2024 (12) TMI 1594 - AT - Income Tax

Ex-parte order passed by CIT(A)/NFAC - as per assessee CIT(A)/NFAC sent notices on another e-mail as not given by assessee - HELD THAT - Admittedly the notices were sent on another e-mail and apart from that out of total four opportunities last three opportunities were given in a very short span of 13 days. Second notice was issued for 14.05.2024 third notice was issued for 22.05.2024 and the fourth and last opportunity was provided for 27.05.2024. Under the above facts of the case we are satisfied with the arguments of assessee that proper opportunity was not provided to the assessee and accordingly in the interest of justice without going into merits of the case we deem it appropriate to set-aside the ex-parte order passed by CIT(A)/NFAC remand the matter back to his file to decide the appeal afresh as per fact and law after providing reasonable opportunity of hearing to the assessee. Appeal filed by the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the dismissal of the appeal by the CIT(A)/NFAC on an ex-parte basis for non-compliance with notices was justified.
• Whether the assessee had reasonable cause for non-compliance with the notices issued by the CIT(A)/NFAC, particularly regarding non-receipt of physical notices and unfamiliarity with e-mail communications.
• Whether the assessment order passed under section 143(3) is valid, given the contention that the notice under section 143(2) was issued by an officer lacking jurisdiction.
• Whether the addition of Rs. 1,62,79,432/- representing 50% of the interest received on compensation under section 56(2)(viii) is justified, considering the interest arises under section 28 of the Land Acquisition Act and the issue was under dispute.
• Whether the interest received under section 28 of the Land Acquisition Act forms part of compensation and thus should not be separately added to income.
• Whether the assessee should be permitted to admit additional evidence in support of its case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of ex-parte dismissal of the appeal by CIT(A)/NFAC for non-compliance with notices

Legal framework and precedents: Principles of natural justice require that an assessee be given a reasonable opportunity of hearing before an adverse order is passed. The issuance and proper service of notices are essential to ensure compliance and to uphold the right to be heard.

Court's interpretation and reasoning: The Tribunal noted that the notices issued by the CIT(A)/NFAC were sent to e-mail addresses that did not belong to the assessee, despite the correct e-mail being mentioned in the grounds of appeal. This resulted in the assessee being unaware of the hearing notices. Further, the last three hearing notices were issued within a short span of 13 days, which was considered insufficient time to prepare and respond.

Key evidence and findings: The assessee's correct e-mail was [email protected], whereas notices were sent to [email protected] and [email protected]. The short intervals between notices (14.05.2024, 22.05.2024, and 27.05.2024) were highlighted as inadequate for proper compliance.

Application of law to facts: Given the defective service of notices and the compressed timeline, the Tribunal found that the assessee was not afforded a proper opportunity to be heard, violating principles of natural justice.

Treatment of competing arguments: The Revenue contended that the ex-parte order was justified due to non-compliance, but the Tribunal gave weight to the procedural deficiencies raised by the assessee.

Conclusion: The ex-parte dismissal was set aside, and the matter was remanded for fresh adjudication after providing a reasonable opportunity of hearing.

Issue 2: Reasonable cause for non-compliance with notices due to non-receipt and unfamiliarity with e-mails

Legal framework and precedents: Reasonable cause for non-compliance can be accepted where the assessee demonstrates genuine inability or lack of knowledge regarding receipt of notices.

Court's interpretation and reasoning: The Tribunal accepted the assessee's explanation that no physical notices were received and that the assessee was not well-versed with e-mail and computer technology, resulting in non-awareness of notices issued through the portal or e-mail.

Key evidence and findings: The discrepancy in e-mail addresses and the assessee's submission about unfamiliarity with digital communication were critical.

Application of law to facts: This constituted a reasonable cause for non-compliance, justifying a fresh opportunity to present the case.

Treatment of competing arguments: The Revenue did not dispute these factual contentions but relied on procedural non-compliance.

