Introduction: The Income Tax Appellate Tribunal (ITAT) Delhi’s recent order in the case Poonam C/o Sanjeev Anand and Associates Vs ITO has attracted a lot of attention. The tribunal set aside an earlier decision made by the Commissioner of Income Tax (Appeals) [CIT(A)], emphasizing the need to provide the assessee with a due opportunity to establish a case of non-receipt of statutory notices. This article delves into the specifics of the case and what it means for taxpayers and legal practitioners alike.
Key Background of the Case: Poonam, the assessee, had appealed against two orders dated 26.10.2022 for the assessment year 2011-12. While the first appeal was about quantum proceedings, the second was against the imposition of a penalty under Section 271(1)(c) of the Income-Tax Act, 1961.
Absence of Assessee and Validity of Assessment: The ITAT proceeded to handle the case ex parte due to the absence of the assessee. The assessee had not filed a tax return for the year when she had purchased an immovable property. The Assessing Officer consequently issued multiple notices, and failing to get a response, completed the assessment on a ‘best judgement’ basis.
Key Points Raised by the Assessee: Before the CIT(A), the assessee argued that no notices were received and that the actual investment in property was only Rs. 34,00,000, whereas the Assessing Officer had considered it to be Rs. 75,84,000 based on the circle rate.
Flaws in CIT(A)’s Order: The CIT(A) upheld the Assessing Officer’s order without providing any substantive reasoning. The tribunal noted that dismissing an appeal solely based on non-prosecution is not in line with Section 250 and 251 of the Income-Tax Act.
ITAT’s Verdict: Considering that the assessee had no opportunity to establish her case, the tribunal set aside the CIT(A)’s order and restored the issues to the Assessing Officer for a fresh assessment. The tribunal also stressed the need to provide a reasonable opportunity to the assessee to be heard.
Implications for Penalty Proceedings: Since the tribunal set aside the quantum proceeding, the imposition of a penalty under Section 271(1)(c) at this stage was considered premature.
Conclusion: The ITAT Delhi’s order emphasizes the importance of following due process and ensuring that assessees have the opportunity to present their case, especially when it comes to the receipt of statutory notices. This case serves as a precedent for similar cases and provides critical insight into the due process within the Indian taxation system.
FULL TEXT OF THE ORDER OF ITAT DELHI
Captioned appeals by the assessee arise out of two separate orders, both dated 26.10.2022, passed by the National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2011-12.
2. While ITA No.2817/Del/2022 arises out of quantum proceedings, ITA No. 2819/Del/2022 is against imposition of penalty under Section 271(1)(c) of the Income-Tax Act, 1961.
3. When the appeals were called out, none appeared on behalf of the assessee. Even, there is no application by the assessee seeking adjournment. However, on perusal of record, it is observed that the notice of hearing issued to the assessee was duly served as evidenced by the postal acknowledgement kept on record.
4. In view of the aforesaid, we proceed to dispose of the appeals ex parte qua the assessee after hearing the learned Departmental Representative and based on material available on record.
5. At the outset, we will deal with ITA No.2817/Del/2022. The dispute in this appeal is in relation to validity of assessment framed under Section 144/147 of the Act and addition made of an amount of Rs.75,84,000 towards unexplained investment in purchase of property.
6. Briefly, the facts are, assessee is a resident individual. Based on information received from the Sub-Registrar, Ghaziabad, it was found that in the year under consideration, the assessee had purchased immoveable property for a consideration of Rs.75,84,000. Whereas, the assessee had not filed any return of income. Therefore, the Assessing Officer issued a notice under Section 133(6) of the Act to the assessee calling for information relating to the investment made. As alleged by the Assessing Officer, assessee did not comply with the said notice. As a result, the Assessing Officer proceeded to reopen the assessment under Section 147 of the Act by issuing a notice under Section 148 of the Act. Even, as observed by the Assessing Officer, the assessee did not comply with the notices issued under Sections 148 and 142(1) of the Act. Therefore, finding no other alternative, the Assessing Officer proceeded to complete the assessment to the best of his judgment, by invoking the provisions of section 144 of the Act. While doing so, he added back the amount of Rs.75,84,000 to the income of the assessee. Against the assessment order so passed, the assessee preferred an appeal before the first appellate authority. However, the appeal was dismissed.
7. We have heard learned Departmental Representative and perused the material available on record.
8. Facts on record reveal, assessee did not participate in the assessment proceedings, for which, the assessment was completed ex parte on best judgment basis.
9. Before the Commissioner (Appeals), the assessee had taken a ground that, firstly, no notice issued under Section 148 and 142(1) was received by the assessee. She has further contended that the actual investment made towards purchase of the property was to the tune of Rs.34,00,000, since, the assessee is a co-owner of the property. It is the case of the assessee that the Assessing Officer has wrongly applied the circle rate of Rs.75,84,000. It is observed, learned Commissioner (Appeals) has dismissed assessee’s appeal with the following observations:
“3. Notice u/s 250 of the I.T. Act was issued to the appellant on 05.03.2022 asking the appellant to file details in support of the grounds of appeal on or before 21.03.2022. However, the appellant did not reply to the notice issued. Accordingly, a 2nd notice u/s. 250 of the I.T. Act was issued on to the appellant on 03.10.2022 asking the appellant to file details in support of the grounds of appeal on or before 18.10.2022. In this notice the appellant was duly informed that this is the final opportunity granted. However, appellant again did not reply to the 2nd notice too till date in absence of details in support of GOA filed, appeal cannot be decided. The non-compliance to the 2 notices issued shows that the appellant is not interested in pursuing her appeal.
The order of A.O. is upheld and the appeal stands dismissed.”
10. From the above extracted observation of the first appellate authority, it is very much clear that he has not disposed of the appeal through a speaking order. His decision is bereft of any reasoning. In sum and substance, the first appellate authority has dismissed the appeal for non-prosecution. This, in our view, is not the mandate of section 250 read with section 251 of the Act.
11. Considering the fact that the proceedings before the departmental authorities were completed ex parte and the assessee did not get any opportunity to establish her case regarding non-receipt of statutory notices and the actual quantum of investment made by her in purchase of house property, we are inclined to set aside the impugned order of first appellate authority and restore the issues to the Assessing Officer for de novo adjudication after providing due and reasonable opportunity of being heard to the assessee. The assessee is also directed to appear before the Assessing Officer and co-operate in finalizing the assessment proceedings. Grounds are allowed for statistical purposes.
12. In the result, the appeal is allowed for statistical purposes .
13. In so far as ITA No.2818/Del/2022 is concerned, this appeal is against the imposition of penalty under Section 271(1)(c) of the Act. Since, we have set aside the order of Commissioner (Appeals) in the quantum proceeding and restored the issues to the Assessing Officer for de novo adjudication, the penalty imposed under Section 271(1)(c) of the Act, at this stage, cannot survive, as, imposition of penalty under Section 271(1)(c) of the Act would depend upon the final outcome of the assessment proceedings.
14. In view of the aforesaid, we set aside the impugned order of learned Commissioner (Appeals) with a direction to the Assessing Officer to consider initiation of penalty proceedings, if warranted, depending upon the final outcome in the assessment proceedings.
15. In the result, both the appeals are allowed for statistical purposes.
Order pronounced in the open court on 16 .08.2023.