2015 (1) TMI 1515 - AT - Income Tax

Assessment ex parte u/s 144 - estimating the gross profit @ 8% of contract and hire receipts - HELD THAT - AO passed the assessment order ex parte which shows that the proper opportunity of being heard was not afforded to the assessee and the ld. CIT(A) without bringing any cogent material in support of his decision confirmed the addition made by the AO. In our opinion the impugned order passed by the ld. CIT(A) is not a speaking order. It is well settled that the order/judgment unsupported by reason is not a judgment in the eyes of law. It is also true that the reasons are the link between the material on record and the conclusion thereafter by the Court/Appellate authority. In our view the CIT(A) should have properly considered the arguments of the assessee as well as findings given by the AO and thereafter he should have made independent findings either in favour or against the assessee. We are of the opinion that the Ld. CIT(A) had not passed a proper order in the eyes of law- See GUJARAT THEMIS BIOSYN LTD. VERSUS JOINT COMMISSIONER OF INCOME-TAX. 1999 (8) TMI 109 - ITAT AHMEDABAD-C - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:

1. Ex-parte assessment by the Assessing Officer (AO).
2. Violation of the principles of natural justice.
3. Addition of 8% of total revenue based on assumptions.
4. Ignoring the books of accounts filed by the assessee.
5. Addition of Rs. 7,21,463/- for credit card payments under Section 37(1) of the Income Tax Act, 1961.
6. Initiation of penalty proceedings based on intangible additions.
7. Confirmation of the AO's order by the Commissioner of Income Tax (Appeals) [CIT(A)] without a reasonable opportunity of being heard.
8. Medical incapacity of the assessee to represent his case.
9. Hardship due to penalty levy.

Detailed Analysis:

1. Ex-parte Assessment by the AO:
The AO conducted an ex-parte assessment under Section 144 of the Income Tax Act, 1961, estimating the gross profit at 8% of the contract and hire receipts, which led to an addition of Rs. 9,38,811/- to the declared income. The assessee contended that the assessment was made without proper representation due to medical incapacity, supported by a medical certificate. The tribunal noted that the assessment order was passed without affording a proper opportunity to the assessee.

2. Violation of Principles of Natural Justice:
The assessee argued that the AO violated the principles of natural justice by not providing a reasonable opportunity to be heard. This claim was supported by the fact that the assessee was on bed rest and unable to represent his case. The tribunal observed that the CIT(A) also failed to address this issue adequately, as the grounds related to this were considered general in nature without proper reasoning.

3. Addition of 8% of Total Revenue Based on Assumptions:
The AO added 8% of the total revenue as income based on assumptions, ignoring the actual profit percentages from previous years, which were significantly lower. The tribunal found that the CIT(A) upheld this addition without providing a reasoned order, thus failing to justify the estimation.

4. Ignoring the Books of Accounts:
The assessee submitted that the AO ignored the books of accounts and other documents provided during the assessment. This issue was not adequately addressed by the CIT(A), who upheld the AO's decision without a detailed examination of the records submitted by the assessee.

5. Addition for Credit Card Payments:
The AO added Rs. 7,21,463/- for payments made through credit card, which was not explained by the assessee during the assessment. The CIT(A) confirmed this addition, noting that the assessee accepted the order and did not challenge this specific addition. However, the tribunal indicated that the CIT(A) failed to provide adequate reasoning for upholding this addition.

6. Initiation of Penalty Proceedings:
The AO initiated penalty proceedings based on intangible additions to the returned income. The assessee argued that this was unjustified, given the circumstances of the case. The tribunal highlighted the lack of a reasoned order from the CIT(A) regarding the initiation of penalty proceedings.

7. Confirmation of AO's Order by CIT(A):
The CIT(A) confirmed the AO's order without offering a reasonable opportunity of being heard to the assessee. The tribunal found that the CIT(A) did not provide a speaking order with reasons for the decisions made, which is a requirement under Section 250(6) of the Income Tax Act, 1961.

8. Medical Incapacity:
The assessee claimed he was medically unfit to represent his case, supported by a medical certificate. The tribunal noted that this issue was not adequately considered by the CIT(A), who dismissed the grounds related to this claim as general in nature.

9. Hardship Due to Penalty Levy:
The assessee argued that the penalty would cause undue hardship. The tribunal observed that the CIT(A) did not address this concern with adequate reasoning.

Conclusion:
The tribunal concluded that the CIT(A) failed to provide a reasoned and speaking order, which is a violation of the principles of natural justice. The tribunal set aside the CIT(A)'s order and remanded the case back to the AO for fresh adjudication, ensuring due and reasonable opportunity for the assessee to be heard. The appeal was allowed for statistical purposes.