ITAT Remands All Income Tax Additions for Fresh Assessment After Denying Assessee Opportunity of Hearing:

The assessee is an individual engaged in the wholesale and retail business of steel as a proprietor, filed his income tax return for Assessment Year 2023-24 on 31 December 2023, declaring a total income of Rs 45,02,140. The return was selected for scrutiny due to the low net profit reported by the assessee. Subsequently, the AO issued a notice under Section 143(2) of the Income Tax Act, 1961, and completed the assessment under Section 143(3) read with Section 144B of the Act.

During the assessment proceedings, the AO noticed that the sales reported in the profit and loss account amounted to Rs 42,12,76,694, whereas the turnover disclosed in the GST returns was Rs 42,26,27,431. Accordingly, the difference of Rs 13,50,737 was treated as suppressed sales and added to the assessee's income. Since the assessee failed to furnish the requisite information in response to the show-cause notice, the AO made the aforesaid additions and disallowances aggregating to Rs 48,62,581 and assessed the total income at Rs 93,64,721.

The CIT(A), observing that the assessee had neither rebutted the assessment findings nor demonstrated an intention to prosecute the appeal, dismissed the appeal and upheld the additions made by the AO.

After considering the rival submissions and examining the records, the Tribunal observed that the assessment had been completed ex parte due to the assessee's failure to respond to the show-cause notice. The CIT(A) had also dismissed the appeal on the ground of non-prosecution without examining the issues on merits. The Tribunal specifically noted that the assessee's request for adjournment before the CIT(A) had neither been expressly accepted nor rejected, and the appellate order was passed immediately thereafter. In such circumstances, the CIT(A) ought to have provided another opportunity of hearing while cautioning the assessee that the appeal would otherwise be decided on the basis of the available material.

The Tribunal emphasised that the assessee had not received an effective opportunity of hearing before either the AO or the CIT(A). It also took note of the detailed 146-page paper book filed before it, which addressed the various additions and disallowances made during assessment proceedings. Accordingly, the Tribunal restored the entire appeal to the file of the AO for fresh consideration. The AO was directed to examine the material and adjudicate all the issues in accordance with law after providing the assessee an adequate opportunity of hearing.