2018 (6) TMI 447 - AT - Income Tax

Additions u/s 68 - Inquiry u/s 133(6) - it submitted that, the assessee were totally kept in the dark and the enquiries were conducted behind the back of the assessee - No compliance with the notices u/s 131 by directors of the share applicants companies - denial of natural justice - Held that - though AO is at liberty to enquire even behind the back of the assessee, however if he is proposing to use it against the assessee or draw adverse inference against the assessee, then he is bound to furnish a copy of the same to the assessee and has to give opportunity to the assessee to meet it (explain or rebut). Miscarriage of justice - As only towards the fag end of the assessment proceedings, the AO issued notice u/s 131 to the Managing Director to produce the director of the share-applicants on 30.03.2015 knowing very well that assessment was getting time barred on the very next day i.e. 31.03.2015. When the Managing Director of assessee company appeared before the AO on 30.03.2015, he was told that assessment order has been already framed and passed i.e. on 30.03.2015 without giving an opportunity to the assessee to explain or rebut the materials collected by the AO behind the back of the assessee, which violates the Natural Justice of the assessee and so we hold that assessee did not get proper opportunity before the AO during assessment proceeding. Following decision in Tin Box Company (2001 (2) TMI 13 - SUPREME COURT), we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment

Summary

Issues: Lack of opportunity during assessment proceedings, violation of principles of natural justice, ex-parte order by CIT(A), adequacy of notices served, compliance with AO's requisitions, violation of natural justice by AO, restoration of matter to AO for de novo assessment.

In this case, the appeal was filed by the assessee company against the ex-parte order of the Ld. CIT(A) for the assessment year 2012-13. The Ld. CIT(A) dismissed the appeal due to lack of compliance by the appellant during the proceedings and absence of new facts for consideration. The appellant argued that no notices were served upon them, leading to a violation of natural justice. The appellant contended that they had provided complete details as requested by the AO but were not given a fair opportunity to be heard. The AO had issued notices under sections 142(1), 133(6), and 131 of the Income Tax Act, requiring information and documents from the share applicants. Despite some compliance from the share applicants, the AO's order did not reflect this information, indicating a lack of transparency in the assessment process.

The AO's actions were scrutinized for conducting administrative inquiries behind the back of the assessee without providing an opportunity to respond, violating the principles of natural justice. The Tribunal emphasized that while administrative inquiries are permissible, using such information against the assessee without disclosure and opportunity to respond is unjust. Citing legal precedents, the Tribunal highlighted the importance of natural justice principles in administrative proceedings to prevent miscarriage of justice. The Tribunal found that the AO's issuance of a notice to the Managing Director on the last day before the assessment deadline, without allowing a chance to explain or rebut collected materials, constituted a violation of natural justice.

Based on the principles enunciated by the Hon'ble Supreme Court and the facts of the case, the Tribunal set aside the Ld. CIT(A)'s order and remanded the matter back to the AO for a fresh assessment. The Tribunal directed the AO to conduct the assessment in accordance with the law and provide the appellant with a fair opportunity to be heard. Ultimately, the appeal of the assessee was allowed for statistical purposes, emphasizing the importance of upholding principles of natural justice and providing a fair hearing to parties involved in assessment proceedings.