Case Law Details
Badrinath Shreenivas Vs ITO (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT), Ahmedabad, has set aside the assessment order against Badrinath Shreenivas for the Assessment Year 2011-12. The case involved the addition of unexplained deposits and income, totaling ₹24,30,980, under Sections 69 and 144 read with 147 of the Income Tax Act, 1961. The tribunal ruled that the assessment was flawed due to the failure to serve notices at the correct address, denying the assessee a fair opportunity to present evidence.
The Assessing Officer (AO) initiated reassessment proceedings after detecting time deposits of ₹9,07,102 in the assessee’s bank account and receipts of ₹15,23,878, as per Form 26AS. Notices were sent under Section 148, but the assessee claimed he never received them. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the assessment, arguing that notices were sent to the address linked to the PAN. The CIT(A) also rejected additional evidence submitted by the assessee under Rule 46A, stating that it was not presented during the assessment stage.
The ITAT, however, emphasized that procedural compliance must align with the principles of natural justice. It noted that the assessee provided bank statements and supporting documents explaining the source of funds but was denied consideration due to strict adherence to procedural rules. Citing judicial precedents that stress fair opportunity in tax proceedings, the tribunal directed the CIT(A) to admit and evaluate the additional evidence. The case was remanded for fresh adjudication, with instructions to allow the assessee a fair hearing.
This ruling underscores the importance of proper notice service in tax assessments. The ITAT’s decision ensures that taxpayers are granted the opportunity to present their case before adverse tax liabilities are confirmed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal filed by the Assessee is directed against the order dated 16/02/2024 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] for the Assessment Year (AY) 2011-12 arising from the assessment order dated 12/12/2018 passed by the Assessing Officer (hereinafter referred to as “AO”) u/s. 144 r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The assessee has raised the following grounds of appeal:
“1. On the facts and circumstances of the case, the order of the Hon’ble CIT (Appeals) is erroneous and against the provisions of the Income Tax Act and Prejudicial to the Appellant.
2. that on facts and in law, the learned CIT(A) has grievously erred in not admitting the additional evidence filed in terms of Rule 46A of the IT Rules, even after calling for a Remand Report from the AO.
3. that on facts, and in law, the learned CIT(A) has grievously erred in rejecting the additional evidence produced before the Hon’ble CIT(A).
4. Further erred in not considering the evidence filed before him before adjudicating the appeal of the appellant notwithstanding the fact that the Ld. A.O. had made the income as unexplained without confronting the precise queries and without granting adequate opportunity.
5. The Hon’ble CIT(A) failed to appreciate the fact that, the appellant was totally ignorant of the assessment proceedings, and he has neither received any notice nor there is documentary proof that the notice was served legally.
6. the Hon’ble CIT(A) failed to appreciate the fact that, appellant had not created Login ID in the income tax department website. No notice was served even by electronic mode.
7. The Hon’ble CIT(A) erred in passing the order u/s 250 by mentioning wrong address of the appellant.
8. The Hon’ble CIT(A) failed to evaluate the additional evidence like voter Id, Aadhar card and Gas connection submitted during the personal hearings.
The Appellant prays to consider his submissions before passing the order in this appeal to meet ends of justice and erase the tax demand assessed by the Learned Assessing Officer.
Among and other grounds that would be urged at the time of hearing the appellant craves leave to amend, alter, delete such grounds, and add such additional grounds, adduce, and explain such additional evidence as facts and circumstances of the appellant’s case.
The appellant humbly submits that the appeal be admitted, and the matter be adjudicated in fair and judicious manner and opportunity of being heard be afforded to meet the ends of justice.
PAYER
The Appellant prays that the addition of tax liability deleted.”
3. At the outset, it is noted that there is a delay of 23 days on the part of the assessee in filing the appeal before the Tribunal. In this regard, the assessee has filed an Affidavit seeking condonation of the said delay on medical grounds.
3.1. Keeping in view the reason given by the assessee in his application for condonation of delay, we are satisfied that there was reasonable and sufficient cause for the delay of 23 days on the part of the assessee in filing the appeal before the Tribunal and even learned Departmental Representative (DR) has not raised any material objection in this regard. We, therefore, in the interest of justice, condone the said delay and proceed to adjudicate the appeal.
