2019 (2) TMI 780 - AT - Income Tax

Reopening of assessment - addition u/s 68 - having two PAN numbers - tangible incriminating information - assessee claimed that he is middle class person who was misguided and mistrusted by his nearest person and was not having any wrong track in life - ex-parte order passed by the CIT(A) - non service of notice to the address of advocate - Held that - The assessee had given the address of said advocate as his communication address before Revenue authorities as the assessee has claimed that he was operating from said premises of the advocate. The assessee has filed an affidavit dated 19-07-2018 to that effect explaining the sequence of events as happened during the course of hearings before learned CIT(A) leading to his non appearance, which is discussed in preceding para‟s of this order in detail. The said affidavit is placed in file. The assessee has also produced certain additional evidences and claim is made that since proper opportunity was not provided to the assessee, the issue may be restored to the file of the learned CIT(A) so that the assessee can explain its case in proper perspective with cogent evidences and thereafter learned CIT(A) can pass fresh appellate order in accordance with law on merits after considering the contentions of the assessee. It is not denied by the assessee that Shri J G Parmar was his advocate. It is the assessee who has furnished the address of the advocate Mr J G Parmar before Revenue including learned CIT(A) for communication purposes as also it is admitted by the assessee that said address of Mr J G Parmar, advocate was used by the assessee for his operations also. The Revenue cannot be faulted if the assessee has not received notices of hearing of appeal issued by learned CIT(A) and it is the assessee who is to be blamed for its woes. The learned counsel for the assessee has conceded and prayed that the issues under appeal may be restored to the file of learned CIT(A) for granting one more opportunity as high pitched assessment is framed against the assessee and the assessee owing to fault of his own advocate did not got opportunity to present its case before learned CIT(A) while otherwise it has a strong case and request is made to take liberal view in the interest of justice. The amounts are found credited in the bank account maintained by Navkar Trading Company of which the assessee has admitted to be proprietor and the onus/burden is on the assessee to explain the sources of credit in said bank account with cogent evidences to satisfy the mandate of provisions of the 1961 Act. Thus keeping in view high pitched assessment framed against the assessee, we are restoring all the issues arising in this appeal to the file of learned CIT(A) for fresh adjudication of these issues after considering contentions/ explanations of the assessee on merits in accordance with law. The assessee in the interest of justice will be allowed to file all relevant explanations/evidences to support its contentions in its defence which will be adjudicated by the learned CIT(A) on merits in accordance with law. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:

1. Ex-parte order by CIT(A) without sufficient opportunity of hearing.
2. Validity of reopening of assessment under Section 147 of the Income-tax Act, 1961.
3. Addition of ?25,87,01,299 under Section 68 as unexplained cash credits.
4. Alternative addition of ?25,87,013 as 1% commission on the unexplained credits.
5. Procedural fairness and opportunity for the assessee to present its case.

Issue-wise Detailed Analysis:

1. Ex-parte Order by CIT(A) Without Sufficient Opportunity of Hearing:

The assessee contended that the CIT(A) erred in confirming the AO's order ex-parte without giving sufficient opportunity of hearing. The Tribunal noted that the assessee's representative did not appear on the final hearing date due to notices not being forwarded by the advocate. The assessee provided an affidavit explaining the sequence of events leading to non-appearance. The Tribunal recognized that the assessee did not receive proper communication and thus did not have a fair chance to present its case before the CIT(A).

2. Validity of Reopening of Assessment Under Section 147:

The assessee argued that the reopening of the assessment was bad in law as the AO had no reason to believe that income had escaped assessment. The Tribunal observed that the AO received information about significant credits in the assessee's bank account, leading to the invocation of Section 147. The reopening was done within four years from the end of the assessment year, and no scrutiny assessment was initially framed. The Tribunal found the reopening to be valid as it was based on tangible incriminating information.

3. Addition of ?25,87,01,299 Under Section 68 as Unexplained Cash Credits:

The AO added ?25,87,01,299 as unexplained cash credits under Section 68, observing that the assessee failed to provide details of debit and credit entries in the bank account. The Tribunal noted that the assessee admitted to opening the bank account and receiving commissions but denied knowledge about the transactions. The AO's reliance on judicial decisions and the assessee's inconsistent statements led to the addition. The Tribunal emphasized the need for the assessee to explain the sources of credits with cogent evidence.

4. Alternative Addition of ?25,87,013 as 1% Commission on the Unexplained Credits:

The AO made an alternative addition of ?25,87,013 as 1% commission on the unexplained credits, based on the assessee's statement before the CBI. The Tribunal observed that the assessee initially admitted to receiving 1% commission but later claimed it to be 0.02%, which the AO deemed an afterthought. The Tribunal highlighted the necessity for the assessee to provide a consistent and plausible explanation for the commission received.

5. Procedural Fairness and Opportunity for the Assessee to Present Its Case:

The Tribunal acknowledged the procedural lapses and the high-pitched assessment framed against the assessee. It emphasized the importance of providing the assessee a fair opportunity to present its case with relevant evidence. The Tribunal decided to restore all issues to the CIT(A) for fresh adjudication, allowing the assessee to file explanations and evidence in its defense. The CIT(A) was directed to provide proper and adequate opportunity of being heard to the assessee in accordance with the principles of natural justice.

Conclusion:

The appeal was allowed for statistical purposes, with the Tribunal restoring all issues to the CIT(A) for fresh adjudication after providing the assessee an opportunity to present its case comprehensively. The Tribunal emphasized the need for procedural fairness and the assessee's responsibility to explain the sources of credits in the bank account with cogent evidence.