Fair hearing in assessment: enhanced addition without fresh notice was quashed and remitted for reconsideration.

An assessment order enhancing the proposed addition without issuing a fresh show cause notice or giving the assessee an opportunity to rebut the higher figure breached fair hearing requirements under the Income-tax Act, 1961. Where the final order substantially enlarges the proposed addition on material already on record, the assessee must be given a chance to explain the enhanced amount. The final assessment order was unsustainable and was quashed, with the matter remitted for fresh consideration after reply and hearing.

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Issues: Whether the final assessment order, passed by enhancing the proposed addition without granting the assessee an opportunity to show cause on the enhanced amount, could be sustained.

Analysis: The assessment proceedings were preceded by a show cause notice proposing a much lower addition, but the final order made a substantially higher addition on the basis of material already on record without any fresh notice or opportunity to respond to the enhanced figure. Such an enlargement of the proposed addition, without affording the assessee a chance to explain or rebut it, offended the requirement of fair hearing and the principles governing assessment under the Income-tax Act, 1961.

Conclusion: The final assessment order could not be sustained and was rightly quashed and set aside, with the matter remitted for fresh consideration after reply and hearing.

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