2018 (4) TMI 248 - AT - Income Tax

Rejection of books of accounts - trading addition - ex-parte order passed by the CIT(A) without providing adequate opportunity of being heard to the assessee - Held that - In the present case, it is an admitted fact that the appeal of the assessee was decided by the CIT(A) ex-parte. He simply mentioned in para 5 of the impugned order that the case was fixed for hearing on 26.02.2016 but there was no response. However, nowhere he mentioned that the notice for hearing on the said date was served upon the assessee. CIT(A) had not accepted this claim of the assessee that it was preparing documents to be filed, for the reason that the assessee had not mentioned in the grounds of appeal that it had not been able to enclose all the necessary documents and needed time to file those documents, he also mentioned that there was no direction given at any point of time by his predecessor to file the written submission or any additional document. CIT(A), it appears that proper opportunity of being heard was not provided and even the documents sought to be filed by the assessee/counsel of the assessee were not permitted to be filed. No notice for enhancement of income was given to the assessee. It is well settled that nobody should be condemned unheard as per the maxim audi alteram partem . Remand the matter back to the file of the ld. CIT(A) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard.

Issues Involved:
1. Deletion of addition by CIT(A) and correctness of account books.
2. Ex-parte order by CIT(A) without providing adequate opportunity of being heard.
3. Confirmation of various additions by CIT(A).
4. Non-allowance of foreign exchange fluctuation loss.
5. Non-allowance of loss from sale/purchase with three parties.
6. Non-allowance of purchase from M/s Kisan Steel Corporation.
7. Enhancement of income by CIT(A) without providing adequate opportunity.
8. Charging of interest under section 234B.

Detailed Analysis:

1. Deletion of Addition by CIT(A) and Correctness of Account Books:
The department contended that the CIT(A) erred in deleting the addition of ?49,58,486/- without appreciating that the Assessing Officer (AO) was not satisfied with the correctness or completeness of the account books of the assessee. The AO had rightly rejected the same under section 145(3) of the Income Tax Act and estimated the income. The department argued that the CIT(A) misinterpreted the provisions of section 145(3) by holding that the AO was bound to pass the assessment order under section 144, whereas the statute uses the word "may" for making an assessment in the manner provided in section 144.

2. Ex-parte Order by CIT(A) Without Adequate Opportunity:
The assessee's main grievance was that the CIT(A) passed an ex-parte order without providing adequate opportunity of being heard, especially when the director was in judicial custody at the relevant time. The assessee argued that the CIT(A) did not serve notice for the hearing date and did not accept the claim that the assessee was preparing documents to be filed.

3. Confirmation of Various Additions by CIT(A):
The assessee contested the confirmation of several additions by the CIT(A), including ?1,69,67,350/- on account of unsecured loans, ?12,67,45,295/- on account of trade creditors, and ?26,23,583/- under the head overseas commission. The assessee argued that these additions were made without observing the principles of natural justice and after rejecting the books of account.

4. Non-allowance of Foreign Exchange Fluctuation Loss:
The assessee contended that the CIT(A) erred in not allowing a foreign exchange fluctuation loss of ?5,72,656/-, claiming that the assessee had not produced documentary evidence in support of its claim.

5. Non-allowance of Loss from Sale/Purchase with Three Parties:
The assessee argued that the CIT(A) wrongly confirmed the AO's action in not allowing the loss from sale/purchase made with three parties, as mentioned in para 5 of the assessment order, due to the lack of documentary evidence.

6. Non-allowance of Purchase from M/s Kisan Steel Corporation:
The assessee also contested the CIT(A)'s confirmation of the AO's action in not allowing the purchase from M/s Kisan Steel Corporation.

7. Enhancement of Income by CIT(A) Without Adequate Opportunity:
The assessee argued that the CIT(A) erred in exercising jurisdiction under section 251(1)(a) and making several enhancements of income without giving adequate opportunity of being heard and by recording incorrect facts and findings. The enhancements included various additions and disallowances, such as ?98,53,525/- on account of reserve and surplus under section 69A, ?38,65,820/- on account of unexplained investment, and several other amounts under sections 69, 69A, and 69C.

8. Charging of Interest Under Section 234B:
The assessee contested the CIT(A)'s confirmation of the AO's action in charging interest under section 234B of the Income Tax Act, 1961.

Conclusion:
The Tribunal considered the submissions of both parties and noted that the CIT(A) had decided the appeal ex-parte without providing proper opportunity of being heard. It was observed that the CIT(A) did not serve notice for the hearing date and did not permit the filing of necessary documents. The Tribunal emphasized the principle of "audi alteram partem" (nobody should be condemned unheard) and deemed it appropriate to set aside the impugned order. The matter was remanded back to the CIT(A) for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard. The appeals of both the department and the assessee were allowed for statistical purposes.

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