ITAT Delhi Restores Best Judgment Assessment of Individual Assessee for Fresh Hearing

Background of the Case

The appeals were filed against orders passed by the National Faceless Appeal Centre under Sections 144 and 271(1)(c) of the Income-tax Act, 1961. The original assessment was completed under Section 144 (best judgment assessment), wherein the Assessing Officer estimated net profit at 4% of gross receipts. Before the first appellate authority as well, the assessee failed to appear or substantiate the grounds raised, apart from filing Form 35. The appeals before the ITAT were filed with delay. The assessee sought condonation by filing an affidavit explaining that his earlier counsel, who was entrusted with filing the appeal, had passed away during the COVID-19 period, resulting in the lapse.

Taking note of the explanation and considering that the assessee is an individual, the Tribunal held that sufficient cause had been shown and condoned the delay, admitting the appeals for adjudication.

Tribunal’s Observations

On merits, the Tribunal noted that the appellate order passed by the NFAC was silent on the manner in which an opportunity of hearing was granted to the assessee. The Bench observed that there was no discussion indicating whether notices were effectively served or whether the assessee was afforded a reasonable opportunity to present his case. The assessee’s counsel submitted that relevant documents, including details of creditors, debtors, bills and vouchers, were available but could not be produced earlier due to failure of effective representation. In view of the principles of natural justice, the Tribunal held that the matter required reconsideration. It set aside the impugned orders and restored the issues on merits to the file of the Assessing Officer with a direction to grant a fresh opportunity of hearing and pass a reasoned order in accordance with law.

The appeals were accordingly allowed for statistical purposes.