellant Granted Hearing Opportunity After Ex-Parte Order

Ravindra Bhaskar Deshmukh, Raigad Versus Deputy Commissioner of Income tax, Panvel

The Tribunal granted the appellant another opportunity of hearing due to the ex-parte order passed by CIT(A) and lack of notice before transferring the ... Addition of bogus purchases - ‘unexplained expenses’- denial of natural justice - Held that:- From the order passed by Ld.CIT(A), it is seen that it is an ex-parte order and has been passed on the basis of material on record by Ld.CIT(A). Before us, Ld.A.R. has submitted that he had originally filed appeal before Ld.CIT(A), Thane. Before the transfer of appeal before Ld.CIT(A), Aurangabad, no opportunity of hearing was given and further since notice was not received by him he could not appear before Ld.CIT(A), Aurangabad. The aforesaid submissions have not been controverted by Revenue or found to be untrue. On the prayer of the assessee to grant one more opportunity of hearing, we are of the view that in the interest of natural justice, assessee has to be granted one more opportunity of hearing. We therefore restore the issue back to the file of Ld.CIT(A), Aurangabad to decide the appeal de novo. Appeal of the assessee allowed for statistical purpose. Issues Involved:1. Ex-parte order by CIT(A) without the appellant's presence.2. Transfer of appeal from CIT(A), Thane to CIT(A), Aurangabad without prior notice.3. Non-receipt of hearing notices by the appellant.4. Failure of CIT(A) to verify assessment records.5. Legality and jurisdiction of the transfer order.6. Addition of Rs. 31,62,752/- as bogus purchases.7. Violation of principles of natural justice.8. Confirmation of addition by CIT(A) despite evidence favoring the appellant.Detailed Analysis:1. Ex-parte Order by CIT(A):The appellant argued that the CIT(A), Aurangabad passed an ex-parte order without the appellant’s presence, deeming it unjustified. The appellant claimed that the notices of hearing were not received, leading to an ex-parte decision.2. Transfer of Appeal Without Prior Notice:The appellant contended that the appeal was originally filed before CIT(A), Thane and was transferred to CIT(A), Aurangabad without any prior notice or opportunity for the appellant to be heard regarding the transfer. This was claimed to be against the provisions of Section 246(3) of the Act, causing inconvenience and prejudice to the appellant.3. Non-receipt of Hearing Notices:The appellant asserted that the notices of hearing under Section 250 were not received at Panvel, resulting in the appellant's absence during the appeal proceedings. The CIT(A) mentioned the issuance of notices but did not provide evidence of service or the mode of service, indicating no proper service was made.4. Failure to Verify Assessment Records:The appellant argued that the CIT(A) did not judiciously consider the compliance made before the AO during assessment proceedings, as the assessment records were neither called for nor verified before adjudicating the matter.5. Legality and Jurisdiction of the Transfer Order:The appellant challenged the legality of the transfer order of the appeal to Aurangabad, stating it was done without any request from the appellant, thus not in consonance with the provisions of Section 246(3) of the Act. The appellant sought the cancellation of the transfer order due to its prejudicial nature.6. Addition of Rs. 31,62,752/- as Bogus Purchases:The primary issue requiring adjudication was the addition of Rs. 31,62,752/- made by the AO on account of bogus purchases from M/s. Shah Industries. The AO, based on information from the Sales Tax Department and lack of evidence from the appellant, treated these purchases as non-genuine and as ‘unexplained expenses.’7. Violation of Principles of Natural Justice:The appellant claimed that the CIT(A)’s order violated the principles of natural justice, as the appellant was not given a fair opportunity to present their case, thus rendering the order unconstitutional.8. Confirmation of Addition by CIT(A):The CIT(A) upheld the AO’s addition of Rs. 31,62,752/- as bogus purchases. The CIT(A) noted that the appellant failed to provide necessary documentary evidence to substantiate the purchases and did not produce the supplier for verification. The CIT(A) relied on various judicial precedents to justify the disallowance of the entire amount of bogus purchases.Tribunal’s Decision:The Tribunal noted that the CIT(A) passed an ex-parte order based on the material on record. The appellant’s claim of non-receipt of notice and lack of opportunity before the transfer of appeal was not contested by the Revenue. Considering the principles of natural justice, the Tribunal decided to grant the appellant another opportunity of hearing. The issue was restored to the file of CIT(A), Aurangabad for a de novo decision, directing the CIT(A) to provide adequate opportunity of hearing to the appellant. The appellant was also directed to furnish all required details promptly. In case of non-compliance by the appellant, the CIT(A) was free to dispose of the appeal based on the available material. The appeal was allowed for statistical purposes.Conclusion:The Tribunal emphasized the importance of natural justice and provided the appellant another chance to present their case. The issue of bogus purchases amounting to Rs. 31,62,752/- was remitted back to the CIT(A) for a fresh decision, ensuring the appellant’s right to a fair hearing.