2025 (5) TMI 1874 - AT - Income Tax

Order passed ex-parte without giving sufficient opportunity of being heard to the assessee - HELD THAT - Proper and sufficient opportunity of being heard cannot be said to have been given by the ld. CIT(Appeals) to the assessee before dismissing the appeal of the assessee. There is a clear violation of principle of natural justice. Therefore consider it fair and proper and in the interest of justice to set aside the impugned order passed by the CIT(A) and remit the matter back to AO for disposing of the appeal of the assessee afresh on merit in accordance with law after giving proper and sufficient opportunity of being heard to the assessee. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the ld. Commissioner of Income Tax (Appeals) (CIT(A)) committed an error in dismissing the appeal ex-parte without affording sufficient opportunity of being heard to the assessee, thereby violating the principles of natural justice.

- Whether the assessee was provided adequate opportunity to rectify the return of income and submit necessary evidence in support of the grounds of appeal.

- Whether the impugned order passed by the ld. CIT(A) can be sustained or requires to be set aside and the matter remitted for fresh adjudication on merits.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Adequacy of opportunity of hearing before dismissal of appeal ex-parte

Relevant legal framework and precedents: The principles of natural justice mandate that no order should be passed against a party without giving them a reasonable opportunity to present their case. In tax proceedings, the appellate authority is required to provide sufficient chances to the assessee to submit evidence and make submissions before dismissing an appeal ex-parte.

Court's interpretation and reasoning: The Tribunal noted that the ld. CIT(A) had dismissed the appeal ex-parte on the ground that the assessee failed to submit the rectified return and supporting documents despite several opportunities. However, the Tribunal found that the order of dismissal was passed without giving proper and sufficient opportunity of being heard to the assessee. The Tribunal emphasized that such dismissal without adequate hearing constitutes a violation of the principle of natural justice.

Key evidence and findings: The record indicated that four opportunities were given by the ld. CIT(A) to the assessee to furnish details and evidence, yet the assessee did not upload the rectified ITR or submit documentary proof. Nonetheless, the Tribunal observed that the assessee had attempted to rectify the return but faced technical difficulties in uploading the revised return on the CPC portal.

Application of law to facts: The Tribunal balanced the procedural lapses against the fundamental right of the assessee to be heard. It concluded that the ld. CIT(A) should have ensured that the assessee was given a fair chance to be heard before dismissing the appeal ex-parte, especially considering the technical impediments faced by the assessee in rectifying the return.

Treatment of competing arguments: While the Revenue contended that sufficient opportunity was provided and the assessee failed to cooperate, the Tribunal gave weight to the principle of natural justice and found that the opportunity afforded was not adequate in the circumstances.

Conclusions: The dismissal of the appeal ex-parte by the ld. CIT(A) was held to be improper due to violation of natural justice principles.

Issue 2: Rectification of return and submission of evidence

Relevant legal framework and precedents: Section 154 of the Income Tax Act allows rectification of mistakes apparent from record. The assessee is entitled to file rectification petitions to correct errors in the return. The appellate authority is expected to consider such rectifications and related evidence before deciding the appeal.

Court's interpretation and reasoning: The Tribunal acknowledged that the difference in income arose due to the speculative business income being adopted twice, which was an error in the return. The assessee was advised to file a rectification petition but was unable to upload the corrected return due to technical issues. The Tribunal observed that the ld. CIT(A) did not sufficiently consider these difficulties and proceeded to dismiss the appeal.

Key evidence and findings: The assessee's return originally declared income from speculative activity twice, causing a discrepancy. The assessee's failure to upload the rectified return was due to technical reasons beyond his control.

Application of law to facts: The Tribunal held that the rectification process should have been facilitated and the appeal decided on merits after allowing the assessee to properly submit the rectified return and supporting documents.

Treatment of competing arguments: The Revenue's insistence on dismissal due to non-submission was outweighed by the assessee's explanation of technical difficulties and the need for a fair hearing.

Conclusions: The appeal requires fresh adjudication after proper compliance by the assessee regarding rectification and evidence submission.

Issue 3: Remand for fresh adjudication

Relevant legal framework and precedents: When an appellate order suffers from procedural infirmities such as violation of natural justice, the proper course is to set aside the order and remit the matter for fresh consideration.

Court's interpretation and reasoning: The Tribunal found that the ld. CIT(A)'s order was vitiated by procedural irregularity and therefore set aside the order. It directed the Assessing Officer to dispose of the appeal afresh on merits after giving proper and sufficient opportunity to the assessee.

Key evidence and findings: The Tribunal noted the absence of merit-based adjudication due to ex-parte dismissal and the need for fresh hearing.

Application of law to facts: The Tribunal's direction ensures adherence to fair procedure and just decision-making in tax appeals.

Treatment of competing arguments: The Tribunal rejected the Revenue's contention to uphold the dismissal, emphasizing the necessity of hearing and merit adjudication.

Conclusions: The matter is remitted for fresh disposal in accordance with law and after due opportunity to the assessee.

3. SIGNIFICANT HOLDINGS

"There is a clear violation of principle of natural justice. I, therefore, consider it fair and proper and in the interest of justice to set aside the impugned order passed by the ld. CIT(Appeals) and remit the matter back to Assessing Officer for disposing of the appeal of the assessee afresh on merit in accordance with law after giving proper and sufficient opportunity of being heard to the assessee."

Core principles established include:

• The necessity of affording proper and sufficient opportunity of hearing before dismissing an appeal ex-parte.
• The importance of considering technical difficulties faced by the assessee in rectifying returns and submitting evidence.
• The requirement to decide appeals on merits rather than procedural defaults where natural justice is compromised.
• The procedural remedy of setting aside orders tainted by violation of natural justice and remanding for fresh adjudication.

Final determinations:

• The ex-parte dismissal of the appeal by the ld. CIT(A) was set aside.
• The appeal was remitted to the Assessing Officer for fresh disposal on merits after giving the assessee proper opportunity to comply and be heard.
• The appeal was treated as allowed for statistical purposes pending fresh adjudication.