2022 (5) TMI 881 - AT - Income Tax

Revision u/s 263 - disallowance of interest - AR submitted that the assessee had filed the additional evidences/documents before the Ld. CIT(A) - On the basis of the remand report the Ld. CIT(A) decided the issue against the assessee but assessee was not provided the opportunity to confront the remand report - denial of natural justice - HELD THAT - As there is no reference of filing response by the assessee as well as there was no mention about the supply of copy of the remand report to the assessee. Therefore, in our considered opinion once the lower authorities or any authority chooses to decide the issue on the basis of the remand report given by the Assessing Officer, a copy of the remand report should be provided to the assessee to rebut the same in accordance with the principles of natural justice. It is a settled law that no person should leave unheard and it is the fundamental rule of the tax adjudication that while deciding any issue an opportunity of being heard should be provided to the assessee and the assessee be given access to the documents on which the Assessing Officer or the Ld. CIT(A) sought to rely upon so as to rebut the same by the assessee. In the present case, it is apparent from the CIT(A) order that the assessee was not supplied with the remand report before deciding the issues against the assessee. Therefore, considering these facts and circumstances of the case, we deem it fit and proper to remand the entire matter to the file of the Ld. AO for de novo assessment, following the principles of natural justice and in accordance with law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against order of CIT(A) - Justification of additions made by AO - Violation of principles of natural justice.

Analysis:
The appeal was filed against the order of the CIT(A) for the assessment year 2007-08. The assessee contested the additions made by the AO, specifically challenging the additions of Rs. 20,01,000 under section 68 for share application money and Rs. 1,88,056 towards outstanding loans. The CIT(A) partially allowed the appeal, granting relief only on the disallowance of interest amounting to Rs. 22,067. Dissatisfied with this decision, the assessee further appealed to the Tribunal.

During the proceedings, it was revealed that the assessee had submitted additional evidence before the CIT(A), who then sought a remand report from the AO. The CIT(A) received the remand report but did not provide a copy to the assessee for rebuttal. The assessee argued that this violated the principles of natural justice as they were not given an opportunity to respond to the remand report. On the other hand, the DR contended that since the assessee did not respond to the remand report, there was no breach of natural justice.

Upon careful consideration, the Tribunal observed that the CIT(A) did not mention the filing of a response by the assessee or the supply of the remand report to them in the order. The Tribunal emphasized the importance of providing the assessee with the remand report to ensure a fair opportunity to rebut the findings, in line with the principles of natural justice. It was reiterated that every party should have a chance to be heard and access to the documents relied upon by the authorities. As the assessee was not provided with the remand report before the decision was made against them, the Tribunal deemed it necessary to remand the entire matter back to the AO for a fresh assessment, ensuring compliance with natural justice principles.

Therefore, the appeal of the assessee was allowed for statistical purposes, emphasizing the need for a fair hearing and access to relevant documents in tax adjudication proceedings.