2023 (10) TMI 1273 - AT - Income Tax

CIT(A) must re-adjudicate after failing to inform assessee of rejected adjournment request violating natural justice

Shiv Singh Versus The Income Tax Officer-1 (2), Bhilai (C.G.)

The ITAT Raipur held that CIT(A)'s failure to intimate the rejection of adjournment request to the assessee violated principles of natural justice. The ... Rejection of the request for adjournment non intimated to assessee - HELD THAT:- As stated by the AR and, rightly so, the failure on the part of the CIT(A) to intimate to the assessee the rejection of his request for adjournment had clearly divested him of an opportunity to defend his case by placing on record whatever material/submissions he had as on the date on which the appeal was fixed for hearing. Reason that in case the rejection of the request for adjournment would have been intimated to the assessee, then he might have participated in the proceedings on the stipulated date of hearing, i.e., on 18.07.2023 and defended his case with whatever material that was available to him. As the CIT(A) had proceeded with and disposed off the appeal at the back of the assessee, concur with the claim of the AR that the latter had remained divested of his right to defend his case before the first appellate authority. Matter, in all fairness and the interest of justice, requires to be restored to the file of the CIT(Appeals) with a direction to him to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether the appellate authority's disposal of the appeal without communicating the refusal of an adjournment request deprived the appellant of the right to be heard and violated principles of natural justice. 2. Whether, given the procedural defect in hearing/adjournment communication, the appropriate remedy is restoration of the appeal to the first appellate authority for de novo adjudication with an opportunity to be heard. 3. (Rendered academic by outcome) Whether the additions made by the assessing officer under the provision dealing with unexplained investments/credits were sustainable on the material on record. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Procedural fairness: communication of adjournment refusal and right to be heard Legal framework: Principles of natural justice and statutory right to a fair hearing require that an appellant be given a reasonable opportunity to present submissions before an adverse adjudicatory step is taken; where an adjournment is sought, the decision on that request and any resulting hearing must be communicated in a manner that enables participation. Precedent treatment: No specific precedents are cited in the impugned orders or in the present adjudication. The Court proceeds on general administrative law and procedural fairness principles rather than distinguishing or following particular case law. Interpretation and reasoning: The record establishes that the appellant uploaded an adjournment request before the appellate hearing date and received an acknowledgement. The appellate authority proceeded with the hearing and dismissed the appeal without communicating whether the adjournment request was accepted or rejected. The Tribunal reasons that, in such circumstances, the appellant was under a bona fide belief that the adjournment had been granted and therefore did not attend or make submissions on the scheduled date. Because the failure to notify rejection of the request effectively foreclosed the appellant's opportunity to appear and present available material on the hearing date, the Tribunal finds that the appellant was divested of a reasonable opportunity to be heard. Ratio vs. Obiter: Ratio - It is a core holding that where an adjournment application is uploaded/served and no communication is made to indicate rejection before the scheduled hearing, proceeding and disposing of the appeal without notifying the appellant violates the right to be heard. Conclusion: The Court concludes that the appellant was denied a fair opportunity to defend the appeal owing to lack of communication about the adjournment request; this procedural denial is established on the record and constitutes sufficient ground for remedial action. Issue 2 - Appropriate remedy: restoration for fresh adjudication Legal framework: Where an appellate process is vitiated by denial of opportunity to be heard, equitable remedies include restoration of the matter to the first appellate forum for fresh consideration after affording the affected party a reasonable opportunity to be heard; such restoration preserves parties' rights and enables adjudication on merits. Precedent treatment: The Tribunal does not rely on specific binding authorities but applies standard remedial principles of administrative fairness and the appellate jurisdiction's power to remit cases for re-adjudication when procedural infirmity prejudices a party. Interpretation and reasoning: Given the established procedural deficiency (lack of intimation of adjournment refusal) and the realistic possibility that the appellant would have participated and furnished material had notice been given, the Tribunal determines that the fair and just course is to restore the appeal to the appellate authority for re-adjudication after granting a reasonable opportunity to the appellant to be heard. The Tribunal refrains from addressing substantive contentions in view of the restoration, leaving all merits open for fresh consideration. Ratio vs. Obiter: Ratio - Restoration to the first appellate authority for fresh adjudication is the appropriate remedy where lack of notice about an adjournment results in denial of opportunity to be heard; merits are to be considered afresh by the appellate authority. Conclusion: The Tribunal restores the matter to the appellate authority with a direction to re-adjudicate the appeal after affording the appellant a reasonable opportunity of being heard; substantive issues are not decided and remain open for determination by the appellate authority. Issue 3 - Merits of additions under unexplained investment/credits (left open as academic) Legal framework: Additions under the provision dealing with unexplained investments/credits require the assessing officer to establish discrepancies between declared/opening/closing balances or to show unexplained credits/investments as per statutory tests; the assessee must be afforded opportunity to explain sources and creditworthiness of those providing gifts or funds. Precedent treatment: The Tribunal expressly refrains from adjudicating merits and therefore neither follows nor distinguishes prior holdings on valuation of unexplained investments, gift characterization, or peak bank credits. Interpretation and reasoning: The assessing officer made additions based on differences in cash balances, alleged unexplained gifts from parents for which creditworthiness was found not satisfactorily explained, and peak bank credits post-purchase of property. The appellate authority upheld these additions noting absence of contrary submissions during appeal. However, because the Tribunal has restored the matter for fresh hearing on procedural grounds, it declines to examine the sufficiency of the AO/CIT(A) reasoning or to opine on evidentiary adequacy. Ratio vs. Obiter: Obiter - Any observations regarding the substantive additions are provisional and non-binding; the Tribunal's decision to restore the case renders substantive comments academic and not part of the operative ratio. Conclusion: Substantive additions under the unexplained investment/credit provision are left open for fresh consideration by the appellate authority after the appellant is afforded opportunity to furnish explanations and material; no determination on merits is made by the Tribunal in this order. Cross-reference The Tribunal's procedural holding (Issue 1) directly grounds the remedial direction (Issue 2); because restoration is ordered, the Tribunal abstains from deciding Issue 3 and leaves it to the appellate authority on rehearing with full opportunity to the appellant to produce evidence and submissions.