ITAT Grants Fresh Hearing Despite Repeated Non-Compliance, Imposes Rs 15,000 Cost

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has given relief to assessee Shri Ayyadurai Adaikalam by setting aside the orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2016-17, 2017-18 and 2018-19. The Tribunal has restored all three matters to the Assessing Officer (AO) for fresh examination after imposing a cost of Rs 5,000 for each assessment year, totalling Rs 15,000.

The assessee is engaged in the business of procuring orders for fireworks on a commission basis. He neither filed his income tax returns nor replied to the notices issued by the AO during the course of assessment proceedings. Accordingly, the AO made best judgment assessment and treated the cash deposits in his bank account as unexplained money u/s. 69A of the Income Tax Act.

The first appellate authority also dismissed the appeals ex parte as the assessee did not respond to repeated notices. Thus the additions made by the AO were confirmed.

The counsel for the assessee argued before the Tribunal that the taxpayer’s educational background is limited and he was not aware of the legal requirements. This lack of understanding made him unable to reply to the notices issued by the Assessing Officer or the appellate authority. The counsel also submitted that the assessee now had necessary documents to explain the source of cash deposits and prayed for one last opportunity to present the evidence before the AO. He also assured the Tribunal that the assessee shall fully cooperate in the fresh proceedings.

The DR opposed the application on the basis that there had been sufficient opportunities throughout the assessment and appellate stages. According to the Revenue, there was no violation of the principles of natural justice, and therefore the appeals should be dismissed.

The Tribunal noted that the assessee did not appear before it during the assessment proceedings or during the first appellate proceedings and therefore, the additions were upheld. But it accepted the explanation of the assessee that non-compliance was due to his limited education and lack of awareness and said he now claims to have documentary evidence explaining the cash deposits.

In the interest of justice and fair play, the Tribunal decided to grant the assessee one more opportunity. It restored all three matters to the file of the Assessing Officer for fresh adjudication, subject to the condition that the assessee pays Rs 15,000 to the Tamil Nadu State Legal Services Authority within one month of receiving the order and submits proof of payment before the AO.

The Tribunal also directed the Assessing Officer to provide the assessee with a reasonable opportunity of being heard. It also directed the assessee to fully co-operate in the proceedings, produce all relevant documents and evidence and avoid seeking unnecessary adjournments.

Accordingly, the Tribunal allowed all three appeals for statistical purposes and remanded the cases to the AO for fresh consideration.