2018 (5) TMI 41 - AT - Income Tax

Income Tax Assessment Order Set Aside for Violating Natural Justice

The Tribunal found that the Principal Commissioner of Income Tax (Pr. CIT) erred in passing the assessment order without proper examination, prejudicial ... Validity of ex-parte order - Held that:- In the present case, it is noticed that the authorized representative of the assessee sought adjournment since his mother got burnt and was hospitalized but the ld. Pr. CIT passed the impugned order ex-parte in haste. It is well settled law that nobody should be condemned unheard as per the maxim “audi alteram partem”. We, therefore, considering the totality of the facts of the present case, deem it appropriate to set aside this case back to the file of the ld. Pr. CIT(C) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Issues Involved:1. Whether the Principal Commissioner of Income Tax (Pr. CIT) erred in holding the assessment order as erroneous and prejudicial to the interest of revenue.2. Whether the assessment order dated 15.10.2014 was in accordance with the provisions of law.3. Whether the Pr. CIT failed to appreciate the facts related to the search and seizure event and the agricultural income disclosed by the assessee.4. Whether the grounds for revision of the assessment order were vague and irrelevant.5. Whether the Pr. CIT provided an effective opportunity of being heard to the assessee.6. Whether the refusal to grant adjournment was unjust and lacked bona fide.7. Whether the order passed was contrary to the facts, law, and principles of natural justice.Issue-wise Detailed Analysis:1. Erroneous and Prejudicial Assessment Order:The Pr. CIT exercised his powers under section 263 of the Income Tax Act, 1961, observing that the assessment order dated 15.10.2014 was passed without proper examination and was prejudicial to the interest of revenue. The reasons included large agricultural income, interest related to exempt income under section 14A, and large unsecured loans. The Pr. CIT noted that the Assessing Officer (AO) did not independently verify the assessee's submissions and failed to examine inter-related transactions, finance costs, and agricultural income properly.2. Compliance with Provisions of Law:The assessee argued that the assessment order dated 15.10.2014 was in full compliance with the law and could not be deemed erroneous or prejudicial to the interest of revenue. The assessee contended that the AO had considered all relevant documents and submissions during the assessment proceedings.3. Search and Seizure Event and Agricultural Income:The assessee pointed out that the search and seizure event from 2008 and the order by the Income Tax Settlement Commission for assessment years 2003-04 to 2010-11 had no bearing on the assessment year 2012-13. The disclosed agricultural income was verifiable from records and consistent with past disclosures. The assessee argued that no defects were found in the quantum of agricultural income, mainly derived from the sale of saplings.4. Grounds for Revision:The assessee claimed that the grounds relied upon by the Pr. CIT for revising the assessment order were vague, indefinite, and irrelevant. The case laws referred to in the impugned order were also deemed irrelevant to the facts of the case, rendering the order dated 16.06.2015 vitiated.5. Opportunity of Being Heard:The main grievance of the assessee was that the Pr. CIT did not provide an effective opportunity of being heard. Despite the authorized representative seeking adjournments due to personal hardships, the Pr. CIT proceeded to pass the order ex-parte.6. Refusal to Grant Adjournment:The assessee argued that the Pr. CIT unjustly refused to grant a one-month adjournment despite legitimate grounds, including the hospitalization of the authorized representative's mother. The refusal was considered lacking in bona fide, especially since the limitation for passing the order under section 263 was not imminent.7. Principles of Natural Justice:The assessee contended that the order was contrary to the facts, law, and principles of natural justice. The Pr. CIT's haste in passing the ex-parte order without adequate opportunity for the assessee to present their case violated the maxim 'audi alteram partem' (hear the other side).Conclusion:The Tribunal considered the submissions and found that the Pr. CIT passed the order ex-parte in haste without providing a reasonable opportunity of being heard. The Tribunal set aside the case to the Pr. CIT for fresh adjudication in accordance with the law, ensuring due and reasonable opportunity for the assessee to be heard. The findings apply mutatis mutandis to the other identical appeals.Result:The appeals of the assessees were allowed for statistical purposes, and the cases were remanded back to the Pr. CIT for fresh consideration.