2025 (11) TMI 449 - AT - Income Tax

Assessee's appeal allowed; assessment set aside and remanded to assessing officer after responses contradicted ex parte findings under s.142(1)

ITAT HYDERABAD - AT set aside the CIT(A)'s impugned order and remanded the matter to the AO for fresh adjudication. The tribunal found the assessee had ... Validity of order ex-parte - addition by estimating the income of the assessee on the gross receipts while framing the best judgment assessment - assessee failed to furnish any reply to the show cause notice issued u/s 142(1) - HELD THAT:- We find that there is no submissions made by the assessee dated 19/03/2025 as stated by the CIT (A) in the impugned order but the assessee has filed the reply to the notice issued by the CIT (A) vide acknowledgement dated 03/04/2024. In the said reply, the assessee has furnished the written submission along with ITR and audited financial statement as well as Form-26AS along with Bank Account statements and other records. Thus, the assessee has not made any request for withdrawal of the appeal before the learned CIT (A). It is manifest from the record that the assessment order in the case of the assessee was passed on 31/03/2022. Thus, it is apparent from the record that there are ambiguities and discrepancies in the basic facts recorded by the CIT (A) while passing the impugned order. Accordingly, the impugned order of the learned CIT (A) is set aside. Since the assessment order was also passed ex-parte and the Assessing Officer has made the addition on the basis of the estimation of the income on the ground that the assessee failed to furnish any reply to the show cause notice issued u/s 142(1). Therefore, in the interest of justice, the matter is remanded to the record of the Assessing Officer for fresh adjudication. Appeal filed by the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether an appellate order recording withdrawal of appeal on the basis that the appellant opted for a settlement scheme, when no such request exists on record, constitutes non-application of mind and warrants setting aside. 2. Whether an appellate authority's recording of materially incorrect basic facts (dates and assessment references) constitutes sufficient ground to quash the appellate order. 3. Whether an assessment framed ex parte by estimating income on the basis that the assessee failed to respond to notices, where the assessee in fact furnished written submissions and documentary material, requires remand for fresh adjudication. 4. Whether a best judgment assessment made by estimating gross receipts, when actual receipts are reflected in statutory statements (Form 26AS) and already included in returned turnover, gives rise to double addition and requires reconsideration. 5. Whether, in the presence of factual ambiguities in both assessment and appellate orders, the appropriate remedy is remand to the Assessing Officer for verification and fresh adjudication. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Appellate dismissal recorded as withdrawal based on alleged opt-in to settlement scheme (non-application of mind) Legal framework: An appellate order must record decisions based on facts on record and the submissions actually made before the authority; an order dismissing an appeal as withdrawn presupposes a clear, recorded request for withdrawal. Precedent treatment: No prior authorities are cited or considered in the judgment; the Tribunal proceeds on principles of fact-based adjudication and requirement of reasoned orders. Interpretation and reasoning: The Tribunal compared the impugned appellate order's factual recital (that the assessee applied under the Direct Tax Vivad Se Vishwas Scheme and requested withdrawal dated 19/03/2025) with the record, which contains a reply and written submissions acknowledged on 03/04/2024 and no request for withdrawal. The Tribunal found the appellate authority's recital contrary to the documentary record, concluding that the appellate order recorded a fact that did not exist and therefore reflected non-application of mind. Ratio vs. Obiter: Ratio - where an appellate order dismisses an appeal on a factual ground (withdrawal) not supported by the record, the order is vitiated for lack of application of mind and must be set aside. Conclusions: The appellate order's dismissal as withdrawn was set aside because the alleged withdrawal was not supported by record; the error amounted to non-application of mind warranting setting aside of the impugned order. Issue 2 - Appellate order recording incorrect basic facts (assessment date and reference) Legal framework: Appellate decisions must correctly recite core facts (such as assessment date and provision relied upon); material misrecitals undermine reasoned decision-making and fairness. Precedent treatment: No authority discussed; the Tribunal relies on principle that orders must not contain material factual