2025 (7) TMI 1692 - AT - Income Tax

CIT(A) Order Set Aside for Violating Right to Hearing Under Section 69A and 115BBE, Matter Remanded

The ITAT Hyderabad held that the CIT(A) failed to provide the assessee with a reasonable opportunity of hearing, as notices were not received and no ... Cash found during the survey operation as additional income - unexplained money u/sec.69A r.w.s.115BBE by treating the amount under the Head ‘Income from other sources” instead of ‘Business Income’ offered by the assessee. HELD THAT:- Since the assessee has not received the notices issued by the CIT(A), the assessee could not file it’s reply along with relevant documentary evidences to substantiate it’s case. Further, although, the learned CIT(A) claims that, several opportunities are provided to the assessee, but, there is no specific reference of any notice issued by the CIT(A) before disposing of the appeal filed by the assessee. Therefore, from the above, it is undisputed clear that, the CIT(A) has not provided reasonable opportunity of hearing to the assessee to explain it’s case and disposed off the appeal in gross violation of principles of natural justice. We set-aside the order of the CIT(A) and restore the issue back to the file of learned CIT(A) with a direction to re-consider the issue, after providing reasonable opportunity of hearing to the assessee to explain it’s case to meet the ends of justice. Appeal of the assessee is allowed for statistical purposes. ISSUES: Whether the cash found during survey and search operations, admitted as additional income by the assessee, can be treated as unexplained money under section 69A of the Income Tax Act, 1961.Whether the addition of the cash amount under the head 'Income from other sources' instead of 'Business Income' is justified.Whether penalty under section 271AAB of the Income Tax Act, 1961 is sustainable in respect of the undisclosed income.Whether the principles of natural justice were violated by the appellate authority in passing the penalty order without providing reasonable opportunity of hearing to the assessee. RULINGS / HOLDINGS: The cash found and admitted as additional income was treated as unexplained money under section 69A of the Act because the assessee introduced physical cash in the cash book to the extent seized by the Department, which the Assessing Officer was not satisfied with.The Assessing Officer rightly made the addition under the head 'Income from other sources' instead of 'Business Income' as per the facts and circumstances of the case.The penalty under section 271AAB at 60% of the undisclosed income was sustained by the CIT(A) due to absence of any documentary evidence or submissions by the assessee to substantiate its case.The appellate authority (CIT(A)) violated the principles of natural justice by disposing of the appeal without providing reasonable opportunity of hearing to the assessee, who did not appear due to non-service of notice.The order of the CIT(A) sustaining the penalty is set aside and the matter is remanded back to the CIT(A) with a direction to provide reasonable opportunity of hearing to the assessee and reconsider the penalty issue. RATIONALE: The legal framework applied includes sections 69A (unexplained money), 115BBE (special provisions for taxation of unexplained income), and 271AAB (penalty for concealment of income) of the Income Tax Act, 1961.The Assessing Officer's approach relied on the principle that unexplained cash introduced into books post-survey constitutes unexplained money liable to be added to income under section 69A.The penalty provisions under section 271AAB require the assessee to substantiate its case to avoid penalty; failure to do so justifies imposition of penalty.The principles of natural justice require that the assessee be given reasonable opportunity of hearing before adverse orders are passed; non-service of notice and non-appearance without opportunity violates these principles.The Tribunal recognized the violation of natural justice and accordingly remanded the matter for fresh consideration after providing opportunity to the assessee, ensuring adherence to procedural fairness and 'ends of justice.'