Ex-parte orders against NRI remanded to AO on cost as consultant failed to inform

Ex-parte orders against NRI remanded to AO on cost as consultant failed to inform

Issue

Whether an ex-parte best judgment assessment and a subsequent ex-parte appellate order can be set aside and remanded for fresh adjudication when the assessee, residing abroad, claims non-receipt of information due to the negligence of his tax consultant.

Facts

• The appeal pertains to the Assessment Year 2012-13 against an order passed by the Commissioner of Income Tax (Appeals) [CIT(A)], NFAC.

• The Assessing Officer (AO) had passed an ex-parte best judgment assessment order under Section 144 of the Income Tax Act.

• The First Appellate Authority [CIT(A)] also decided the appeal ex-parte without the assessee’s participation.

• The counsel for the assessee submitted that the assessee was residing abroad during the relevant period.

• Notices of hearing were allegedly served upon the assessee’s tax consultant, who failed to inform the assessee about the proceedings. Consequently, the assessee could not present his case before the lower authorities.

Decision

• The Income Tax Appellate Tribunal (ITAT) held that the interest of justice would be served by granting the assessee an opportunity to present his case before the AO.

• The Tribunal set aside the impugned order of the CIT(A).

• The matter was restored to the file of the Assessing Officer for a fresh decision.

• This relief was granted subject to the payment of a cost of Rs. 10,000/- by the assessee.

• The assessee is required to deposit this amount in the Prime Minister’s Relief Fund and furnish evidence/receipt of such deposit to the AO as a condition precedent for the fresh hearing.

• The appeal was treated as allowed for statistical purposes.

Key Takeaways

• Natural Justice Over Procedural Default: Courts and Tribunals generally prefer disputes to be adjudicated on merits rather than on technical defaults, especially when the assessee is prevented by “sufficient cause” (like being abroad or consultant’s negligence).

• Consultant’s Negligence: A taxpayer often cannot be penalized for the professional negligence or failure of their authorized representative to communicate notices.

• Conditional Remand: To balance the equities and penalize the delay/default, Tribunals have the power to impose costs on the assessee while restoring the case.

• Best Judgment Assessment (Section 144): Even a best judgment assessment is subject to judicial review and can be remanded if the assessee demonstrates they were not given a fair opportunity to be heard.

THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH
BENCH “SMC” CHANDIGARH

Shri Balwinder Pal Singh,
House No.2507, Phase-7,
Mohali.
Vs
The ITO,
Mohali.