2019 (7) TMI 1032 - AT - Income Tax

Ex-parte orders - denial of natural justice - CIT-A without hearing / considering and adjudicating on the assessee s contentions before passing ex-parte order - HELD THAT - Admittedly the assessee did attend before the CIT(A) in the first two hearings and that the notices of hearing on 21.05.2018 and for the last hearing on 18.09.2018 were returned unserved resulting in impossibility of compliance by the assessee. In these circumstances, it certainly cannot be inferred that the assessee s actions were either malafide or deliberate and we are therefore of the view that the CIT(A) s action in passing the impugned order ex-parte, without hearing / considering and adjudicating on the assessee s contentions on merits is a clear case of violation of the principles of natural justice. More so, when the assessee has been fastened with a huge liability of ₹ 44,65,340/-; which she entirely disputes. In this view of the matter, we are of the considered opinion that the interests of substantial justice would be well served if the impugned ex-parte order of the CIT(A) be set aside and do so. No opportunity to cross examine was provided to the appellant and hence the order passed was in violation of principles of natural justice and consequently the assessment order passed was bad in law - HELD THAT - From the above Para 8 of the judgment of Hon ble Karnataka High Court in the case of Chandra Devi Kothari 2015 (2) TMI 1313 - KARNATAKA HIGH COURT it is seen that matter was restored back to the file of the AO for fresh decision after providing copy of the statements and other related details relied on by the AO. As per the facts noted by the High Court in the earlier paras of judgment (supra) and as per the facts of the case on hand, there appears to be no difference in facts and therefore by respectfully following this judgment in the case of Chandra Devi Kothari (Supra), we set aside the impugned order of learned CIT(A) for Assessment Year 2014-15 and restore the matters of treatment of consideration received on sale of shares of NCL Research and Financials Pvt. Ltd., to the file of the AO for fresh decision

Summary

Issues Involved:
1. Violation of principles of natural justice by CIT(A) in passing an ex-parte order.
2. Denial of opportunity to cross-examine parties whose statements were relied upon by the AO.
3. Legitimacy of the addition under section 68 of the Income Tax Act, 1961.
4. Denial of exemption under section 10(38) of the Income Tax Act, 1961.
5. Imposition of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Detailed Analysis:

1. Violation of Principles of Natural Justice by CIT(A):
The assessee contended that the CIT(A) decided the appeal ex-parte without intimating the assessee or her authorized representative (AR), thereby violating the principles of natural justice. The CIT(A) recorded that the AR appeared and sought adjournments on the initial hearing dates, but subsequent notices were returned unserved. The Tribunal observed that the assessee's actions were neither malafide nor deliberate, and the ex-parte order was a clear violation of natural justice. The Tribunal set aside the ex-parte order of the CIT(A) and remanded the matter for a fresh hearing on merits.

2. Denial of Opportunity to Cross-examine Parties:
The assessee argued that the AO relied on the report of the Kolkata Investigation Directorate and statements of various operators and brokers without providing an opportunity for cross-examination. The Tribunal referred to the judgment of the Karnataka High Court in the case of Chandra Devi Kothari, which mandates providing fair hearing and related details to the assessee. The Tribunal restored the matter to the AO for fresh decision, directing the AO to provide the necessary documents and allow cross-examination.

3. Legitimacy of Addition under Section 68:
The assessee challenged the addition of ?96,24,511/- under section 68, contending that she did not maintain books of accounts, and hence, no credit could be found in the books. The Tribunal, in light of the remand for fresh hearing and cross-examination, did not adjudicate on the merits of the addition at this stage.

4. Denial of Exemption under Section 10(38):
The assessee claimed exemption of ?82,98,511/- on long-term capital gains from the sale of shares under section 10(38). The AO treated the sale proceeds as unexplained cash credit under section 68. The Tribunal, considering the remand for fresh adjudication, did not delve into the merits of the exemption claim at this juncture.

5. Imposition of Interest under Sections 234A, 234B, and 234C:
The assessee disputed the imposition of interest under sections 234A, 234B, and 234C, arguing that there was no liability to additional tax. The Tribunal, given the remand for fresh hearing, did not specifically address the imposition of interest at this stage.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, setting aside the ex-parte order of the CIT(A) and remanding the matter to the AO for fresh adjudication. The AO was directed to provide the assessee with the necessary documents and statements relied upon and to afford an opportunity for cross-examination, ensuring compliance with the principles of natural justice.