2012 (8) TMI 67 - AT - Income Tax

Confirming he assessment order u/s.144 by CIT(A) - Decline in Gross Profit rate in comparison to the ratio of profit disclosed in the past - Held that - As the assessee is not a habitual defaulter because the admitted factual position is that the accounts have been duly audited and thereupon a return has also been filed within the prescribed period - the AO has admitted that the notices were complied with and representative of the assessee as well as one of the Director of the assessee attended the assessment proceedings - inability of AO to allow assessee to present his case on many occasions informed of the assessment having been finalized ex-parte u/s.144 - the assessee deserves reasonable opportunity of being heard - case is remitted back to AO - in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against the order of Learned CIT(Appeals)-I, Surat for Assessment Year 2004-05.

Issue 1: Violation of Principles of Natural Justice

The appellant contested the action of the Assessing Officer (AO) in framing the assessment order under section 144 of the Income Tax Act, 1961, alleging a violation of natural justice. The appellant argued that both the lower authorities erred in not properly appreciating the submissions, evidence, and supporting documents during the proceedings. The AO noted a decline in the Gross Profit rate for the year under consideration compared to previous years and issued a show-cause notice, which the appellant allegedly did not respond to. Consequently, the AO rejected the books of account under section 145(3) and calculated the Gross Profit at 22.64%, leading to the taxation of income.

Issue 2: Opportunity of Hearing

The first appellate authority dismissed the appellant's claims of not being offered proper opportunities and passing an ex-parte order. The appellant argued that the assessment was completed hurriedly, ignoring natural justice, as the matter was nearing the limitation period by the end of December-2006. The appellant contended that they fully cooperated during the assessment proceedings, and the AO proceeded ex-parte due to an alleged default on a specific date. The Tribunal observed that the appellant had duly audited accounts, filed returns on time, and attended the assessment proceedings. However, the AO proceeded ex-parte despite the appellant's admission to represent the case on the relevant date. Citing the case law of Collector, Land Acquisition vs. Mst.Katiji & Ors., the Tribunal remitted the matter back to the AO for a de novo decision on merits, emphasizing the need for providing an adequate opportunity of hearing to the appellant.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, setting aside the AO's order and directing a de novo assessment with proper hearing opportunities for the appellant. The Tribunal instructed the appellant to proactively contact the AO for a convenient hearing date within 20 days of receiving the order. As a result of the decision to remit the matter back to the AO, the other grounds related to quantum additions were deemed unnecessary for further adjudication.