2025 (7) TMI 948 - AT - Income Tax

Assessment order was passed ex parte u/s 144 - assessee s non-compliance to the statutory notices - HELD THAT - Even before the ld. CIT(A) the assessee failed to present its case effectively and the appeal was disposed of without proper consideration of the factual matrix and supporting documents. Thus the matter needs to be restored to the file of the AO for fresh consideration. We therefore set aside the order of the CIT(A) and remand the matter to the file of the AO for fresh adjudication after providing reasonable opportunity to the assessee to furnish documentary evidences - Appeal of the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the assessment order passed under section 144 of the Income Tax Act, 1961 (the Act) due to non-compliance by the assessee was valid and justified.

- Whether the appellate order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] without detailed examination of the facts and evidence submitted by the assessee was appropriate.

- Whether the assessee was denied the opportunity of being heard in violation of principles of natural justice during assessment and appellate proceedings.

- Whether the matter requires remand for fresh adjudication after providing reasonable opportunity to the assessee to submit documentary evidence in support of claimed expenses and depreciation under section 57 of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and justification of assessment order passed under section 144 of the Act

Relevant legal framework and precedents: Section 144 of the Act empowers the Assessing Officer to make an assessment to the best of his judgment where the assessee fails to comply with notices or to produce evidence called for during assessment proceedings. The provision is intended to prevent delay and ensure finality in assessment but must be exercised after giving reasonable opportunity to the assessee.

Court's interpretation and reasoning: The Tribunal noted that the assessment order was passed ex parte under section 144 due to the assessee's failure to respond to notices issued under sections 142(1) and 143(2) of the Act, as well as reminders. Despite multiple opportunities, the assessee did not furnish any documentary evidence to substantiate the claimed expenses and depreciation. The Assessing Officer was thus compelled to disallow the entire claimed expenses and add them back to income.

Key evidence and findings: The evidence on record showed the assessee declared income from various sources totaling Rs. 1,40,98,549, and claimed expenses of Rs. 1,42,80,649 along with depreciation of Rs. 2,36,754 under section 57. No supporting documents were submitted despite statutory notices and reminders.

Application of law to facts: The Assessing Officer's action to proceed under section 144 was consistent with the statutory mandate since the assessee's non-compliance prevented proper verification of claims. The order was thus legally sustainable on the facts.

Treatment of competing arguments: The assessee contended that non-compliance was due to negligence of previous counsel and lack of communication, but failed to substantiate this during assessment. The Tribunal acknowledged the non-compliance but noted the procedural necessity of the assessment order.

Conclusions: The assessment under section 144 was validly passed given the assessee's failure to cooperate and produce evidence.

Issue 2: Appropriateness of the appellate order passed by CIT(A) without detailed examination of facts and evidence

Relevant legal framework and precedents: The CIT(A) is vested with appellate jurisdiction under section 250 of the Act and is required to consider all relevant facts, evidence, and submissions before confirming or modifying the assessment order. Dismissing an appeal on technical grounds without proper examination is generally discouraged.

Court's interpretation and reasoning: The Tribunal observed that the CIT(A) dismissed the appeal on technical grounds without detailed examination of the facts and materials later submitted by the assessee. This resulted in denial of substantive justice to the assessee.

Key evidence and findings: The assessee's submissions before the CIT(A) included explanations attributing non-compliance to previous counsel's negligence and claims of sufficient materials being submitted later. The CIT(A) did not engage with these submissions meaningfully.

Application of law to facts: The appellate authority's failure to consider the factual matrix and evidence amounted to procedural impropriety and contravened the principles of natural justice.

Treatment of competing arguments: The Revenue supported the appellate order, emphasizing procedural compliance and non-submission of evidence. However, the Tribunal prioritized fair adjudication over procedural technicalities.

Conclusions: The appellate order was flawed due to lack of proper consideration of the assessee's case and evidence.

Issue 3: Denial of opportunity to be heard and requirement of remand for fresh adjudication

Relevant legal framework and precedents: Principles of natural justice mandate that an assessee must be given a reasonable opportunity to be heard and to produce evidence before adverse orders are passed. Remand is appropriate where procedural lapses or non-consideration of evidence have occurred.

Court's interpretation and reasoning: The Tribunal found that both the assessment and appellate proceedings were conducted without proper opportunity to the assessee. The assessee's failure to respond was partly attributed to negligence and communication gaps. The Tribunal emphasized the need for fair play and justice.

Key evidence and findings: The record showed multiple notices and reminders issued to the assessee, but also indicated that the assessee attempted to submit materials before the CIT(A). The Tribunal noted the absence of a proper hearing or consideration of these materials.

Application of law to facts: The Tribunal held that the interests of justice required setting aside the appellate order and remanding the matter to the Assessing Officer for fresh adjudication after providing reasonable opportunity to the assessee to submit documentary evidence.

Treatment of competing arguments: The Revenue opposed remand, relying on procedural compliance and the assessee's initial non-cooperation. The Tribunal, however, prioritized substantive justice and fair hearing.

Conclusions: The matter was remanded for fresh adjudication with directions to provide the assessee adequate opportunity to comply and present evidence, failing which ex parte adjudication may follow.

3. SIGNIFICANT HOLDINGS

- "In the interests of justice and fair play, we are of the considered opinion that the matter needs to be restored to the file of the Assessing Officer for fresh consideration."

- The Tribunal established the principle that even where an assessment is passed under section 144 due to non-compliance, subsequent appellate proceedings must afford a proper hearing and consider all relevant evidence before confirming such order.

- The Tribunal held that dismissal of appeal on technical grounds without examination of facts and materials submitted by the assessee is contrary to principles of natural justice and fair adjudication.

- The final determination was to set aside the appellate order and remand the matter to the Assessing Officer for fresh adjudication after providing reasonable opportunity to the assessee to furnish documentary evidence in support of claimed expenses and depreciation.

- The Tribunal directed the assessee to appear and comply with notices diligently in remand proceedings, warning that failure to do so may result in ex parte adjudication as per law.