2024 (11) TMI 1502 - AT - Income Tax

Assessee given final opportunity after repeated non-cooperation; matter remanded for fresh adjudication and hearings to consider bona fide compliance

Dinesh Ghanshyam Jani Versus DCIT-4 (3) (1), Mumbai, Maharashtra

ITAT noted the assessee's repeated non-cooperation before AO and CIT(A) but, in the interest of justice, remanded the matter for fresh adjudication and ... Addition of undisclosed income - appellant’s non-cooperation during assessment proceedings as well as the appellate proceedings - HELD THAT:- When the case was called for hearing the ld.AR of the assessee specifically requested for sending back the case to the ld.AO as no substantive hearing could take place either before him or the CIT(A).It is apparent that both the authorities have allowed adequate opportunity of hearing to the assessee which was not availed. Such a non-cooperative attitude cannot be appreciated. However, it is also true that the issues in hand could not be adjudicated on account of non compliance by the assessee. We take note of the request of the ld.AR sympathetically in the interest of justice and fair play who has pleaded for restoring the matter and has also assured making necessary compliance to the authorities. The provisions of the Act are not penal in nature and any bonafide omission on part of the assessee should not be used against it. Therefore, a last opportunity of hearing is allowed to him to make proper representation before the authorities - Appeal of the Assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether reopening of assessment under section 147 read with section 148 was justified where reassessment was initiated after the original return and assessment, and whether the AO recorded valid reasons and obtained necessary approval under section 151. 2. Whether addition of a large sum as undisclosed income (accommodation-entry allegation) was sustainable where the assessee did not respond to notices, did not file return in response to notice under section 148, and appellate proceedings lacked substantive explanation. 3. Whether principles of natural justice were violated by assessment under section 144 (ex parte) and by appellate conduct, including alleged lack of opportunity to confront or cross-examine departmental witness statements relied upon. 4. Whether delay in filing the appeal to the Tribunal ought to be condoned where the appellant asserted non-receipt of the appellate order and sought certified copies before filing. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reopening under sections 147/148 and approval under section 151 Legal framework: Reopening for escapement of income requires compliance with section 147/148. For reassessment beyond four years, satisfaction of proviso (failure to disclose fully and truly) is necessary; administrative approval under section 151 must be obtained in accordance with law. Precedent Treatment: No specific precedents were invoked or distinguished in the judgment; treatment rests on application of statutory requirements and factual record. Interpretation and reasoning: The Court examined the record of initiation of proceedings (notice dated and served), the assessee's non-filing of return in response to notice under section 148, and non-cooperation with AO's notices under section 142(1). The Tribunal noted the departmental investigative finding alleging accommodation entries by a third party and that such entries were provided to the assessee. Regarding approval under section 151, the Tribunal observed a contention of mechanical approval by the higher authority raised by the assessee but did not find the reassessment invalid on that ground given the overall factual backdrop and the assessee's non-cooperation. Ratio vs. Obiter: Ratio - Reopening was not set aside where the assessee failed to respond to statutory notices and where investigative material linked the assessee to accommodation entries; procedural approval objection (section 151) was insufficient to vitiate jurisdiction on the facts. Obiter - Remarks about mechanical nature of approval were noted but not treated as determinative. Conclusions: The Court upheld the validity of reassessment initiation under sections 147/148 on the facts, finding AO's action not vitiated by lack of proper reasons or approval in the circumstances of non-cooperation and investigative material indicating escapement of income. Issue 2 - Sustenance of addition as undisclosed income based on departmental investigation and non-cooperation Legal framework: Additions as unexplained or undisclosed income may be made where evidence indicates accommodation entries or undisclosed receipts; assessment under section 144 may be resorted to when assessee does not cooperate. Precedent Treatment: The Tribunal relied on statutory provisions and the factual finding of the Investigation Wing; no case law was cited. Interpretation and reasoning: The Tribunal emphasized the factual finding that a third party was engaged in providing accommodation entries and that the assessee received such an entry. The assessee's failure to file return in response to section 148 notice, failure to respond to multiple section 142(1) notices, and absence of explanation before the AO and CIT(A) strengthened the departmental case. Given the non-cooperation, the AO assessed ex parte under section 144 and made the addition, which the CIT(A) had upheld; the Tribunal found no fault in taxing the alleged accommodation-entry sum as undisclosed income. Ratio vs. Obiter: Ratio - Where investigative material links the assessee to accommodation entries and the assessee wilfully fails to cooperate with assessment and appellate proceedings, an addition treating the sum as undisclosed income is sustainable. Obiter - Observations about the non-penal nature of the Act and encouragement of bonafide compliance are ancillary. Conclusions: The addition of Rs. 1,33,00,000/- as undisclosed income was upheld on the facts given the investigation findings and the assessee's sustained non-cooperation with statutory processes. Issue 3 - Procedural fairness, applicability of section 144, and rights to confront evidence Legal framework: Principles of natural justice require opportunity to be heard; section 144 permits assessment when the assessee does not comply with notices. Appellate authorities must afford adequate hearing; reliance on witness statements without providing opportunity for confrontation can raise jurisdictional issues. Precedent Treatment: No specific authorities considered; the Tribunal applied statutory and natural justice principles factually. Interpretation and reasoning: The Tribunal recognized two strands: (a) the assessee repeatedly failed to avail hearings and did not supply explanations or documents despite multiple statutory notices; (b) the ld.AR requested remand to enable substantive hearing and compliance, asserting lack of opportunity to confront statements. Although the Tribunal found the assessee's non-cooperation demeritorious, it exercised equitable discretion in favor of a last opportunity in the interest of justice. The Tribunal directed remand for de novo assessment with strict directions that the AO must afford adequate opportunity and that the assessee must comply; it warned that no further opportunity would be granted on further non-compliance. Ratio vs. Obiter: Ratio - Even when ex parte assessment under section 144 is permissible due to non-cooperation, a tribunal may remit for de novo adjudication and require the AO to afford a hearing if the appellate representative shows a bona fide request for opportunity and compliance; ensuring principles of natural justice can merit remand despite prior non-compliance. Obiter - Emphasis that provisions of the Act are not penal and bonafide omissions should not be used against the assessee. Conclusions: Although the ex parte assessment and addition were sustained on the merits, the Tribunal remitted the matter for de novo assessment to allow a final, adequate opportunity to the assessee to present its case, subject to strict compliance and the AO's adherence to natural justice. Issue 4 - Condonation of delay in filing appeal Legal framework: Delay condonation requires sufficient cause for delay in filing appeal to the Tribunal; non-receipt of the impugned order and subsequent obtaining of certified copies can constitute sufficient cause. Precedent Treatment: No specific precedents cited; decision rests on factual satisfaction of sufficient cause. Interpretation and reasoning: The Tribunal found that the appellant did not receive the appellate order and sought certified copies from the CIT(A). Certified copies were supplied and the appeal was filed thereafter. The Tribunal accepted this as sufficient cause and condoned the delay. Ratio vs. Obiter: Ratio - Non-receipt of the appellate order and prompt action to obtain certified copies and thereafter file the appeal can constitute sufficient cause for condonation of delay. Obiter - None significant. Conclusions: Delay in filing the appeal was condoned on the factual record demonstrating non-receipt of the order and timely steps to procure certified copies. Relief and dispositive conclusion Although the reassessment and addition were not found to be vitiated on the factual matrix, the Tribunal allowed the appeal for statistical purposes by remitting the matter to the assessing officer for de novo assessment with directions to afford adequate opportunity in accordance with principles of natural justice; the assessee is strictly required to comply with notices and furnish details, failing which no further opportunity will be granted.