Facts of the Case

The assessee, a business concern, was subjected to assessment proceedings during which the Assessing Officer issued statutory notices seeking details and supporting documents. Due to alleged non-compliance or insufficient response, the assessment was completed ex-parte under best judgment provisions.

Additions were made to the returned income based on material available on record. The first appellate authority upheld the assessment order.

Issues Involved

  1. Whether additions made in an ex-parte assessment without proper verification are sustainable.
  2. Whether the assessee was denied reasonable opportunity of being heard.

Petitioner’s (Assessee’s) Arguments

  • The assessment was completed without granting effective opportunity to produce evidence.
  • The additions were made on assumptions without proper examination of books and records.
  • The assessee had valid explanations which could not be furnished earlier due to circumstances beyond control.
  • The order violated principles of natural justice.

Respondent’s (Revenue’s) Arguments

  • Statutory notices were duly issued but not complied with by the assessee.
  • In absence of satisfactory explanation, the Assessing Officer was justified in completing the assessment under Section 144.
  • The additions were based on available material and within statutory authority.

Court Order / Findings (ITAT Decision)

  • Even in best judgment assessments, reasonable opportunity must be provided to the assessee.
  • Proper adjudication requires verification of facts and examination of evidence.
  • Additions made without adequate inquiry and opportunity cannot be sustained.
  • Set aside the orders of the lower authorities on the disputed issues
  • Remanded the matter to the Assessing Officer for fresh adjudication
  • Directed that adequate opportunity of hearing be granted to the assessee

Important Clarification

  • Best judgment assessments must conform to principles of fairness and due process.
  • Additions cannot be sustained solely on the basis of non-compliance without substantive verification.
  • Remand orders aim to ensure proper assessment and do not grant relief on merits.

Link to download the order - https://itat.gov.in/public/files/upload/1611138554-102%20Alld%202019%20S.%20Lal%20Enterprises.pdf

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