2020 (12) TMI 1028 - AT - Income Tax

Enhancement of the income by the CIT(A) - AO after hearing the assessee, considered the turnover as per Form-26AS as the gross receipts of the assessee and estimated the Net Profit @8% of such turnover and brought it to tax - HELD THAT - CIT(A) has not given any notice in writing for enhancement of income to the assessee. DR also confirmed that no written notice was given to the assessee. Taking the same into consideration, we deem it fit and proper to remit the issue to the file of CIT(A) for reconsideration of the issue in accordance with law and if the CIT(A) feels that the assessment has to be enhanced, then, he shall issue a notice to the assessee and after considering the assessee's objections, if any, filed by the assessee in writing, thereafter only, the CIT(A) shall adjudicate the appeal. - Appeal of assessee is allowed for statistical purposes.

Summary

Issues:
Assessment of income based on Form-26AS, enhancement of income without notice, rejection of accounts, reconciliation of turnover, consideration of previous year's income, failure to consider grounds of appeal.

Analysis:
The appeal concerned the assessment year 2016-17 where the Assessing Officer (AO) noted a variance between the total receipts offered by the assessee and those in Form-26AS. The AO considered the turnover per Form-26AS as gross receipts and estimated net profit at 8% for taxation. The assessee appealed to the CIT(A) who increased the income without prior notice to the assessee. The grounds of appeal included errors in law and facts, lack of notice, rejection of accounts, failure to consider reconciliations, and the impact of the previous year's income on the current assessment.

During the hearing, it was revealed that the CIT(A) did not provide written notice of the income enhancement to the assessee, which was acknowledged by the Departmental Representative (DR) as well. Considering this procedural lapse, the ITAT decided to remit the issue back to the CIT(A) for reconsideration in compliance with the law. The ITAT directed the CIT(A) to issue a written notice to the assessee if income enhancement was still deemed necessary, allowing the assessee to present objections in writing. The ITAT emphasized the importance of providing a fair opportunity for the assessee to be heard in such proceedings.

Ultimately, the ITAT allowed the appeal of the assessee for statistical purposes, highlighting the procedural irregularity in the CIT(A)'s failure to provide a written notice before enhancing the income. The judgment underscored the significance of adhering to due process and ensuring that the assessee is afforded a fair opportunity to present their case and objections in tax assessment proceedings.