2024 (8) TMI 1006 - AT - Income Tax

Validity of order passed by CIT(A) - Validity of reassessment order - ex-parte order passed w/o affording adequate opportunity of being heard and denying inspection of assessment records, in gross violation of principles of natural justice - HELD THAT - The order dated 18.03.2022, passed ex-parte qua the assessee, is a non-est order, in as much as it was passed on 18.03.2022, which was a Public Holiday, since the festival of Holi fell on 18.03.2022 and as such, 18.03.2022 was not a working day. Then, vide notice dated 11.03.2022, issued u/s 250 of the Act, the assessee had been required by the NFAC to submit written submissions on or before 21.03.2022 Therefore, evidently, the assessee was to file written submissions on or before 21.03.2022. However, the impugned order got to be passed, in high haste, before the expiry of the said date of 21.03.2022, i.e., on 18.03.2022, rendering the order passed by the ld. CIT(A) to be an order passed in flagrant violation of the stipulation/requirements contained in the notice dated 11.03.2022. Apropos the observations of the ld. CIT(A) to the effect that the documents, the certified copies of which were sought by the assessee from the office of the Assessing Officer, were either already in the possession of the assessee, or were not relevant for the purposes of the decision of the appeal pending before the ld. CIT(A), it is trite that it is not for the ld. CIT(A), in the absence of material on record leading to such a conclusion, to hold that these documents were in possession of the assessee. It is not within the purview of the ld. CIT(A) to conclude that the documents were not relevant for the purposes of the decision of the appeal. It is entirely only for the assessee to consider as to whether the documentary evidence which he seeks to rely on is relevant or not. Shutting out the supply of certified copies of the assessment record to the assessee is nothing other than violation of the principles of natural justice, in that thereby, the assessee though legally entitled to it, has been deprived of documentary evidence available on record of the AO. The adjournments too, are not shown to have been sought as unnecessary adjournments. It is, due to the fact that the certified copies of the assessment record, as sought for by the assessee from the office of the AO, were only partially supplied to the assessee, despite the assessee having given repeated numerous reminders requesting supply of such certified copies of the assessment record, that the adjournments (two in number) were sought. On considering the above conspectus of the matter, the grievance of the assessee by way of Ground Nos. 1 2, is found to be justified . The order passed by the ld. CIT(A) is an order passed in violation of the principles of natural justice. Accordingly, the order under appeal is set aside and the matter is remanded to the file of the ld. CIT(A), to be decided afresh - CIT(A) shall pass the order expeditiously, i.e., within a period of three months from the date of receipt of this order. Assessee appeal allowed for statistical purposes.

Summary

Issues Involved:
1. Dismissal of appeal in limine by CIT(A).
2. Jurisdiction and validity of the reassessment order.
3. Additions and disallowances made by the Assessing Officer (AO).
4. Opportunity of being heard and principles of natural justice.

Detailed Analysis:

1. Dismissal of Appeal in Limine by CIT(A):
The primary issue was the CIT(A)'s dismissal of the appeal in limine without adjudicating the merits. The assessee contended that the CIT(A) erred by dismissing the appeal ex-parte without affording an adequate opportunity of being heard and denying inspection of the assessment records, violating principles of natural justice. The Tribunal had previously remitted the matter to the CIT(A) for a fresh decision on merits, emphasizing that rejection of an adjournment application does not automatically result in dismissal of the appeal. The CIT(A) was directed to decide the appeal on merits after giving the assessee an opportunity to be heard. However, the CIT(A) again dismissed the appeal, claiming the assessee failed to furnish documents and sought unnecessary adjournments.

2. Jurisdiction and Validity of the Reassessment Order:
The assessee challenged the reassessment order under Section 143(3) read with Section 147 of the Income Tax Act, arguing it was without jurisdiction and beyond the period of limitation prescribed under Section 153(2). The assessee also contended that the reassessment proceedings were initiated without "reason to believe" that income had escaped assessment, making the order illegal. Furthermore, the reassessment was based on information received without independent application of mind by the AO, and additions were made on issues not forming the basis of reopening the assessment.

3. Additions and Disallowances Made by the AO:
The AO assessed the income of the assessee at Rs. 100,29,36,642 against the declared income of Rs. 2,99,46,380, making several additions and disallowances:
- Addition of Rs. 88,11,84,963 on account of alleged undisclosed profits from the sale of land.
- Disallowance of Rs. 7.03 crores as non-compete fees.
- Disallowance of Rs. 1,74,23,151 as 'Biana Forfeiture Expenses'.
- Disallowance of Rs. 40,82,148 as interest on capital raised for business purposes.
The assessee argued that these additions and disallowances were made without appreciating the facts and relevant documents.

4. Opportunity of Being Heard and Principles of Natural Justice:
The Tribunal found that the CIT(A) violated the principles of natural justice by dismissing the appeal without providing an adequate opportunity for the assessee to be heard. The CIT(A) assumed that the documents requested by the assessee were either already in possession or irrelevant, without material evidence to support this conclusion. The Tribunal noted that the order dated 18.03.2022 was passed on a public holiday (Holi), and the assessee was given a deadline of 21.03.2022 to submit written submissions, which was not adhered to by the CIT(A).

Conclusion:
The Tribunal set aside the order of the CIT(A) and remanded the matter for a fresh decision on merits, directing the CIT(A) to provide due, adequate, and effective opportunity of hearing to the assessee. The CIT(A) was instructed to pass the order expeditiously within three months and supply the certified copies of the assessment records to the assessee. The remaining grounds raised by the assessee were not addressed at this stage. The appeal was treated as allowed for statistical purposes.