Introduction: In the recent case of Ghanshyam Sagarmal Modi vs. ACIT, the Income Tax Appellate Tribunal (ITAT) Mumbai ruled in favor of the assessee, highlighting the justified non-appearance and quashing the assessment order made by the Assessing Officer (AO). The appeal was filed against the decision of the National Faceless Appeal Centre (NFAC) Delhi/CIT(A) under sections 143(3) and 250 of the Income Tax Act.
Detailed Analysis: The individual assessee, Ghanshyam Sagarmal Modi, filed an appeal against the order of the NFAC Delhi/CIT(A). The grounds of appeal included objections to the ex-parte order passed without providing adequate hearing opportunities to the appellant.
The AO, during the scrutiny under CASS, issued notices and questionnaires. The Ld. AR of the assessee complied with the notices, submitting details and participating in discussions. However, the AO, upon reviewing financial statements, found discrepancies in the information provided by the assessee regarding rental income and claimed expenditures.
The AO estimated additions under various heads, including income from house property and disallowance of expenses at 10%. The total income was assessed at Rs. 35,25,850/-. The appellant then filed an appeal before the CIT(A), who confirmed the AO’s actions due to non-compliance and dismissed the appeal.
During the hearing before ITAT Mumbai, the Ld.AR argued that the CIT(A) overlooked submissions made during assessment and that the non-appearance was due to the ongoing information collection process. The ITAT acknowledged that non-appearance could have various reasons and set aside the CIT(A)’s order.
The ITAT recognized the principles of natural justice and provided the assessee with another opportunity to present their case with evidence. The order of the CIT(A) was overturned, and the entire disputed issues were remitted to the CIT(A) for fresh adjudication.
Conclusion: The case of Ghanshyam Sagarmal Modi vs. ACIT serves as a reminder of the importance of providing adequate hearing opportunities and considering justifications for non-appearance. The ITAT Mumbai’s decision to quash the assessment order reinforces the principles of natural justice and ensures a fair opportunity for the assessee to present their case. Taxpayers are encouraged to cooperate and submit necessary information for a thorough and unbiased assessment process.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC) Delhi /CIT(A) passed u/sec143(3) and U/sec250 of the Act.The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the Appellant’s case and in law the Ld CIT(A) erred in passing an ex-parte order without providing an adequate opportunity of being heard to the appellant
2. On the facts and circumstances of the Appellant’s case and in law, the Id. CIT(A) erred in confirming the action of Ld AO in making addition of Rs. 14,49,440/-under the head Income from House Property by estimating minimum average rental value of flat nos. 401,501 and 601 as per para 5.1 of the impugned assessment order.
3. On the facts and circumstances of the Appellant’s case and in law, the IdCIT(A) erred in confirming the action of Ld AO in making an addition of Rs88,560/under the head Income from House Property by estimating minimum average rental value for Swastik Plaza Shop as per Para 5.2 of the impugned assessment order
4.On the facts and circumstances of the Appellant’s case and in law, the Id. CIT(A) erred in confirming the action of Id. AO in disallowing the sum of Rs. 21,380/- on ad-hoc basis being 10% of the total expenditure of Rs2,13.801/- as per para 6 of the impugned assessment order
5. The appellant craves leaves to alter amend withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearings
2. The brief facts of the case are that, the assessee is an individual and derives income from house property, business, capital gains and income from other sources. The assessee has filed the return of income for the A.Y 20 13-14 on 28.09.20 13 disclosing a total income of Rs.24,28,170/- and the return of income was processed u/sec 143(1) of the Act. Subsequently the case was selected for scrutiny under CASS and notice u/sec 143(2) and U/sec 142(1) of the Act along with questionnaire are issued. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and submitted the details and the case was discussed. The Assessing Officer (AO) on perusal of the financial statements and computation of income found that the assessee has received the rent from various tenants and has not disclosed the complete information. The A.O dealt on the facts and information at Para 5 & 5.2 of the order and has calculated the income from house property in respect of the flat Nos. 401, 501 & 601 aggregated to Rs.10,14,608/- and Annual rental value of shop of Rs.61,980/-.Further the AO found that the assessee has claimed expenditure under various heads in the profit and loss account and these expenses are not properly supported by the vouchers/bills and the A.O has estimated the disallowance@10% of the claim, which works out to Rs. 21,380/-.Finally the AO has assessed the total income of Rs.35,25,850/- and passed the order u/sec 143(3) of the Act dated 14.03.20 16.
3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, statement of facts and findings of the AO and has issued notices of hearing and since there was no compliance by the assessee to notices. Therefore the CIT(A) considering the information on record has confirmed the action of the A.O and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal.
4. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the action of the Assessing officer overlooking the submissions made in the assessment Further the assessee has a good case on merits and shall substantiate with the material evidences and prayed for an opportunity to explain before the lower authorities. Contra, the Ld. DR supported the order of the CIT(A).
5. We heard the rival submissions and perused the material on record. Prima-facie the CIT(A) has passed the order considering the fact that there is no appearance after seeking adjournment by the assessee in spite of providing adequate opportunity of hearing. Therefore, the CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and decided the appeal based on the information available on record and dismissed the appeal. The Ld.AR submissions are that the assessee was in the process of collecting the information and the non appearance before the appellate authority is not a wanton act. Whereas the assessee has raised grounds of appeal challenging the additions of the A.O and there could be various reasons for non appearance which cannot be overruled. Therefore, considering the principles of natural justice shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the entire disputed issues to the file of the CIT(A) to adjudicate afresh and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of the appeal. And we allow the grounds of appeal of the assessee for statistical purposes.
6. In the result, the appeal filed by assessee is allowed for statistical purposes.
Order pronounced in the open court on 20.11.2023