2008 (9) TMI 462 - AT - Income Tax

Summary

Issues Involved:
1. Whether the AO is required to confront the assessee with evidence gathered against them before passing a best judgment assessment u/s 144 of the IT Act.

Summary:

1. Requirement to Confront Assessee with Evidence:

The question arisen for determination herein is as to whether, having proceeded to frame a best judgment under s. 144 of the IT Act, it is incumbent on the AO to confront the assessee with evidence gathered against the assessee before passing the assessment order using that evidence against the assessee.

2. Assessee's Claim and Evidence:

The assessee claimed his income was agricultural, supported by J. Forms and affidavits from himself and his father. The AO issued letters to commission agents to confirm the sale of crops and issuance of J. Forms. The agents confirmed the issuance of J. Forms but denied any crop sales during the relevant financial years.

3. AO's Findings:

The AO held that the assessee was non-cooperative, had no land in his name, and provided irrelevant J. Forms and self-serving affidavits. Consequently, the AO treated the income as income from other sources.

4. CIT(A) Confirmation:

The CIT(A) confirmed the AO's order, leading to the assessee's appeal.

5. Assessee's Argument:

The learned counsel for the assessee argued that the AO erred by relying on evidence gathered at the assessee's back without confronting him, violating principles of natural justice and rendering the assessment order void ab initio.

6. Departmental Representative's Argument:

The learned Departmental Representative supported the AO's order, stating that the burden of proof was on the assessee, who failed to provide concrete evidence of agricultural income and was non-cooperative throughout the proceedings.

7. Tribunal's Analysis:

Sec. 144 requires the AO to give the assessee an opportunity of being heard before making a best judgment assessment. The Tribunal noted that the legislature's amendment to s. 144 emphasized the necessity of this opportunity. The Tribunal referenced case law supporting the principle that material gathered by the AO must be disclosed to the assessee for rebuttal.

8. Conclusion:

The Tribunal held that the AO's failure to confront the assessee with the commission agents' evidence violated principles of natural justice, making the assessment liable to be set aside. The assessment was restored to the AO for de novo consideration, with instructions to provide the assessee an opportunity to rebut the evidence.

9. Result:

In the result, for statistical purposes, both the appeals are treated as allowed.