Assessment invalid for violating natural justice; remand for fresh adjudication under Section 69B with one more opportunity

HC found the assessment order vitiated by violation of principles of natural justice because the taxpayer was called to explain only a specific sum, leading to no opportunity to contest excess stock treated as unexplained investment under Section 69B. The impugned orders are set aside and the matter is remanded to the assessing authority. The authority must afford one more opportunity to the taxpayer to file explanations/objections regarding the excess stock and pass fresh orders within 12 weeks from receipt of this judgment.

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Issues Involved:
1. Violation of principles of natural justice.
2. Availability of alternative remedy.
3. Assessment of excess stock as unexplained investment under Section 69B of the Income Tax Act.

Summary:

1. Violation of principles of natural justice:
The appellant, a partnership firm engaged in trading furniture and home appliances, challenged an assessment order claiming it was made in violation of the principles of natural justice. The appellant argued that they were misled to believe their explanation regarding stock variation was accepted, except for Rs. 29,36,013/-. The appellant responded only to this amount, believing the rest was accepted. The court found merit in this argument, noting that the appellant was not given a fair opportunity to explain the excess stock of Rs. 3,10,20,813/-, resulting in a violation of natural justice principles.

2. Availability of alternative remedy:
The court addressed the rejection of the writ petition on the grounds of the availability of an alternative remedy. It acknowledged that while courts generally avoid entertaining writ petitions when an alternative remedy is available, exceptions exist, such as violations of natural justice. Given the identified violation, the court deemed it appropriate to intervene under Article 226 of the Constitution of India.

3. Assessment of excess stock as unexplained investment under Section 69B of the Income Tax Act:
The appellant's case involved a survey under Section 133A of the Income Tax Act, leading to the issuance of notices under Sections 143(2) and 142(1). The assessment order added Rs. 3,10,20,813/- as unexplained investment under Section 69B, citing insufficient documentary evidence. The appellant contended that they were led to believe only Rs. 29,36,013/- was in question, affecting their ability to respond adequately. The court found the proceedings lacked clarity, leading to the appellant's misunderstanding and insufficient opportunity to explain the excess stock.

Conclusion:
The court set aside the impugned assessment order and the writ petition order, remanding the matter back to the assessing authority. The authority is directed to provide the appellant with a fresh opportunity to explain the excess stock and pass a new order within 12 weeks. The writ appeal was disposed of on these terms, with no costs, and the connected miscellaneous petition was closed.

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