ITAT Quashes Ex-Parte Order in Real Estate Cash Deposit Case, Directs Fresh Hearing

The Income Tax Appellate Tribunal (ITAT) in Ahmedabad has set aside an ex-parte order issued by the Commissioner of Income Tax (Appeals) (CIT(A)) and remanded the matter for fresh consideration. The Tribunal held that the principles of natural justice were violated as the assessee’s submissions and the remand report were not considered adequately.

The appellant, Ghanshyambhai Nanalal Charandas, an individual engaged in the business of real estate, house property, and other sources of income, filed his return for the Assessment Year 2015-16, declaring an income of ₹6,31,710 along with agricultural income of ₹28,00,000.

The case was selected for limited scrutiny. However, the Assessing Officer (AO) completed the assessment under Section 143(3) of the Income Tax Act, 1961, determining the income at ₹1,70,11,619 by making additions of ₹88,60,909 as unexplained cash deposits and ₹75,19,000 as unexplained investments in land.

Aggrieved by this, the assessee filed an appeal before the CIT(A). Despite being granted eight opportunities, the appeal was dismissed ex-parte on December 29, 2023, confirming the AO’s additions. This led to the appeal being brought before the ITAT.

Represented by Anil Kshatriya, the assessee argued that the assessment order was invalid as the AO had exceeded the scope of limited scrutiny without the necessary approval for conversion into complete scrutiny. It was submitted that detailed written submissions had been filed before the CIT(A), who had called for a remand report from the AO in 2019. The AO submitted the remand report in July 2020.

However, after the case was migrated to the CIT(A), these documents were not considered, and the appeal was dismissed ex-parte. It was contended that due to a change in tax consultant, the assessee was unaware of the NFAC hearing dates, leading to non-appearance.

Represented by Nitin Vishnu Kulkarni, the Revenue submitted that the remand report dated July 23, 2020, was indeed on record. It was argued that the matter should be restored to the CIT(A) for proper adjudication on merits, rather than allowing the assessee’s appeal outright.

The Bench, comprising Judicial Member T.R. Senthil Kumar and Accountant Member Narendra Prasad Sinha, observed that the CIT(A) had dismissed the appeal without considering either the assessee’s written submissions or the remand report filed by the AO. Thus, the Tribunal held that this amounted to a violation of the principle of natural justice.

Accordingly, the matter was remanded back to the CIT(A), with a direction to adjudicate the case afresh on merits after granting the assessee proper opportunity of hearing. The Tribunal also directed the assessee to fully cooperate and file all relevant documents, with liberty to raise additional grounds.

Thus, the appeal of the assessee was allowed for statistical purposes.