Court rules in favor of petitioner citing breach of natural justice, discrepancy in audit report, and denial of personal hearing.

The Court found in favor of the petitioner, acknowledging a breach of natural justice and failure to consider the petitioner's explanation in an assessment order. A discrepancy in unsecured loans between the audit report and balance sheet was cited as the reason for the addition to the petitioner's income. Despite the petitioner's request, a personal hearing was denied by the Assessing Officer. The Court issued notice to the respondents, directed the filing of a counter-affidavit, and stayed the operation of the assessment order pending further orders. The case was scheduled for the next hearing on 02.06.2021.

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Issues:
Challenge to assessment order based on breach of natural justice and failure to consider petitioner's explanation and material; Discrepancy in unsecured loans between audit report and balance sheet; Denial of personal hearing to petitioner by Assessing Officer.

Analysis:

Issue 1: Breach of Natural Justice and Failure to Consider Petitioner's Explanation
The petitioner contended that there was a breach of natural justice as the impugned assessment order was passed without considering the petitioner's reply dated 12.03.2021, which explained and attempted to establish the genuineness of the unsecured loans received. The petitioner had requested a personal hearing, but it was not granted by the Assessing Officer (AO). The AO proceeded with the assessment without taking into account the material provided by the petitioner, which led to the addition of &8377; 9,56,00,000 to the petitioner's declared income under Section 68 of the Income Tax Act, 1961 for the assessment year 2018-2019.

Issue 2: Discrepancy in Unsecured Loans
On the other hand, the revenue represented by Mr. Zoheb Hossain argued that the addition to the petitioner's income was due to a discrepancy between the audit report and balance sheet regarding unsecured loans for the financial year 2017-2018. The audit report showed unsecured loans as &8377; 11,55,35,000, while the balance sheet reflected &8377; 5,33,18,001 for the same period. This discrepancy was cited as the reason for the addition to the petitioner's income.

Issue 3: Denial of Personal Hearing
Despite the petitioner's request for a personal hearing, the AO did not grant the same. The AO proceeded with finalizing the assessment order based on the lack of response from the petitioner to the show cause notice, presuming that the petitioner had nothing to say in the matter. This denial of a personal hearing and failure to consider the petitioner's explanation and material raised concerns about the procedural fairness of the assessment process.

Conclusion
The Court acknowledged the petitioner's contention that there was a breach of natural justice and failure to consider the petitioner's explanation. Considering the circumstances, the Court found a prima facie case in favor of the petitioner and issued notice to the respondents. The Court directed the filing of a counter-affidavit within three weeks and ordered a stay on the operation of the impugned assessment order until further orders. The matter was listed for the next hearing on 02.06.2021.

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