2016 (6) TMI 1503 - HC - Income Tax

Rejection of books of account - Tribunal justification in holding that the rejection of books of account by AO was without reasons and in the absence of any specific defects being pointed out? - Appeal is admitted on question no.(i). Tribunal justification in restoring the assessment for denovo adjudication after providing copies of all evidence collected by the AO in respect of which additions was sought to be made by the AO - We find that the impugned order of the Tribunal on the above issue is unimpeachable. The basic principles of natural justice require that before any addition is made by the Assessing Officer on information obtained from third parties/own source he must confront the assessee with the material so obtained. This above would enable the assessee to explain the correctness/incorrectness or unreliability of the evidence so obtained. In the absence of the necessary evidence sought to be used being given by the Assessing Officer to the Assessee it would amount to condemning a person without a proper hearing. No substantial question of law.

Summary

The Bombay High Court addressed an appeal under Section 260A of the Income Tax Act, 1961, challenging an order by the Income Tax Appellate Tribunal concerning the Assessment Year 1992-93. The appeal raised two key questions of law.Regarding Question (ii), the Tribunal had restored the assessment for de novo adjudication, emphasizing that the Assessing Officer must provide the assessee with all evidence relied upon for additions to declared income. The Tribunal found that the Assessing Officer had added Rs. 17.76 crores as unexplained investments without furnishing the evidence to the assessee. The Tribunal's decision underscored the principles of natural justice, requiring the Assessing Officer to confront the assessee with such material, allowing the assessee to challenge its correctness. The High Court found the Tribunal's decision unimpeachable, noting that the failure to provide evidence would amount to condemning a person without a proper hearing. Consequently, Question (ii) did not give rise to any substantial question of law and was not entertained.The appeal was admitted on Question (i), and the Registry was directed to communicate the order to the Tribunal to facilitate the availability of related papers and proceedings when required by the Court.