2012 (12) TMI 245 - AT - Income Tax

Natural justice opportunity to being heard - Held that - CIT(A) has decided the appeal of the assessee ex.parte - CIT(A) has not provided adequate opportunity of being heard to the assessee before deciding the appeal matter remanded to CIT(A)

Summary

Issues:
1. Opportunity of hearing by CIT (A)
2. Jurisdiction of ITO
3. Service of notice u/s 148 and 143(2)
4. Grounds of appeal pertaining to reopening of assessment
5. Disallowance of deduction u/s 80IA, excessive profits, and manipulation of expenses
6. Disallowance of capital loss
7. Addition of capital introduced under section 68 of the Act
8. Levy of interest under section 234A and 234B

1. Opportunity of hearing by CIT (A):
The appeal was dismissed ex-parte by CIT(A) due to the appellant's non-appearance, despite an adjournment request citing pending appeals. The appellant argued inadequate opportunity was provided. ITAT held that a right of appeal includes the right to be heard, emphasizing natural justice principles. The order was set aside, directing CIT(A) to rehear the appeal, stressing the importance of affording due opportunity to the assessee.

2. Jurisdiction of ITO:
Assessee challenged the ITO's jurisdiction, alleging non-referral of the issue to the Commissioners of Income Tax and reliance on undisclosed orders. ITAT found discrepancies in ITO's actions and concurrent jurisdiction with Addl. CIT. The assessment was annulled due to jurisdictional errors.

3. Service of notice u/s 148 and 143(2):
Issues arose regarding the proof of notice service by the ITO, with the CIT(A) failing to consider the requirements of section 282 of the Act. The ITAT found faults in the assessment order's silence on notice issues, leading to the annulment of the assessment.

4. Grounds of appeal pertaining to reopening of assessment:
The appellant raised multiple grounds challenging the initiation of assessment proceedings under section 147. The ITAT found flaws in the ITO's 'reason to believe' and reliance on unrelated observations, leading to the annulment of the assessment.

5. Disallowance of deduction u/s 80IA, excessive profits, and manipulation of expenses:
The CIT(A) upheld the disallowance of deductions and questioned the profits declared by the appellant. The ITAT found errors in the assessment, including reliance on unverified evidence and contradictory claims, resulting in the exclusion of such evidence from consideration.

6. Disallowance of capital loss:
The CIT(A) upheld the disallowance of a capital loss. The ITAT reviewed the decision and annulled the disallowance.

7. Addition of capital introduced under section 68 of the Act:
The CIT(A) upheld the addition of capital introduced under section 68. The ITAT reevaluated the decision and annulled the addition.

8. Levy of interest under section 234A and 234B:
The CIT(A) upheld the levy of interest under sections 234A and 234B. The ITAT reviewed the decision, considering excessive interest charges and directing a reassessment.

The ITAT's detailed analysis and annulment of the assessment in various aspects highlight the importance of procedural fairness, jurisdictional clarity, and proper application of tax laws in the adjudication process. The judgment underscores the need for authorities to adhere to legal provisions and principles of natural justice while conducting assessments and appeals.