2021 (10) TMI 213 - AT - Income Tax

Denial of natural justice - addition of bogus purchases in ex-parte appeal - HELD THAT - CIT(A) passed ex-parte order without recording his satisfaction, whether the notice sent to the assessee was duly served on not. Thus, in our view the assessee was not offered sufficient and reasonable opportunity of hearing at the stage of first appellate stage. Therefore, we restore the appeal back to the file of ld CIT(A) to decide all the issues afresh on merit and in accordance with law. Needless to order that before passing the order the ld. CIT(A) shall grant fair opportunity of hearing to the assessee. The assessee is also directed to appear before the ld.CIT(A) as and when the date of hearing and to provide all necessary evidence and information without any further delay and not to seek the adjournment without any valid reasons. The assessee is further directed to provide his e-mail address and telephone number to make communication with him or his representative - Appeal of the assessee is allowed for statistical purpose.

Issues:
1. Validity of jurisdiction for reopening assessment under section 147
2. Addition made on account of alleged bogus purchasers
3. Confirmation of addition of genuine purchasers based on third party statement
4. Denial of cross-examination opportunity to the appellant

Analysis:

Issue 1: Validity of jurisdiction for reopening assessment under section 147
The appellant challenged the assumption of jurisdiction by the Assessing Officer for initiating reassessment proceedings under section 147 of the Income Tax Act. The Tribunal noted that the case was reopened based on incriminating material found during a search and seizure action related to accommodation entries of bogus purchases. The appellant received a significant amount from a group under investigation. The Tribunal found that the assessing officer failed to consider the evidence provided by the appellant regarding normal purchases and subsequent sales, leading to a disallowance of the entire purchases from the group. The Tribunal directed the case to be sent back to the CIT(A) for a fresh decision, emphasizing the importance of fair hearing and compliance with procedural requirements.

Issue 2: Addition made on account of alleged bogus purchasers
The assessing officer made a 100% disallowance of purchases from a specific entity based on a report from the investigation wing. The CIT(A) confirmed this action, stating that the appellant failed to comply with notices despite several opportunities. The Tribunal observed that the CIT(A) did not adequately address the reopening validity challenge raised by the appellant. The Tribunal emphasized that the appellant should be given a fair opportunity to present their case and directed the matter to be reconsidered by the CIT(A.

Issue 3: Confirmation of addition of genuine purchasers based on third party statement
The CIT(A) confirmed the addition of genuine purchasers solely based on a third party statement without providing the appellant with an opportunity for cross-examination. The Tribunal found that the appellant's rights were compromised due to the ex-parte nature of the proceedings. It directed the case to be remanded to the CIT(A) for a fresh decision, ensuring the appellant's right to a fair hearing and proper examination of all relevant issues.

Issue 4: Denial of cross-examination opportunity to the appellant
The assessing officer denied the appellant the opportunity for cross-examination, leading to adverse findings against the appellant. The Tribunal highlighted the importance of providing a reasonable opportunity for the appellant to present their case and cross-examine relevant parties. It directed the case to be reconsidered by the CIT(A) with a specific emphasis on granting the appellant a fair hearing and addressing all issues raised by the appellant.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for a fair hearing, compliance with procedural requirements, and proper examination of all relevant issues in the assessment process.

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