2025 (11) TMI 43 - AT - Income Tax

Order set aside for lack of cooperation; matter remitted for fresh adjudication on relinquishment consideration and other income

ITAT (Ahmedabad) set aside the CIT(A) order and restored the matter to the AO for fresh adjudication after holding that the assessee had repeatedly failed ... Condonation of delay in filing of appeal before the CIT(A) - Validity of reassessment proceedings and Additions against consideration for relinquishment of rights in ancestral property - Income from other sources - Non-cooperation and disregard towards the due process of law - assessee either failed to appear or failed to file any substantive evidence in support of his claim - principles of natural justice not satisfied - HELD THAT:- It is observed that despite repeated opportunities at various stages of proceedings, both before the AO and the CIT(Appeals), the assessee either failed to appear or failed to file any substantive evidence in support of his claim. The conduct of the assessee clearly reflects non-cooperation and disregard towards the due process of law. Nevertheless, in the interest of substantial justice, and keeping in view that tax proceedings are not strictly adversarial but quasi-judicial in nature, we are of the considered opinion that one more opportunity deserves to be granted to the assessee to substantiate his case before the Assessing Officer. In taking this view, we derive support from the decisions of Guduthur Bros. [1960 (7) TMI 5 - SUPREME COURT] where it was held that procedural lapses should not result in denial of justice and the matter can always be restored for fresh consideration when the principles of natural justice are not satisfied, and from Tin Box Company [2001 (2) TMI 13 - SUPREME COURT] wherein the Apex Court held that when the assessee has not been provided a fair opportunity of being heard or the assessment is made without proper participation, the matter should be restored to the Assessing Officer for fresh adjudication. Similar view was also taken in CIT v. Jansampark Advertising and Marketing (P.) Ltd [2015 (3) TMI 410 - DELHI HIGH COURT] holding that the AO must afford a fair opportunity and pass a reasoned order after examining the evidence on record We set aside the impugned order of the CIT(Appeals) and restore the matter to the file of the Assessing Officer with a direction to re-adjudicate the issue afresh after providing due opportunity to the assessee to substantiate his claim with necessary documentary evidences. Appeal of the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether reassessment proceedings under section 148/148A were validly initiated and within limitation under section 149 given information of escaped income exceeding the monetary threshold. 2. Whether the Assessing Officer had recorded requisite independent belief/opinion for reopening and whether reliance solely on information from investigation wing suffices. 3. Whether the addition of Rs. 55,00,000 as 'Income from Other Sources' (consideration for relinquishment of rights in ancestral property) was justified in absence of corroborative evidence regarding genuineness and source of cash payments. 4. Whether the assessment proceedings complied with principles of natural justice (opportunity of hearing) and statutory procedures (including faceless assessment/section 144B implications). 5. Whether penalty proceedings under sections 271(1)(c), 271F and 271(1)(b) could be sustained given the facts and the record of cooperation/non-cooperation. 6. Whether delay in filing the present appeal should be condoned. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reopening under sections 148/148A and limitation under section 149 Legal framework: Reopening of assessment requires issuance of notice under section 148 and adherence to time limits laid down in section 149; section 148A prescribes pre-reopening procedural steps; section 149(1)(b) extends limitation where escaped income exceeds statutory threshold. Precedent Treatment: The Tribunal treated applicability of section 149(1)(b) and compliance with section 148A procedure as central to limitation inquiry; no precedent was overruled. Interpretation and reasoning: The Court examined dates of notices and found that the notice under section 148A(b) was issued within the permissible time and that escaped income exceeded the threshold (Rs. 50 lakh), bringing the matter within section 149(1)(b). It further noted that procedural steps under section 148A were followed and opportunities were granted, though the assessee failed to respond. Ratio vs. Obiter: Ratio - Where escaped income exceeds statutory threshold, limitation under section 149(1)(b) applies and procedural compliance with section 148A must be examined; finding that notices were timely and procedure followed is binding for the fact scenario. Obiter - General observations on investigation-sourced information do not form broader precedent. Conclusion: Reopening was not barred by limitation; the reassessment proceedings were validly initiated in time under section 149(1)(b) after compliance with section 148A. Issue 2 - Requirement of independent opinion for reopening and reliance on information from investigation wing Legal framework: Jurisprudence mandates that AO must form an independent belief/opinion for reopening; reliance on information from other sources is permissible provided AO records own satisfaction/opinion and follows procedure. Precedent Treatment: The Court referred to the statutory requirement of recording opinion under section 148A(d)/148 and emphasized procedural compliance; no departure from existing case law. Interpretation and reasoning: The Tribunal observed that notices under section 148A were issued and opportunities afforded, and despite the assessee's contention, the record indicated the AO had followed the prescribed process. The AO's recording of statements and investigation findings, coupled with the absence of responses from the assessee, supported the AO's course of action. Ratio vs. Obiter: Ratio - AO may act on information from investigation wing provided statutory pre-conditions are satisfied and AO records requisite satisfaction; mere reliance on such information without recording AO's opinion would be impermissible (distinguished factually). Obiter - Broad commentary on quality of intelligence information. Conclusion: The reopening was not invalid merely because it originated from investigation information; procedural