4. The brief facts of the case are that the assessee did not file his return of income for AY 2011-12. The AO was in possession of information that during the year under consideration, the assessee has made time deposits with Indian Bank to the tune of Rs.9,07,102/- and as per 26-AS total receipt of the assessee was of Rs.15,23,878/-. On the basis of this information, the notice u/s 148 of the Act was issued to the assessee after obtaining necessary approval. In response, the assessee failed to reply and file the return of income. The AO provided various opportunities to the assessee by issuing notices u/s 142(1) of the Act, but there was no reply from the assessee. The AO assessed the total income at Rs.24,30,980/- by passing order u/s.144 r.w.s.147 of the Act. The AO added Rs.9,07,102/- as unexplained investment u/s 69 of the Act and Rs.15,23,878/- as unexplained income. The assessee also filed an application for rectification u/s 154 of the Act, which led to partial rectification, granting 30% standard deduction u/s 24(a) of the Act for rent income and credit for TDS amounting to ₹1,52,378/-. The assessed income post-rectification was reduced to ₹20,70,980/-.
5. The assessee preferred an appeal before the CIT(A). The assessee contended that notices were sent to an incorrect address. However, CIT(A) concluded that the Notices were sent to the PAN address as per records and updating the address in the PAN database was the appellant’s responsibility. On the ignorance of assessee, the CIT(A) concluded that assessee’s submission of a rectification application under Section 154 of the Act indicated awareness of the assessment, contradicting the claim of ignorance. During appellate proceedings, the assessee argued that the deposit represented Rs.4,07,102/- from maturity proceeds of an earlier fixed deposit made in F.Y. 2007-08 and Rs.5,00,000/- as refundable deposit from a tenant. The CIT(A) upheld the addition concluding that no evidence or supporting documents (FD maturity receipts or rental agreements) were provided during the assessment proceedings. The assessee provided a break-up of the addition of Rs.15,23,878/- as –
- 12,00,000/- as rent income.
- 3,23,878/- as commission income.
5.1. The CIT(A) allowed standard deduction of 30% of Rental income u/s 24(a) of the Act, but denied expenses against commission for want of evidence.
6. Dissatisfied with the order of the CIT(A), now the assessee is in appeal before us.
7. During the course of hearing before us, the Ld. Counsel for the assessee submitted that notices were not served at the correct address as the notices were sent to an outdated address (Vadodara) from the PAN database. The Ld. Counsel also stated that no notice of proceedings was served and, thus, the assessee could not respond to or defend his case during the assessment and appellate stages. The Ld. Counsel further contended that the deposit in bank represented the maturity proceeds of an earlier deposit made in FY 2007-08 and Bank statements were submitted as additional evidence to substantiate this claim however the same was not considered by the CIT(A).
8. On the other hand, the Ld. DR relied on the orders of the authorities below.
9. We have heard the rival submissions, examined the material available on record, and carefully considered the contentions raised by both parties. It is noted that the assessee has produced additional evidence during the appellate proceedings before the CIT(A), which includes bank statements substantiating the maturity of earlier fixed deposits and documents explaining the nature of income reported in Form 26AS. These pieces of evidence, crucial for determining the assessee’s claims, were not admitted by the CIT(A) on procedural grounds under Rule 46A of the Income Tax Rules, 1962. However, the reasons furnished by the assessee for not producing the evidence during the assessment proceedings, including the claim of non-receipt of notice due to outdated address and the lack of login credentials on the Income Tax Portal, indicate that there was sufficient cause for the delay in submission.
9.1. The principles of natural justice require that a taxpayer should not be denied an opportunity to present relevant evidence, especially when such evidence has a material bearing on the outcome of the case. The procedural requirements under Rule 46A must be harmonized with the need to ensure substantive justice. In this context, we find that the additional evidence submitted by the assessee is directly relevant to the issues in dispute and should have been considered by the CIT(A) after affording the AO an opportunity to examine the same.
9.2. In the interest of justice, we deem it appropriate to restore the matter to the file of the CIT(A) with a direction to admit and evaluate the additional evidence submitted by the assessee, including the bank statements and other documents. The CIT(A) shall provide the AO with a reasonable opportunity to examine the additional evidence and submit a remand report. Thereafter, the CIT(A) shall adjudicate the appeal afresh on merits after considering the submissions and evidence produced by the assessee.
9.3. In light of the foregoing, the order of the CIT(A) for Assessment Year 2011-12 is set aside and the matter is remanded to the file of the CIT(A) for a fresh adjudication on merits. The CIT(A) is directed to grant the assessee a reasonable opportunity of being heard and to duly consider all submissions and evidence submitted during the fresh appellate proceedings. The assessee is directed to fully co-operate with the proceedings and comply with all notices issued by the CIT(A). Any failure to do so, may result in adverse consequences, including an ex-parte decision.
10. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 13th December, 2024 at Ahmedabad.
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