inconsistencies. Interpretation and reasoning: The appellate order misidentified the assessment order date and the provisions applied (referring to an assessment dated 29/09/2021 for AY 2010-11, while record showed assessment on 31/03/2022). Such ambiguities and discrepancies demonstrate that the appellate authority did not correctly examine or record the case facts. Ratio vs. Obiter: Ratio - material misrecital of basic facts in an appellate order is a ground to set aside that order because it reflects flawed decision-making. Conclusions: The impugned appellate order was set aside on account of material factual inaccuracies recorded by the appellate authority. Issue 3 - Validity of ex parte best judgment assessment when assessee furnished written submissions and documents Legal framework: Best judgment (ex parte) assessments under the relevant provisions are permissible where a taxpayer fails to comply with notices; however, if the taxpayer did furnish responses and documents, the Assessing Officer is obliged to consider those materials before making an assessment. Precedent treatment: No prior decisions cited; Tribunal applies settled administrative law principles requiring that assessment be based on proper verification of available material. Interpretation and reasoning: The record before the Tribunal showed that the assessee submitted written submissions, ITR, audited financial statements, Form-26AS, bank statements and other records by way of reply to notice (acknowledged 03/04/2024). Nevertheless, the Assessing Officer proceeded to make an ex parte addition by estimating income on gross receipts on the ground of non-response to notice u/s 142(1). Given the existence of material on record, the ex parte estimate lacked a proper factual basis. Ratio vs. Obiter: Ratio - where assessment is framed by estimation despite the taxpayer having filed relevant records and submissions, the assessment is unsustainable and should be remanded for reconsideration with proper verification. Conclusions: The matter was remanded to the Assessing Officer for fresh adjudication and verification because the ex parte best judgment assessment ignored available submissions and records. Issue 4 - Double addition through estimation when statutory reporting (Form 26AS) already reflects receipts included in turnover Legal framework: Additions by estimate should not result in duplication where actual receipts are verifiable and already reflected in the taxpayer's turnover; assessments must avoid double counting and must consider statutory information (e.g., Form 26AS under s.194C) and bank records. Precedent treatment: No authorities considered; Tribunal applies principles of avoidance of double addition and requirement to reconcile estimates with documentary evidence. Interpretation and reasoning: The assessee contended that contractual receipts reported in Form-26AS (Rs. 3,19,21,268) were included in declared turnover, and a separate addition on estimation resulted in double addition. The Tribunal noted this contention and observed that the Assessing Officer did not appear to have considered the Form-26AS and other documents before making an ex parte estimate, necessitating fresh verification. Ratio vs. Obiter: Ratio - where reliable statutory or bank records exist showing receipts included in turnover, an estimating addition that duplicates those receipts is improper and requires reassessment after verification. Conclusions: The Tribunal directed remand for reconsideration to prevent double addition and to enable the Assessing Officer to reconcile estimated income with Form-26AS and other records. Issue 5 - Appropriate remedy where both assessment and appellate orders contain factual ambiguities Legal framework: When both assessing and appellate orders manifest material factual errors or non-application of mind, the appropriate remedial course is to set aside the flawed order(s) and remit the matter for fresh decision after proper verification and opportunity to be heard. Precedent treatment: No authorities cited; the Tribunal follows principles of fair hearing and correctness of administrative fact-finding. Interpretation and reasoning: Given the combination of (a) an assessment framed ex parte despite filed submissions, (b) an appellate order recording a non-existent withdrawal and misstating assessment details, the Tribunal concluded that adjudication on merits was vitiated and justice required remand for fresh adjudication by the Assessing Officer. Ratio vs. Obiter: Ratio - remand for fresh adjudication is the correct remedy where both assessment and appellate processes contain material errors and the taxpayer's submissions were not properly considered. Conclusions: The appellate order was set aside and the matter remanded to the Assessing Officer for fresh adjudication after proper verification and examination of the records filed by the assessee; the appeal was allowed for statistical purposes.