ITAT Remands Rs 4.90 Crore Depreciation Dispute to CIT(A) for Fresh Adjudication, Citing Natural Justice Concerns and Need for Further Opportunity:

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has sent back a tax dispute involving Monnet Ispat & Energy Ltd. to the Commissioner of Income Tax (Appeals) for fresh consideration.

The case relates to Assessment Year 2012-13 and concerns a disputed depreciation claim of Rs 4.90 crore. The Assessing Officer had originally disallowed Rs 6.07 crore, alleging that the company had claimed depreciation on fixed assets that were not actually purchased.

The tax department's case arose from a search and seizure operation conducted in November 2010 at the residential premises of A.K. Jain. According to the assessment order, documents found during the search indicated that certain fixed-asset purchases shown in the company's books were not genuine. The department therefore treated the transactions as sham and disallowed depreciation claimed on those assets.

The company challenged the addition before the CIT(A). The appellate authority examined a reconciliation submitted by the company and reduced the disallowance from Rs 6.07 crore to Rs 4.90 crore.

The company then approached the ITAT, arguing, among other things, that the assessment violated the principles of natural justice. It contended that material seized from third parties and statements recorded during the search had been used against it without giving the company a proper opportunity to respond or cross-examine the persons concerned.

The matter had earlier been dismissed by the ITAT in September 2021 because of an order relating to insolvency proceedings and a moratorium under the Insolvency and Bankruptcy Code. The Tribunal subsequently recalled that order in January 2026, allowing the present appeal to be heard again.

After hearing the department's representative and examining the record, the ITAT noted that the CIT(A) had accepted the company's reconciliation. However, the Tribunal also found substance in the company's grievance regarding the opportunity to present its case.

The Tribunal observed that, in the interest of natural justice, the CIT(A) should have given the assessee a further opportunity to present its case.

The ITAT therefore set aside the issue and sent it back to the CIT(A) for fresh adjudication. The CIT(A) has been directed to give the company three effective opportunities to present its case and submit the necessary documents and evidence.

The Tribunal also directed the company to make use of these opportunities and furnish the required material.

As a result, the appeal was allowed for statistical purposes.