Natural justice in tax assessment: ex parte additions for joint bank deposits were remanded for fresh verification and hearing.

Delay of 35 and 76 days in filing the appeals was condoned because the assessees supported the applications with affidavits and showed sufficient cause, particularly in the Covid period. The ex parte best judgment assessments and appellate orders arising from additions for cash deposits in a joint bank account were set aside because the assessees had not been given an effective opportunity to explain the source of the deposits. The matter was remanded for de novo assessment before the Assessing Officer, with factual verification of ownership and source, and the same deposit was not to be taxed again in the wife's hands if it was established in the husband's hands.

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Issues: (i) Whether the delay of 35 days and 76 days in filing the appeals could be condoned. (ii) Whether the ex parte assessment and appellate orders, based on addition of cash deposits in a joint bank account, should be set aside and the matter remanded for fresh consideration.

Issue (i): Whether the delay of 35 days and 76 days in filing the appeals could be condoned.

Analysis: The delay applications were supported by affidavits and the reasons offered were found to be reasonable and sufficient to explain the belated filing. The delay occurred in the background of the Covid period, and the appeals were therefore admitted for adjudication.

Conclusion: The delay was condoned in favour of the assessees.

Issue (ii): Whether the ex parte assessment and appellate orders, based on addition of cash deposits in a joint bank account, should be set aside and the matter remanded for fresh consideration.

Analysis: The assessments under the best judgment procedure and the appellate orders were passed ex parte. The notices and show-cause process coincided with the Covid period, and the assessees were not afforded an effective opportunity to explain the source of the cash deposits. The account was a joint account, with the husband as first holder, and the matter required factual verification by the Assessing Officer. In these circumstances, fairness required a fresh opportunity and de novo assessment. The Tribunal also indicated that the same amount should not be taxed again in the wife's hands if the source is established in the husband's hands.

Conclusion: The ex parte orders were set aside and the assessments were restored to the Assessing Officer for de novo adjudication in favour of the assessees.

Final Conclusion: The dispute was not finally determined on merits, and the matter was sent back for fresh assessment after granting the assessees an opportunity to substantiate the nature and source of the cash deposits.

Ratio Decidendi: Where tax proceedings have proceeded ex parte and the assessee was deprived of an effective opportunity to explain disputed deposits, especially during the Covid period, the matter may be remanded for de novo assessment in the interests of natural justice; a joint bank deposit cannot be taxed twice on the same facts without proper determination of ownership and source.

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