2024 (7) TMI 1094 - HC - Income Tax

Tribunal dismissed assessee's appeal ex-parte - Addition u/s 68 - bogus LTCG - addition to the share capital on the ground that failure of discharge the onus - HELD THAT - It is not the assessee who remained negligent towards his statutory rights of appeal. But, unfortunately, the Chartered Accountant, who was engaged to contest and to make effective representation before the Tribunal, has failed to perform his professional duty diligently. In our view, therefore, neither any fault nor any negligence can be attributed to the assessee, who has been saddled with liability of tax. Considering the same, only on humanitarian ground, we propose to show our interference for the limited purpose of remanding the present appeal back to the Tribunal for fresh decision on merits, after giving reasonable opportunity of hearing to the appellant assessee.

Summary

Issues:
1. Challenge to the order of the Income-Tax Appellate Tribunal regarding additions to share capital, unsecured loan, investment, and expenses.

Analysis:

Addition of Rs. 25,00,000 as Share Capital:
The appellant contested the addition of Rs. 25,00,000 as share capital under Section 68 of the Income Tax Act, 1961. The appellant argued that there was sufficient evidence to prove the identity, capacity, and genuineness of the transactions. The Tribunal upheld the addition despite the evidence presented. The High Court acknowledged the appellant's plea and remanded the case back to the Tribunal for fresh consideration, emphasizing the need for a fair hearing.

Addition of Rs. 5,00,000 as Unsecured Loan:
Similarly, the appellant challenged the addition of Rs. 5,00,000 as an unsecured loan under Section 68 of the Act. The appellant claimed that there was ample evidence to establish the legitimacy of the transaction. Despite this, the Tribunal confirmed the addition. The High Court, recognizing the appellant's right to a proper hearing, set aside the Tribunal's decision and directed a reevaluation of the matter.

Addition of Rs. 36,00,000 as Unexplained Investment:
The appellant also disputed the addition of Rs. 36,00,000 as an unexplained investment under Section 69 of the Act. The appellant contended that the entire purchase price of land and building was duly recorded in the books, questioning the Tribunal's decision. The High Court, prioritizing fairness, remanded this issue back to the Tribunal for a fresh assessment.

Disallowance of Employee and Other Expenses:
Regarding the disallowance of employee expenses amounting to Rs. 6,44,000 and other expenses totaling Rs. 7,10,000, the appellant raised objections concerning the facts and nature of the expenditure. Despite the appellant's arguments, the Tribunal upheld the disallowance. The High Court, considering the importance of a proper representation, allowed the appeal, setting aside the Tribunal's decision and ordering a reevaluation of the expenses issue.

In conclusion, the High Court, recognizing the appellant's right to a fair hearing and effective representation, remanded all issues back to the Tribunal for fresh consideration. The Court emphasized the importance of providing reasonable opportunities to the appellant for presenting their case.