2025 (4) TMI 345 - AT - Income Tax

Rectification application u/s 154 - addition on account of difference in import purchase and custom duty w.r.t. CBEC VAT return - HELD THAT - CIT (A) has not adjudicated the matter on merits and merely dismissed the appeal without considering the materials that the assessee has filed during the assessment proceedings. We also find that the CIT(A) has not accorded adequate opportunity and virtual hearing as requested by the assessee. We consider it fit in the interest of justice to set aside the issue to the file of the CIT for a fresh adjudication after examining all the materials and evidence filed by the assessee. Appeal of the assessee allowed for statistical purposes.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the order passed by the Assessing Officer under section 154 of the Income-tax Act, 1961, was legally valid.
Whether the CIT(A) erred in not providing an opportunity for a virtual hearing, thereby violating the principles of natural justice.
Whether the CIT(A) failed to adjudicate on the grounds of appeal, including additional grounds, and whether this failure rendered the order legally defective.
Whether the CIT(A) erred in confirming the additions made by the Assessing Officer regarding discrepancies in import purchases and customs duty.
Whether the CIT(A) erred in confirming the disallowance of expenses related to the sale of property.
Whether the CIT(A) erred in confirming the invocation of section 115BBE by the Assessing Officer.
Whether the CIT(A) erred in not providing a remand report as requested by the assessee.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Order under Section 154

Relevant Legal Framework and Precedents: Section 154 of the Income-tax Act allows for rectification of mistakes apparent from the record. The legal threshold for what constitutes a "mistake apparent from the record" is well-established through precedents, requiring the mistake to be obvious and not debatable.
Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) dismissed the appeal on the grounds that the issues raised were not mistakes apparent from the record but required factual verification.
Key Evidence and Findings: The Tribunal found that the CIT(A) did not adequately consider the materials presented by the assessee during the assessment proceedings.
Application of Law to Facts: The Tribunal determined that the CIT(A) failed to provide a reasoned order addressing the substantive issues raised by the assessee.
Conclusions: The Tribunal concluded that the CIT(A) did not adjudicate the matter on merits and dismissed the appeal without proper consideration.

Issue 2: Opportunity for Virtual Hearing

Relevant Legal Framework: Principles of natural justice require that parties be given an opportunity to be heard.
Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not provide the requested opportunity for a virtual hearing, which is a procedural lapse.
Conclusions: The Tribunal allowed the appeal on this ground, emphasizing the need for adherence to natural justice principles.

Issue 3: Adjudication of Grounds of Appeal

Court's Interpretation and Reasoning: The Tribunal observed that the CIT(A) failed to adjudicate the grounds of appeal, including additional grounds, which were relevant to the rectification order.
Conclusions: The Tribunal found this to be a significant oversight and remanded the matter for fresh adjudication.

Issue 4: Additions Related to Import Purchases and Customs Duty

Relevant Legal Framework: Section 69C of the Income-tax Act pertains to unexplained expenditure, including discrepancies in financial records.
Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) confirmed the additions without adequately addressing the evidence provided by the assessee.
Conclusions: The Tribunal remanded the issue for reconsideration, emphasizing the need for a detailed examination of the evidence.

Issue 5: Disallowance of Expenses Related to Property Sale

Relevant Legal Framework: The treatment of property sales and related expenses under business and profession income.
Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not properly adjudicate the disallowance of expenses related to the property sale.
Conclusions: The Tribunal remanded the issue for further examination.

Issue 6: Invocation of Section 115BBE

Relevant Legal Framework: Section 115BBE deals with tax on income referred to in sections 68, 69, 69A, 69B, 69C, or 69D.
Court's Interpretation and Reasoning: The Tribunal did not find adequate reasoning in the CIT(A)'s confirmation of the invocation of this section.
Conclusions: The Tribunal remanded the matter for a fresh decision.

Issue 7: Provision of Remand Report

Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) did not provide a remand report, which was necessary for a comprehensive adjudication of the issues.
Conclusions: The Tribunal found this to be a procedural deficiency requiring rectification.

3. SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal emphasized the importance of adhering to principles of natural justice, particularly the opportunity to be heard and the need for reasoned orders addressing all grounds raised by the assessee.
Final Determinations on Each Issue: The Tribunal allowed the appeal for statistical purposes, remanding the matter to the CIT(A) for a fresh adjudication on all issues, ensuring that all evidence and materials are duly considered.

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