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2025 (2) TMI 817 - AT - Income TaxReopening of assessment u/s 147 - addition of entire credits on account of undisclosed and unexplained income - appellant failed to satisfactorily explain the nature and source of the cash deposit due to which the assessment order was upheld by the CIT(A) - HELD THAT - It is an undisputed fact that the date of hearing in respect of the last notice was on 14.08.2024 and on the same day the order u/s 250 of the Act was passed at 15.17 IST. Therefore the CIT(A) has passed the order without waiting for the reply on the date hearing on 14.08.2024. Be that as it may the ld. AR has also not filed any evidence to show that the assessee had in fact filed reply on or before 14.08.2024. Considering all these facts we are of the view that though the assessee was negligent and non-cooperative before the lower authorities the CIT(A) should have waited for the reply of the assessee till 14.08.2024. The ld. AR requested that another opportunity may be granted to the assessee to submit all the required explanations and details and plead his case on merit. Principles of natural justice would call for giving another opportunity of hearing to the assessee. Accordingly we hold that the interests of justice would be met in case the AO re-examines the entire issue afresh subject to payment of cost of Rs. 10, 000/- (Rupees ten thousand only) by the assessee to the credit of the District Legal Services Authority Surat within three weeks from receipt of this order. Grounds of appeal raised by the assessee are allowed for statistical purposes. Levy of penalty u/s 271(1)(c) and u/s 271F - Since the matter has been restored to the AO for fresh adjudication there is no basis at all for levy of penalty u/s 271(1)(c) of the Act. As the penalty order does not survive the resultant order of CIT(A) is quashed. AO may initiate proceedings u/s 271(1)(c) of the Act during the fresh assessment proceedings if required conditions are fulfilled. Accordingly the ground is allowed for statistical purpose. Levy of penalty u/s 271(1)(b) as assessee did not comply with the notices issued u/s 148 142(1) 129 - CIT(A) observed that the AO has taken a lenient view by levying penalty for one default though there were multiple non-compliances by the assessee. The appellant has not proved that there was reasonable cause for the said failures within the meaning of section 273B of the Act. We also find that the AO has been very fair and reasonable in levying penalty of Rs. 10, 000/- for one default only in spite of failure of assessee on four occasions to comply with the notices issued by him. It may be mentioned that section 271(1)(b) requires penalty of Rs. 10, 000/- for each such failure. Therefore instead of Rs. 40, 0000/- the AO has levied penalty of Rs. 10, 000/-. Hence we find no reason to differ from the findings of the lower authorities. Accordingly grounds are dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Ex-parte Orders and Opportunity to be Heard The relevant legal framework includes principles of natural justice, which require that parties be given a fair opportunity to present their case. The Tribunal noted that the CIT(A) passed orders without waiting for the assessee's reply, despite issuing a notice with a deadline for submission. The Tribunal found that although the assessee was negligent, the CIT(A) should have allowed more time for a response before passing the order. Reopening of Assessment and Issuance of Notices The reopening of assessment under section 147 and the issuance of notice under section 148 were challenged on procedural grounds. The Tribunal examined whether the AO followed proper procedures, including obtaining necessary approvals. The Tribunal found procedural lapses, such as issuing notices beyond the limitation period and not obtaining the correct approvals, which necessitated a fresh examination by the AO. Additions on Account of Unexplained Income The AO made additions based on unexplained credits in the assessee's bank account. The Tribunal noted the lack of cooperation and evidence from the assessee. However, it emphasized the need for a fresh assessment, allowing the assessee another opportunity to provide explanations and evidence. Penalties under Sections 271(1)(b), 271(1)(c), and 271F The Tribunal considered the penalties imposed for non-compliance with statutory notices and failure to explain discrepancies. It found that while the AO and CIT(A) were justified in initiating penalties, the penalties should be reconsidered during the fresh assessment proceedings. The Tribunal highlighted the importance of providing the assessee with an opportunity to comply before enforcing penalties. Treatment of Competing Arguments The Tribunal balanced the arguments presented by both parties, acknowledging the assessee's claims of procedural unfairness while also recognizing the revenue's position on non-compliance and unexplained income. It concluded that a fresh assessment with proper procedural adherence would serve justice. Conclusions The Tribunal concluded that the interests of justice required setting aside the CIT(A)'s orders and remitting the matters back to the AO for fresh assessments. It emphasized the need for the AO to provide adequate opportunities for the assessee to present evidence and explanations. SIGNIFICANT HOLDINGS The Tribunal's significant holdings include:
Final Determinations on Each Issue The Tribunal allowed the appeals for statistical purposes, setting aside the CIT(A)'s orders and remitting the matters back to the AO for a fresh assessment. It ordered the AO to adhere to procedural fairness and provide the assessee with adequate opportunities to comply and present their case.
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