Reassessment Order Quashed and Remanded: ITAT Sets Aside Ex-Parte Decision on Unexplained Property Investment

Reassessment Order Quashed and Remanded: ITAT Sets Aside Ex-Parte Decision on Unexplained Property Investment

1. The Core Issue

The assessee challenged a reassessment order where an addition of ₹67,60,000 was made under Section 69 of the Income Tax Act. The addition was based on alleged unexplained investments made in the purchase of a property during the financial year 2013-14.

2. Procedural Hurdles

• Condonation of Delay: The appeal was filed with a delay of 119 days. The assessee submitted an affidavit explaining the reasons for the delay. The Tribunal, noting no objection from the Departmental Representative (DR), condoned the delay and proceeded to hear the case on its merits.

• Lack of Natural Justice: The primary grievance was that both the Assessing Officer (AO) and the CIT(Appeals) passed ex-parte orders. The assessee argued that they were never afforded a reasonable opportunity to be heard or to submit necessary evidence to explain the property transaction.

3. The Tribunal’s Findings

The ITAT Chandigarh Bench (represented by Shri Krinwant Sahay, AM) observed significant procedural lapses in the lower authorities’ handling of the case:

1. Ex-Parte Assessment: The AO concluded the reassessment under Section 148 without the assessee’s participation, leading to the high-value addition based on a “best judgment” scenario.

2. CIT(A) Failed to Rule on Merits: The Tribunal noted that the National Faceless Appeal Centre (NFAC) confirmed the AO’s order without a substantive finding on the merits. Even in an ex-parte situation, the CIT(A) is legally required to analyze the material on record and pass a reasoned order under Section 250.

3. Remand for Fresh Adjudication: The Bench held that the “element of natural justice” was violated. It is essential for the taxpayer to have an opportunity to provide a “source of investment” for the property purchase.

4. Final Decision

The Tribunal set aside the order of the CIT(A) and remanded (restored) the case to the file of the CIT(A) for fresh adjudication.

• Fresh Opportunity: The CIT(A) is directed to provide the assessee with a proper opportunity to present her case and furnish bank statements, sale deeds, or other evidence.

• Assessee’s Duty: The assessee is directed to cooperate with the NFAC and not contribute to any further delays.

• Outcome: The appeal is allowed for statistical purposes.

Key Takeaways for Taxpayers

• Ex-Parte Orders are Challengeable: If an order is passed against you without a hearing, the ITAT frequently sends the case back to ensure you get a fair chance to present your side.

• Explain the Source: For additions under Section 69 (Unexplained Investment), the burden of proof is on the taxpayer to show that the funds used for property purchases came from tax-paid income, gifts, or loans.

• Condonation of Delay: If you miss an appeal deadline, ensure you provide a valid affidavit. Courts are generally lenient if the delay is not intentional and the stakes are high.