2025 (5) TMI 1941 - AT - Income Tax

CIT(Appeals) dissmised appeal without giving any opportunity of hearing to the assessee - HELD THAT - assessee is a unit of RMET and it has separate PAN and using it for banking transactions TDS etc. During the course of assessment proceedings there was no proper response from the assessee s side and assessee has also not demonstrated before the AO that the disputed amount is included in the consolidated Income Expenditure account of RMET. Even before us the ld. counsel has not filed separate income and Expenditure account of this unit as stated above that the units are preparing separate income and expenditure account. Considering the prayer of the ld. counsel for the assessee and in the interest of justice we restore the matter to the file of AO for fresh consideration.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal include:

• Whether the order passed by the CIT(Appeals) without adjudicating the grounds urged by the appellant and without giving an opportunity of hearing was legally sustainable.
• Whether the CIT(A) complied with the mandatory requirements under Section 250(6) of the Income-tax Act, 1961 while passing the appellate order.
• Whether the CIT(A) erred in upholding the assessment order passed under Section 144 of the Act without proper application of mind and without considering the facts and evidence.
• Whether the assessment order passed under Section 144 was valid in light of the appellant's compliance with notices under Section 142(1) and the procedural safeguards prescribed under Sections 144 and 144A of the Act.
• Whether the invocation of Section 69A of the Act for addition of undisclosed cash credit was legally valid, considering the appellant did not maintain books of account as prescribed under Section 2(12A) of the Act.
• Whether the assessment order suffered from jurisdictional defects due to non-compliance with the proviso to Section 144A and absence of supervisory sanction as required by the Board Circular dated 14.12.2018.
• Whether the appellant was entitled to cancellation of interest levied under Sections 234A, 234B, and 234C of the Act.
• Whether the assessment and appellate proceedings were consistent with judicial discipline and precedent, especially with respect to other assessment years involving the appellant.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of CIT(A) order passed without hearing and adjudication of grounds

Legal framework and precedents: Principles of natural justice require that an appellant be given a reasonable opportunity of hearing before an adverse order is passed. Section 250(6) of the Income-tax Act mandates that the appellate authority shall dispose of the appeal after considering the grounds urged by the appellant and after giving an opportunity to be heard.

Court's interpretation and reasoning: The Tribunal noted that the CIT(A) passed the order ex parte without providing the appellant an opportunity to be heard and without adjudicating the grounds raised. This amounted to non-application of independent mind and failure to comply with statutory requirements under Section 250(6).

Key evidence and findings: The appellant submitted copies of e-proceedings and the Department's confirmation that no hearing was granted. The CIT(A) order was silent on the appellant's submissions.

Application of law to facts: The Tribunal held that the CIT(A)'s order was not in strict compliance with Section 250(6) and was therefore liable to be set aside.

Treatment of competing arguments: The Department acknowledged the lack of hearing but relied on the AO's order. The Tribunal emphasized that procedural fairness cannot be waived.

Conclusion: The CIT(A) order was quashed for non-compliance with natural justice and statutory provisions.

Issue 2: Validity of assessment order passed under Section 144 without proper procedure and jurisdiction

Legal framework and precedents: Section 144 allows for assessment when the assessee fails to file a return or comply with notices. However, the AO must follow mandatory procedural safeguards including issuance of notices and giving opportunity to explain. Section 144A and the related Board Circulars require supervisory sanction before passing such orders.

Court's interpretation and reasoning: The Tribunal observed that the AO passed the assessment under Section 144 without proper compliance of the proviso to Section 144A and without obtaining supervisory sanction as per Board Circular dated 14.12.2018. The appellant had also complied with notices under Section 142(1) by submitting certain explanations, though incomplete.

Key evidence and findings: The appellant's submissions explained the relationship with the umbrella trust and consolidated accounting. The AO did not consider these fully and proceeded with unilateral assessment.

Application of law to facts: The Tribunal found that the assessment order suffered from jurisdictional defects and was liable to be quashed or reconsidered.

Treatment of competing arguments: The Department contended that the appellant's failure to file return justified the order. The Tribunal emphasized procedural compliance and opportunity to be heard.