Conclusion: The Tribunal found merit in the assessee's plea and directed a fresh hearing.

Issue 3: Jurisdictional validity of notice issued under section 143(2)

Legal framework and precedents: Notice under section 143(2) must be issued by the officer having jurisdiction over the case; otherwise, the assessment order passed under section 143(3) is liable to be declared null and void.

Court's interpretation and reasoning: The facts reveal that the case was initially under the jurisdiction of Income Tax Officer, Ward-2(1), Jalgaon, but was transferred to Ward-2(2), Jalgaon. Notices were issued by different officers accordingly.

Key evidence and findings: The transfer of jurisdiction was communicated by letter dated 14.07.2018. Notices under section 142(1) and 143(2) were issued by the respective officers in charge.

Application of law to facts: The Tribunal did not delve into the merits of this issue in view of the remand but implicitly recognized the jurisdictional transfer as valid.

Treatment of competing arguments: The assessee challenged the jurisdiction, but the Tribunal did not pass a conclusive finding on this ground at this stage.

Conclusion: No conclusive determination was made; the matter is to be considered afresh on remand.

Issue 4 and 5: Justification of addition of Rs. 1,62,79,432/- as 50% of interest received on compensation under section 56(2)(viii) and whether such interest forms part of compensation under section 28 of the Land Acquisition Act

Legal framework and precedents: Section 56(2)(viii) of the Income Tax Act deals with income from other sources, including interest or compensation received. Section 28 of the Land Acquisition Act provides for interest on delayed compensation. The taxability of such interest depends on whether it is treated as capital receipt or income.

Court's interpretation and reasoning: The Assessing Officer treated 50% of the interest received as income and added the amount under section 56(2)(viii). The assessee contended that the interest is part of the compensation and hence not taxable separately. The Tribunal, however, did not examine this issue on merits due to the remand.

Key evidence and findings: The interest amount was Rs. 3,25,58,865/-, with 50% (Rs. 1,62,79,432/-) added to income after deduction under section 57.

Application of law to facts: The Tribunal refrained from adjudicating on this substantive issue pending fresh hearing.

Treatment of competing arguments: The assessee argued on legal and factual grounds regarding the nature of interest; the Revenue supported the addition.

Conclusion: The issue remains open for fresh consideration.

Issue 6: Admission of additional evidence

Legal framework and precedents: Admission of additional evidence is at the discretion of the appellate authority, especially when it is relevant and necessary for just adjudication.

Court's interpretation and reasoning: The Tribunal directed that the assessee be given an opportunity to submit evidence in support of the grounds of appeal during the fresh hearing.

Key evidence and findings: The assessee requested admission of additional evidence, which was not considered previously due to ex-parte dismissal.

Application of law to facts: The remand allows the assessee to produce evidence, subject to compliance with procedural requirements.

Treatment of competing arguments: The Revenue did not oppose the remand or admission of evidence.

Conclusion: The assessee is permitted to submit additional evidence on remand.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Under the above facts of the case, we are satisfied with the arguments of Ld. Counsel of the assessee that proper opportunity was not provided to the assessee and accordingly in the interest of justice, without going into merits of the case, we deem it appropriate to set-aside the ex-parte order passed by Ld. CIT(A)/NFAC & remand the matter back to his file to decide the appeal afresh as per fact and law after providing reasonable opportunity of hearing to the assessee."

Core principles established include:

• The necessity of proper service of notices to ensure compliance and uphold the right to be heard.
• Reasonable cause for non-compliance due to procedural deficiencies and lack of awareness of notices can justify setting aside adverse orders.
• Compressed timelines for hearings may violate principles of natural justice.
• Remand of the matter is appropriate where procedural lapses prevent adjudication on merits.
• Assessees must be given an opportunity to produce evidence and present their case fully.

Final determinations on issues are that the ex-parte dismissal is set aside, and the appeal is allowed for statistical purposes with directions for fresh hearing and adjudication on all grounds, including jurisdictional and substantive taxability issues.