Facts of the Case

The assessee was subjected to assessment proceedings during which the Assessing Officer issued statutory notices seeking information and explanations. Due to alleged non-compliance or inadequate response, the assessment was completed ex-parte under best judgment provisions.

Substantial additions were made to the income, treating certain receipts / deposits as unexplained. The Commissioner of Income Tax (Appeals) upheld the assessment order.

Issues Involved

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

Petitioner’s (Assessee’s) Arguments

  • The assessment was framed without providing effective opportunity to explain the transactions.
  • The additions were made on assumptions without examining supporting evidence.
  • The assessee had valid explanations which could not be presented due to procedural circumstances.
  • The order violated principles of natural justice.

Respondent’s (Revenue’s) Arguments

  • Statutory notices were duly issued but not complied with.
  • In absence of satisfactory response, the Assessing Officer was justified in completing the assessment under Section 144.
  • The additions were based on available material on record.

Court Order / Findings (ITAT Decision)

The ITAT Allahabad Bench held:

  • Even in best judgment assessments, reasonable opportunity must be provided to the assessee.
  • Additions relating to unexplained income require proper examination of facts and evidence.
  • To meet the ends of justice, the matter warranted reconsideration by the Assessing Officer.

Accordingly, the Tribunal:

  • 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

  • Ex-parte assessments must still adhere to principles of fairness and due process.
  • Additions under Sections 69/69A require objective verification of source of funds.
  • Remand orders aim to ensure proper assessment and do not constitute relief on merits.

Link to download the order - https://itat.gov.in/public/files/upload/1611138446-343%20Alld%202018%20Mir%20Aslam.pdf

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