Conclusion: The assessment order under Section 144 was not sustainable without fresh consideration following due procedure.

Issue 3: Applicability of Section 69A for addition of undisclosed cash credits

Legal framework and precedents: Section 69A applies to unexplained cash credits appearing in books of account maintained as per Section 2(12A). The maintenance of books of account is a sine qua non for invoking Section 69A.

Court's interpretation and reasoning: The Tribunal noted that the appellant did not maintain books of account as prescribed under Section 2(12A), being a unit of a trust with consolidated accounts prepared at the parent trust level. Therefore, the application of Section 69A was erroneous.

Key evidence and findings: The appellant's explanation and submissions showed that the cash deposits were part of consolidated accounts of the umbrella trust, which maintained proper books and filed returns accordingly.

Application of law to facts: The Tribunal held that the addition made under Section 69A was not justified and liable for deletion unless the AO was able to demonstrate otherwise on fresh consideration.

Treatment of competing arguments: The Department relied on the separate PAN and non-filing of returns by the unit. The Tribunal balanced this with the consolidated accounting structure and the appellant's submissions.

Conclusion: The addition under Section 69A was not sustainable without proper evidence and legal basis.

Issue 4: Consistency with judicial discipline and precedents

Legal framework and precedents: The principle of judicial discipline requires that similar issues be decided consistently unless distinguishable facts exist. Precedents for other assessment years are relevant for uniformity.

Court's interpretation and reasoning: The Tribunal noted that the appellant's contentions for other assessment years had been accepted by the Departmental authorities but were ignored by the CIT(A). This was a failure to follow precedential ratio and judicial discipline.

Key evidence and findings: The appellant relied on a prior order under Section 148A(d) for AY 2019-20 where their submissions were accepted.

Application of law to facts: The Tribunal emphasized that the AO and CIT(A) must consider such precedents and apply them consistently.

Treatment of competing arguments: The Department did not dispute the existence of prior orders but relied on the facts being different. The Tribunal found the distinction insufficient to ignore precedent.

Conclusion: The CIT(A) erred in not following judicial discipline and precedent, necessitating reconsideration.

Issue 5: Interest liability under Sections 234A, 234B, and 234C

Legal framework and precedents: Interest under these sections is leviable for delay in filing returns, non-payment of advance tax, and deferment of tax payments. However, if the assessment is set aside or quashed due to procedural defects, interest liability may also be reconsidered.

Court's interpretation and reasoning: The appellant denied liability for interest, citing procedural irregularities and non-est status of the assessment order.

Key evidence and findings: Since the assessment order was set aside for fresh consideration, interest liability could not be sustained without a valid assessment.

Application of law to facts: The Tribunal reserved the appellant's right to seek waiver of interest after fresh assessment proceedings.

Treatment of competing arguments: The Department did not press the interest issue in detail given the procedural defects.

Conclusion: Interest liability was not adjudicated and was left open for determination post fresh assessment.

3. SIGNIFICANT HOLDINGS

"The CIT(A) order was not in strict compliance with Section 250(6) of the Income-tax Act, 1961 and was passed without giving the appellant an opportunity of hearing, thereby violating principles of natural justice and rendering the order liable to be set aside."

"The assessment order passed under Section 144 without proper compliance of the proviso to Section 144A and without obtaining supervisory sanction as mandated by Board Circular dated 14.12.2018 is non-est and suffered from jurisdictional defect."

"Section 69A of the Act cannot be invoked for addition of undisclosed cash credits in the absence of maintenance of books of account as prescribed under Section 2(12A) of the Act, and such addition is liable to be deleted unless otherwise substantiated."

"Judicial discipline and precedential ratio require that similar issues across assessment years be decided consistently, and failure to follow binding precedents constitutes an error warranting annulment of the impugned order."

"The appellant is entitled to reasonable opportunity of hearing and the AO is directed to reconsider the matter afresh, including examination of consolidated accounts of the umbrella trust and the unit, with due regard to procedural safeguards and applicable CBDT instructions."

"The interest liability under Sections 234A, 234B, and 234C is reserved and may be reconsidered after valid assessment proceedings."