2016 (11) TMI 1508 - AT - Income Tax

Assessment u/s 153C - assessee declared an amount as short term capital gains and claimed benefit of the provisions of section 111A of the Act relating to the tax on short term capital gains suo moto in certain cases - AO never mentioned that the above additional income is attributable to any incriminating material seized u/s 132 - Held that - It is evident from the record that the AO did not have evidence / incriminating material to show that the said income of ₹ 28,12,544/- or deduction of ₹ 1,10,000/- has a basis of any incriminating material found during the search action. However, this is the case where adjudication by the CIT (A) is done in the absence of the assessee or his representative. Considering the fairness of the requirement of the adjudication of issues involved, we are of the opinion, the grounds raised by the assessee in the appeal are required to be remanded to the file of the CIT (A) for fresh adjudication after granting a reasonable opportunity of being heard to the assessee. Assessee is also directed to make attendance without fail this time in the second round of proceedings before the first appellate authority. We order accordingly. Thus, grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
1. Correctness of assessment order made u/s 143(3) r.w.s 153A of the Act
2. Applicability of provisions of section 153A of the Act in absence of incriminating material
3. Violation of principles of natural justice by CIT (A)
4. Merits of the assessment order and additions made therein

Analysis:
1. The appeal raised seven grounds, including legal issues on the correctness of the assessment order under section 143(3) r.w.s 153A of the Act and the applicability of section 153A without incriminating material. The assessee argued for unabated assessment, claiming the AO lacked authority for additions without incriminating material. Allegations were made against the CIT (A) for an exparte adjudication.

2. The assessee requested an adjournment to compile details, but the request was rejected. Grounds no. 4 and 6 highlighted the absence of the assessee during the CIT (A)'s order, seeking a remand for further opportunity. The issue of assessment without incriminating material under section 153A was deemed unsustainable in law.

3. The AO's order showed the assessee's revised income declaration after a search action, with no incriminating material supporting the increased income. The AO treated the additional income as normal, denying certain deductions. The CIT (A) confirmed these decisions exparte, leading to a lack of fairness in the adjudication process.

4. The Tribunal found the AO lacked evidence or incriminating material to support the additional income or deductions. The fairness of adjudication required remanding the grounds to the CIT (A) for fresh adjudication with a reasonable opportunity for the assessee to be heard. The assessee was directed to attend the proceedings, leading to the allowance of the grounds raised for statistical purposes.

Conclusion:
The appeal was allowed for statistical purposes, emphasizing the importance of fair adjudication and the right to be heard in tax assessment proceedings. The Tribunal's decision aimed to uphold the principles of natural justice and ensure a proper assessment process in line with the provisions of the Income Tax Act.