Facts of the Case
The appellant filed return of income for the Assessment Year 2002-03. An assessment was completed under section 143(3) on 28.03.2005 at an income of Rs. 10,94,330/-. The assessment was re-opened under section 147 and the assessment was completed under section 143(3) read with section 147 on 07.12.2009, accepting the returned income. The Assessing Officer inadvertently omitted to include the additions made in the original assessment proceedings of Rs. 8,29,600/- out of commission payment. The Assessing Officer issued notice under section 154 on 13.05.2010 proposing to amend the assessment order dated 07.12.2009. No reply was filed by the appellant on the specified date of hearing, which was 20.05.2010. The Assessing Officer accordingly, rectified the mistake vide order under section 154 dated 24.05.2010, and assessed the total income at Rs. 10,94,330/- as was assessed in the original assessment order under section 143(3) dated 28.03.2005.
Question of Law
Whether passing of an ex-parte order without giving chance of hearing to Assessee constitute the violation of Natural Justice?
Contention of the Assessee
The Assessee contended that the AO has failed to comply with the directions of the ld. CIT(A) to verify the justification of the payment of commission after opportunity to the assessee. The AO made additions during original assessment proceedings u/s 143(3) of the Act amounting to Rs.8,29,600 being commission paid. Further the issue of impugned addition was agitated before the first appellate authority during appeal against the order u/s 143(3) of the Act but the same was dismissed without any adjudication on merits simply holding that the original assessment was reopened and reassessment has been made, as such the original assessment and appeal against that order u/s 143(3) of the Act does not survive and has become infructuous. The AO did not make any disallowance or addition in this regard and completed the reassessment u/s 147/143(3) of the Act on 7.12.2009 at the returned income but subsequently without any valid reason, the AO issued a notice u/s 154 of the Act to the assessee, showing his intention to rectify the reassessment order dated 7.12.2009. The said notice was given to the assessee on 13.5.2010 fixing the case for hearing on 20.5.2010 but on the said date of hearing, the AO marked absent of the assessee and passed an ex parte order without affording due opportunity of hearing for the assessee in a hasty manner without any justified reason and violating principles of natural justice.
Contention of the Revenue
When reassessment proceedings were started and ended by passing a reassessment order u/s 147/143(3) of the Act, then original assessment order passed u/s 143(3) of the Act and appeal against that order does not survive for adjudication and the same was correctly dismissed by the CIT(A). Further the reassessment proceedings were completed without making any addition on account of impugned commission amount but this was a mistake apparent from record which was rightly rectified by the AO by passing order dated 24.5.2010 u/s 154/147 of the Act supporting the impugned order of the CIT(A). The AO did not refer to the original records before completing the reassessment u/s 147 of the Act and the counsel of the assessee never brought the assessment order u/s 143(3) of the Act dated 28.3.2005 to the attention of the AO, further, the AO was quite justified and correct in rectifying the reassessment order and appeal was rightly dismissed by the CIT(A).
Held by the Tribunal
The Hon’ble Tribunal was of the view that the AO passed rectification order ex parte without affording due opportunity of hearing for the assessee as from the rectification order. The rectification order passed in a hasty manner is clearly against the principles of natural justice. The ground of assessee pertaining to disallowance of commission was not adjudicated on merits. In this situation, Hon’ble Tribunal held that the issue requires proper adjudication at the level of the AO after affording due opportunity of hearing for the assessee. Hence, rectification order as well as impugned order of CIT(A) dated 28.2.2013 was set aside and the issue of claim of the assessee of Rs.8,29,600 being commission paid is restored to the file of AO for a proper and fresh adjudication.