2024 (8) TMI 1616 - AT - Income Tax

Appeal allowed for statistical purposes; matter remitted for de novo adjudication and final hearing after lack of e-notice awareness

Sri Ramchandra Singh Premises of Avinash Kr. Saw Versus ITO Ward-1 (1), Dhanbad

Sri Ramchandra Singh Premises of Avinash Kr. Saw Versus ITO Ward-1 (1), Dhanbad - TMI 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the reassessment/order passed after exercise of power under section 263 resulting in de novo proceedings and subsequent addition under section 69 (unexplained cash deposits) constituted merely a change of opinion where original assessment under section 143(3) had been completed. 2. Whether the assessee's failure to respond to notices in faceless/e-proceedings (NFAC/ITBA portal) amounted to deliberate non-compliance warranting dismissal of appellate contentions and affirmation of additions. 3. Whether, in the facts, the unexplained bank deposits of Rs. 3,86,38,036/- were rightly added to income under section 69 in absence of explanation and compliance. 4. Whether the matter required remand to the appellate authority for de novo adjudication in light of claimed lack of notice awareness and principles of natural justice. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether the exercise of jurisdiction under section 263 (setting aside original assessment) and subsequent framing of fresh assessment was in effect a mere change of opinion. 2.1 Legal framework: - Section 263 empowers the Commissioner to call for and examine records of any assessment if it is found that the assessment is prejudicial to the interests of the revenue, and to direct the Assessing Officer (AO) to make a fresh assessment where justified. 2.2 Precedent Treatment: - The Court's reasoning relies on the statutory power under section 263 as enabling fresh enquiries where material discrepancies (here, bank deposits vs. declared receipts) are discovered; no precedential overruling or special distinction is invoked in the judgment. 2.3 Interpretation and reasoning: - The Tribunal notes the original assessment under section 143(3) was completed, but PCIT observed a material discrepancy between audited sales/gross receipts (Rs. 6,98,88,110/-) and total bank deposits (Rs. 10,85,26,146/-), revealing excess deposits of Rs. 3,86,38,036/-. The Commissioner, therefore, invoked section 263 to set aside the original assessment directing de novo enquiries. - The Court does not expressly hold that the setting aside was wrongful as mere change of opinion; instead, it accepts that section 263 may be validly invoked where such materially inconsistent information comes to light post-assessment. 2.4 Ratio vs. Obiter: - Ratio: Section 263 may legitimately be exercised to direct de novo assessment where significant undisclosed material (bank deposit discrepancy) exists; the mere prior completion of section 143(3) assessment does not immunize the assessment from supervision under section 263. 2.5 Conclusion: - The Tribunal does not overturn the use of section 263 on the ground of mere change of opinion; it treats the Commissioner's action as procedurally permissible given the material discrepancy that warranted fresh inquiry. Issue 2: Whether the assessee's non-response to faceless/e-portal notices amounted to deliberate non-compliance preventing relief. 3.1 Legal framework: - Principles of natural justice require adequate notice and opportunity to be heard before adverse orders are passed. Faceless/ITBA e-proceedings require service on the portal; non-compliance can result from genuine non-receipt or lack of technological competence. 3.2 Precedent Treatment: - The Tribunal relies on ordinary principles that absence of reply may justify basing decision on materials on record, but also recognizes that lack of deliberate defiance and prior compliance in original assessment are relevant factors favoring a further opportunity. 3.3 Interpretation and reasoning: - The AO and CIT(A) recorded multiple opportunities and noted no response on the portal. The assessee explained lack of awareness of e-proceedings due to limited computer knowledge and absence from station; earlier original assessment showed cooperation. The Tribunal found the claim of inadvertent non-awareness credible given past compliance. - In balancing fairness and procedural regularity, the Tribunal concluded that there was no deliberate defiance and that principles of natural justice and fair play required one last opportunity for the assessee to be heard. 3.4 Ratio vs. Obiter: - Ratio: Where failure to respond in e-proceedings is credibly explained as non-awareness or incapacity, and prior cooperative conduct exists, the appellate forum should consider granting a fresh opportunity rather than mechanically upholding adverse findings. - Obiter: Observations regarding the adequacy of specific notices and portal procedures are ancillary; the judgment does not lay down procedural directives for e-service generally. 3.5 Conclusion: - The Tribunal held non-compliance was not deliberate and remanded the matter for de novo consideration, directing the appellate authority to afford proper and adequate opportunity in accordance with natural justice. Issue 3: Whether the unexplained bank deposits could properly be added to income under section 69 absent explanation or compliance. 4.1 Legal framework: - Section 69 deems unexplained investments/deposits to be income of the assessee if the assessee cannot satisfactorily account for them. 4.2 Precedent Treatment: - The Tribunal applied the settled legal principle that unexplained cash/bank deposits may be treated as income where the assessee fails to provide satisfactory explanation or documents following notice and opportunity. 4.3 Interpretation and reasoning: - On remand, the AO had treated the excess deposits of Rs. 3,86,38,036/- as unexplained due to absence of explanation in response to notices issued during de novo proceedings; therefore, addition under section 69 was made. The Tribunal did not finally adjudicate the factual sufficiency of that addition on the merits because it ordered de novo adjudication by the appellate authority in light of procedural deficiencies (lack of hearing opportunity). The Tribunal emphasized that the assessee must comply with notices and furnish details for adjudication. 4.4 Ratio vs. Obiter: - Ratio: In the absence of satisfactory explanation, unexplained bank deposits can be added under section 69; however, such addition must follow a procedure that respects the assessee's right to be heard. - Obiter: The Tribunal's direction that the assessee would comply with future notices is a practical expectation rather than a binding legal test on the merits. 4.5 Conclusion: - While the AO's application of section 69 was factually supported by unexplained deposits and absence of response, the Tribunal set aside the appellate decision for de novo consideration to permit the assessee an opportunity to explain those deposits; the substantive legality of the section 69 addition was not finally determined in this order. Issue 4: Whether remand to the appellate authority for de novo adjudication was appropriate. 5.1 Legal framework: - Courts/Tribunals may remit matters for fresh consideration where procedural irregularity or denial of opportunity to be heard compromises adjudication, and where remand serves the interests of justice. 5.2 Precedent Treatment: - The Tribunal exercised discretion to remit rather than decide on merits given the factual issue of notice awareness and prior cooperation during original assessment. 5.3 Interpretation and reasoning: - Considering past cooperation and credibility of the assessee's explanation about lack of e-portal awareness, the Tribunal found remand appropriate to ensure compliance with natural justice. The Revenue did not strongly oppose restoration. The Tribunal directed the appellate authority to give proper and adequate hearing and to adjudicate de novo, with expectation of cooperation from the assessee. 5.4 Ratio vs. Obiter: - Ratio: A remand for de novo adjudication is warranted where procedural fairness has been compromised and a credible explanation of non-compliance exists; the appellate authority must then give a proper hearing and decide on merits. 5.5 Conclusion: - The Tribunal allowed the appeal for statistical purposes and remanded the matter to the appellate authority for de novo adjudication, instructing that principles of natural justice be observed and the assessee be afforded a final opportunity to explain and produce requisite documents.