requirements were met such that AO's action stood. Issue 3 - Addition of Rs. 55,00,000 as taxable income in absence of corroborative evidence (classification as 'Income from Other Sources') Legal framework: Burden lies on assessee to substantiate claimed nature/source of receipts; unexplained cash credits/receipts may be taxable as income under recognized heads where genuineness and source are not established. Precedent Treatment: The Court applied settled principles that unexplained receipts can be taxed and that admissions in statements are relevant; no precedent was overruled. Interpretation and reasoning: The assessee admitted receipt of Rs. 55,00,000 in cash under a family partition deed; payers failed to produce credible evidence to substantiate the source of funds. Given lack of documentary corroboration and repeated non-cooperation, the AO and CIT(A) were justified in treating the receipt as consideration for relinquishment and taxing it under 'Income from Other Sources.' Ratio vs. Obiter: Ratio - In the absence of credible corroborative evidence regarding source and genuineness of large cash payments, such receipts may be assessed as income; admission by assessee and corroborative (or lack of) evidence from payers are material. Obiter - Remarks on propriety of taxing relinquishment proceeds under a particular head where different characterisation might have been possible if evidence were furnished. Conclusion: The addition of Rs. 55,00,000 was justified on the material before the authorities; assessee's failure to substantiate the transaction warranted taxation as income from other sources. Issue 4 - Compliance with principles of natural justice and faceless assessment regime (section 144B implications) Legal framework: Assessments must adhere to principles of natural justice - reasonable opportunity to be heard; faceless assessment scheme operates under section 144B with prescribed procedures for issue/response. Precedent Treatment: The Tribunal relied on authorities stressing restoration for fresh adjudication where fair opportunity was not afforded (Guduthur Bros., Tin Box, Jansampark) and applied those principles to factual record. Interpretation and reasoning: Although authorities found that notices were issued and opportunities were afforded, the assessee repeatedly failed to respond. Nevertheless, in the interest of substantial justice and recognizing tax proceedings as quasi-judicial, the Tribunal concluded that one further opportunity should be granted and the matter remanded to the AO for fresh adjudication to ensure fairness and compliance with natural justice. Ratio vs. Obiter: Ratio - Where there is non-cooperation but the record suggests procedural or participatory defects (or potential deficiency in the opportunity afforded), the matter may be restored to AO for fresh hearing; restoration is warranted to secure substantial justice. Obiter - Comments on faceless assessment compliance were made contextually and do not constitute broad precedent. Conclusion: Though procedural steps were largely followed, the matter is remitted for fresh adjudication with a further opportunity to the assessee to substantiate claims, to safeguard natural justice. Issue 5 - Initiation of penalty proceedings (sections 271(1)(c), 271F, 271(1)(b)) Legal framework: Penalty provisions require establishment of concealment, failure to file return, or non-compliance with statutory notices; imposition depends on facts and conduct. Precedent Treatment: The Tribunal noted initiation of penalties but did not finally adjudicate their sustainment on merits pending re-adjudication of primary issue; no precedent altered. Interpretation and reasoning: The AO had initiated penalty proceedings on account of alleged concealment and non-compliance. Given remand for fresh adjudication on the taxability issue and the assessee's non-cooperation, penalty proceedings remain contingent on outcomes of reassessment; the Tribunal did not finally decide penalties but preserved AO's authority to proceed. Ratio vs. Obiter: Obiter - Initiation of penalties appropriate where non-cooperation observed; final determination deferred. Ratio - Not applicable as a definitive conclusion on penalties was not rendered. Conclusion: Penalty proceedings were appropriately initiated on the facts but their fate is to be determined after re-adjudication by the AO; Tribunal did not quash penalties at this stage. Issue 6 - Condonation of delay in filing appeal Legal framework: Courts/Tribunals adopt a liberal, justice-oriented approach in condoning delay where sufficient cause is shown; length of delay is less material than the acceptability of explanation. Precedent Treatment: The Tribunal relied on established Supreme Court authorities emphasizing preference for substantial justice over technicalities and acceptability of explanations for delay. Interpretation and reasoning: The assessee explained delay due to bona fide change of accountant and inadvertent misplacement of papers. Applying liberal approach and precedents that favour substantial justice where delay is not deliberate or mala fide, the Tribunal found the explanation satisfactory and condoned the 293-day delay. Ratio vs. Obiter: Ratio - Delay in filing appeal can be condoned where a bona fide, satisfactory explanation is furnished and absence of mala fide or deliberate lapse is demonstrated. Obiter - Remarks on administrative causes for delay. Conclusion: Delay of 293 days in filing the appeal was condoned; appeal admitted for hearing on merits. Relief and ancillary directions Interpretation and reasoning: Balancing non-cooperation by assessee with principles of natural justice, the Tribunal remitted the matter to the Assessing Officer for fresh adjudication after affording opportunity to substantiate the claimed partition receipt. To ensure participation and discourage casual approach, a cost of Rs. 10,000 was imposed to be deposited before the next hearing and proof produced. Ratio vs. Obiter: Ratio - Where reassessment is remanded for fresh consideration due to participatory defects, the Tribunal may impose costs to ensure compliance and discourage indifference. Obiter - The specific quantum of costs is a discretionary ancillary measure. Conclusion: Matter restored to Assessing Officer for fresh adjudication; assessee to be given opportunity to produce documentary evidence; cost of Rs. 10,000 imposed to be deposited in government treasury prior to next hearing.