ITAT Sets Aside Rs 92.67 Crore Income Tax Addition for Violation of Natural Justice

The ITAT Kolkata condoned the delay of 58 days in filing the appeal, holding that the non-compliance was not the fault of the assessee but due to the careless behaviour of the tax consultant. The case is sent back to the tax authorities for fresh consideration, noting a violation of the principles of natural justice.

Addhya Forex (P) Limited had challenged an order dated September 30, 2024, passed by the CIT(A) under Section 250 of the Income Tax Act, 1961, for the Assessment Year 2016-17. The appeal before the tribunal was time-barred by 58 days. The assessee explained that it was not aware of the case proceedings before the CIT(A) and hence could not respond to the associated notices and orders because of the negligence of this tax consultant. It came to know about the impugned order in January 2025, and thus requested the condonation of the delay before the ITAT Kolkata. The tribunal found the explained reason genuine; hence, it condoned the delay.

The assessee had initially declared an income of Rs 2.40 lakh in its income tax return (ITR) for the Assessment Year 2016-17. The case was later reopened by the tax authorities. However, due to non-compliance and non-submission of relevant documentary evidence by the assessee, the tax authorities treated the bank credits of about Rs 92.67 crore as unexplained money under Section 69A and made an addition of the entire amount to the assessee’s income. When approached, the CIT(A) dismissed the appeal, considering continuous non-compliance by the assessee.

Thereafter, the assessee filed an appeal before the ITAT Kolkata, claiming that a survey was carried out on 19.05.2023, on the basis of which reassessment proceedings were initiated. However, the case was not properly represented before the lower authorities (AO) nor even before the CIT(A) on account of miscommunication between the assessee and the tax consultant. Therefore, it requested the tribunal to grant it another opportunity to explain its side and remand the matter back to the tax authorities.

The tribunal had noted “the submissions made and the documents filed. Since no compliance was made before the Ld. AO as well as before the Ld. CIT(A) and both the orders are in effect ex parte orders; therefore, in the interest of justice and fair play it was considered that the request of the assessee to set aside the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) and remit the matter back to the Ld. AO for making the reassessment de novo.”

When the tribunal analysed the case, it noted that both the assessment and appellate orders were passed without granting the assessee a proper opportunity of hearing, which explicitly reflects a violation of the principles of natural justice. Considering the same, the tribunal quashed the impugned order dated September 30, 2024, and remanded the case to the tax authorities for fresh adjudication. As a result, the appeal was partly allowed for statistical purposes.