Facts of the Case

The assessee was subjected to assessment proceedings in which the Assessing Officer issued statutory notices seeking details and explanations regarding certain financial transactions, including deposits and income disclosures. Due to alleged non-compliance or inadequate response, the assessment was completed ex-parte under best judgment provisions.

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 granting effective opportunity to present explanations and supporting evidence.
  • The additions were made on assumptions without examining the true nature of the transactions.
  • 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 response, 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)

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 supporting evidence.
  • To meet the ends of justice, the matter required 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 comply with principles of fairness and natural justice.
  • Additions under Sections 69/69A require objective verification of the source of funds.
  • Remand orders ensure fair reassessment and do not constitute relief on merits.

Link to download the order - https://itat.gov.in/public/files/upload/1611138687-104%20Alld%202019%20Mohd%20Saleem.pdf

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