ITAT quashes Ex-parte Order due to Non-Service of Notice, grants Assessee Opportunity of Hearing

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The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) recently quashed an ex-parte order due to the non-service of notice and granted the assessee the opportunity of hearing.

The assessee Stanton Capital (India) P Ltd. did not file a return for the Assessment Year 2011-12 and did not respond to notices from the assessing officer. The officer ultimately proceeded to frame an assessment under section 144 of the Act based on available records, which showed unexplained credits of Rs.2,98,56,934/- in the assessee’s account with HSBC Bank.

The assessing officer obtained bank statements and sought explanations from the assessee, but not received any response. As a result, the cash credit was treated as unexplained income and added to the total income of the assessee, and an ex-parte assessment order was passed.

This order was challenged before the CIT (A). The grounds raised by the counsel for the assessee were that no proper opportunity of hearing was provided to the assessee, and that the assessing officer had no jurisdiction over the assessee.

Additionally, the impugned addition of Rs. 2,98,56,934/- on account of alleged cash credit was deemed wrong, particularly when the assessing officer had not given any allowance in respect of the expenses shown in the bank statement.

The CIT(A) dismissed all the grounds raised by the assessee. The assessee filed an appeal before the Tribunal 42 days after the deadline, which made it barred by limitation to that extent. They filed an application for condonation of delay, citing the director’s criminal proceedings and imprisonment as the reason for the delay. The assessee requested that the delay be condoned since it was beyond their control. The revenue’s counsel objected to the condonation of delay.

The tribunal allowed the assessee’s request to condone the delay of 42 days in filing their appeal before the Tribunal. The delay was due to multiple proceedings against the director of the assessee-company, who was responsible for submitting the appeal, and the tribunal found this to be a reasonable explanation for the delay.

The counsel for the assessee raised objections against the validity of the assessment framed under section 147 of the Act. They argued that there was no satisfaction of the assessing officer and no live link between possession of the information with the AO and the belief of escapement of income.

 Furthermore, the reasons were recorded without any application of mind, and the assessing officer had mentioned escapement of income for Assessment Year 2010-11 in the reasons recorded while jurisdiction for reopening was assumed for Assessment Year 2011-12.

The assessing officer had only possessed information about one bank account despite mentioning two, and there was no service of notice under section 148 on the assessee. The service of notice was also not in accordance with Section 282 of the Act read with Rule 127 of IT Rules.

The tribunal bench consisting of Vice-President Shri Rajpal Yadav, and the accountant member Smt. Annapurna Gupta observed that the assessee did not receive an adequate opportunity to present its defense and supporting evidence to challenge the validity of the revenue authorities’ actions.

It was further observed that the notices were not served in the proper manner, and the assessing officer did not obtain the necessary approval before issuing them, indicating a lack of applied mind.

The assessee should be given a proper opportunity to be heard and submit supporting documents. As a result, the appeal of the assessee was allowed for statistical purposes.To Read the full text of the Order CLICK HERE

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Stanton Capital (India) P Ltd. vs ITO


Counsel for Appellant:   Shri Anil Shah

Counsel for Respondent:   Shri Atul Pandey

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