2018 (11) TMI 519 - AT - Income Tax

Tribunal overturns addition under section 68 for lack of natural justice

The Tribunal set aside the Ld. CIT(A)'s order upholding the addition of Rs. 6,40,85,000 under section 68 for AY 2008-09 due to the violation of natural ... Validity of reopening of assessment - addition u/s 68 - violation of the principles of natural justice in having passed the ex parte order qua the assessee without affording adequate opportunity of being heard to the assessee - Held that:- We note that though the AO has stated that he has issued summons u/s. 131 of the Act, no dates of issue of summons have been mentioned in the assessment order. We note that no other investigation was conducted by AO is discernable from the order. So, we find force in the submission of the AR that no proper opportunity before the AO during the reassessment proceedings because only one date was fixed for hearing on 16.12.2013 to Assessee Company. We note that since the directors of Assessee Company could not appear before the AO in pursuance of the summons u/s. 131 (this fact of summons issued is contested by assessee), the AO saddled the addition by drawing adverse inference is per-se without application of mind, which action of A.O. cannot be countenanced. So, we find force in the submission of AR that no proper opportunity was given to assessee by AO during the reassessment proceedings and so we are, therefore, of the opinion that assessee did not get proper opportunity before the AO during reassessment proceedings. In the light in Tin Box Company [2001 (2) TMI 13 - SUPREME COURT] DR accepted that assessee did not get proper opportunity before the AO during reassessment proceedings, we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. Appeal of assessee is allowed for statistical purposes Issues:Appeal against Ld. CIT(A)'s order for AY 2008-09 - Addition of Rs. 6,40,85,000 u/s. 68 - Violation of principles of natural justice - Proper opportunity of being heard - Ex parte order - Investigation guidelines - Lack of opportunity - Remand for fresh adjudication.Analysis:The appeal concerns the assessee challenging the Ld. CIT(A)'s decision upholding the addition of Rs. 6,40,85,000 made by the AO under section 68 for AY 2008-09. The primary contention is the violation of natural justice principles due to the ex parte order passed by Ld. CIT(A) without affording adequate opportunity to the assessee. The Ld. AR argued that the AO's action was arbitrary, ignoring material evidence and influenced by a previous CIT's order under section 263. The AO's investigation involved issuing notices to the assessee and its directors, but due to non-appearance, the addition was made. However, the AO's actions were questioned as they did not follow specific investigation guidelines provided by the CIT, leading to a lack of proper opportunity for the assessee during reassessment proceedings.The Tribunal noted discrepancies in the AO's procedures, such as the lack of detailed investigation and the absence of proper opportunity for the assessee to present its case. Citing the Tin Box Company case, the Tribunal emphasized the importance of providing a reasonable opportunity for the assessee to be heard during assessment. Referring to a similar case, the Tribunal highlighted the need to follow investigating guidelines to determine the genuineness of transactions. Additionally, a Delhi High Court case underscored the obligation of authorities to conduct thorough inquiries and not close cases prematurely based on incomplete investigations.Considering the precedents and the acknowledgment by the Ld. DR of the lack of proper opportunity for the assessee, the Tribunal set aside the Ld. CIT(A)'s order and remanded the matter to the AO for fresh assessment. The decision aimed to ensure that the assessee receives a fair hearing and that the assessment is conducted in accordance with the law. Ultimately, the appeal was allowed for statistical purposes, and the matter was directed to be decided after providing the assessee with a proper opportunity to present its case.In conclusion, the judgment addressed issues related to natural justice, proper opportunity for the assessee, adherence to investigation guidelines, and the importance of thorough inquiries in assessment proceedings. The decision emphasized the need for fair procedures and compliance with legal principles to uphold the integrity of the assessment process.