2021 (2) TMI 937 - AT - Income Tax

Validity of reopening of assessment - Assessee argued that AO eopened the assessment by issuing notice u/s. 148 and passed the ex-parte order u/s. 144 r.w.s. 147 - unexplained investment in mutual fund - HELD THAT - AO has recorded in the assessment order that assessee filed his reply dated 12.05.2014 explaining the circumstances under which the assessee received the money it was initially invested into the fixed deposit and thereafter the maturity amount was invested into mutual fund. These facts were recorded by the Assessing Officer of the assessment order. AO has also recorded this fact that the notice issued through post was received back with the postal remark that the addressee has shifted to Delhi and not residing at Mirzapur. Therefore, these facts were in the knowledge of the Assessing Officer that the assessee has shifted to Delhi. Since the assessment order was passed ex parte and the Ld. CIT(A) has also not verified the relevant record therefore, in the interest of justice, the matter is set aside to the record of the AO for proper verification of the evidences, bank statement of the assessee as well as the other evidences to be filed by the assessee along with the explanation of the source of investment in the mutual fund - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
Ex-parte assessment order under section 144/147 of the IT Act, denial of opportunity to be heard, addition of unexplained investment, interest charged under different sections of the IT Act.

Analysis:

1. Ex-parte Assessment Order:
The appeal was against an ex-parte assessment order under section 144/147 of the IT Act for the AY 2007-08. The appellant contended that the order was unjustified as it was passed without providing a proper opportunity to be heard. The appellant argued that the appeal was filed on time with necessary documents, but no chance to explain the case was given. The Tribunal noted the appellant's argument and set aside the matter for proper verification of evidence and bank statements, emphasizing the importance of providing a fair hearing.

2. Addition of Unexplained Investment:
The Assessing Officer had added ?10 lakh as unexplained investment in mutual funds to the appellant's income. The appellant explained that the investment was made from the maturity amount of fixed deposits, supported by bank statements. Despite this explanation, both the Assessing Officer and the CIT(A) confirmed the addition. The Tribunal found that the authorities did not consider the correct facts and evidence provided by the appellant. Consequently, the Tribunal set aside the matter for reevaluation, directing the Assessing Officer to verify the bank account and the source of investment before making a fresh decision.

3. Denial of Opportunity and Natural Justice:
The appellant argued that the denial of a chance to explain the source of investment in mutual funds was against the principles of natural justice. The Tribunal acknowledged this argument and emphasized the need for a fair and just process. It directed the Assessing Officer to reexamine the evidence and provide the appellant with a proper opportunity to present their case before issuing a new order.

4. Interest Charged under IT Act:
The appellant raised concerns about the interest charged under different sections of the IT Act, deeming it unjustified and illegal. While the Tribunal did not provide detailed analysis on this specific issue in the judgment, it allowed the appeal for statistical purposes, indicating a broader consideration of the appellant's grievances.

In conclusion, the Tribunal's judgment highlighted the importance of procedural fairness, proper verification of evidence, and adherence to principles of natural justice in tax assessments. The decision to set aside the matter for reevaluation underscored the significance of a thorough examination of facts and evidence before making additions to a taxpayer's income.