ITAT Sets Aside CIT(A)'s Ex Parte Order in Rs 1.78 Crore Bogus Derivative Loss Dispute After Finding Need for Fresh Hearing:

The ITAT Kolkata set aside the ex parte order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] in the case of Delta International Ltd for Assessment Year 2015-16 and restored the matter to the CIT(A) for fresh adjudication on merits after providing a reasonable opportunity of being heard to the assessee.

Delta International Limited (assessee) had declared Nil (Zero) income for the Assessment Year 2015-16. The assessee's case was reopened under Section 148 of the Income Tax Act, 1961, based on information regarding alleged fictitious losses booked through coordinated trading in illiquid stock options on the Bombay Stock Exchange (BSE).

During the assessment proceedings, the AO observed that the assessee had claimed a bogus derivative loss of Rs 1.78 crore. Due to non-compliance by the assessee, the AO passed an ex parte assessment order under Section 147 read with Section 144B. The AO added Rs 1.77 crore under Section 68 as unexplained income and Rs 3.55 lakh under Section 69C towards unexplained commission expenditure, determining the total income at Rs 1.81 crore.

The assessee, being dissatisfied with the aforementioned additions, challenged the same before the Commissioner of Income Tax (Appeals) [CIT(A)]. However, even after the grant of multiple opportunities, the assessee remained non-compliant. Consequently, the CIT(A) passed an ex parte order without considering the case on its merits and sustained the impugned additions made by the AO.

Thereafter, the assessee approached the Income Tax Appellate Tribunal (ITAT), contending that both the lower authorities, i.e., the AO and the CIT(A), had passed an ex parte order without considering the merits of the case. Thus, the assessee requested the Tribunal to grant one more opportunity to present its case. The tax authorities did not oppose this request of the assessee.

After considering the submissions, the Tribunal observed that the assessee had not properly complied with the proceedings before either authority. However, in the interest of justice, it decided to restore the appeal to the CIT(A) for fresh consideration of all grounds on merits through a speaking order.

The first appellate authority has been instructed to grant the assessee a proper opportunity of hearing and thereafter pass a reasoned order. Further, the assessee has been directed to avoid unnecessary adjournments and follow Rule 46A of the Income Tax Rules, 1962. Accordingly, the appeal was partly allowed for statistical purposes.