The Income Tax Appellate Tribunal, Ranchi, has reaffirmed that denial of a reasonable opportunity to be heard vitiates any order under tax law, regardless of the merits of the claim. In a significant ruling, the Tribunal restored two assessment proceedings to the Assessing Officer while imposing costs on the assessee for its failure to cooperate during earlier stages.
Background & Facts
The Dispute
The appeals before the Tribunal arise from orders passed by the Commissioner of Income Tax (Appeals), Patna-3, dismissing the assessee’s appeals for Assessment Years 2008-09 and 2012-13. The assessee, Rungta Projects Limited, challenged the orders of the Assessing Officer which had rejected its claims for deductions and adjustments, alleging that it was denied a fair opportunity to present its case.
Key Facts
- The assessee filed appeals before the CIT(A) for both A.Y. 2008-09 and 2012-13
- The Assessing Officer passed orders dismissing the assessee’s submissions without recording any evidence or granting a personal hearing
- The CIT(A) upheld these orders without requiring the assessee to produce documents or explain its position
- The assessee had received notices from the Assessing Officer but did not respond substantively or appear before the authorities
- The assessee’s representative admitted before the Tribunal that there was a lack of cooperation during the assessment proceedings
- No documents supporting the assessee’s claims were filed before the Assessing Officer or the CIT(A)
Procedural History
- 2010-2011: Assessment proceedings initiated for A.Y. 2008-09
- 2013-2014: Assessment proceedings initiated for A.Y. 2012-13
- 2014-2015: Appeal filed before CIT(A), Patna-3 against order for A.Y. 2008-09
- 2015-2016: Appeal filed before CIT(A), Patna-3 against order for A.Y. 2012-13
- 08/08/2025: CIT(A) dismissed both appeals ex-parte, citing non-production of evidence
- 23/04/2026: Appeals filed before ITAT Ranchi (ITA No. 337 & 338/Ran/2025)
The Parties' Positions
The assessee contended that the Assessing Officer and CIT(A) acted arbitrarily by dismissing appeals without granting a hearing, violating the principles of natural justice. It sought restoration of the appeals to allow submission of documentary evidence.
The Revenue argued that the assessee had ample opportunity to produce documents but failed to do so, and that the lower authorities were justified in dismissing the appeals on grounds of non-cooperation.
Relief Sought
The assessee sought:
- Setting aside of the CIT(A) orders dated 08/08/2025
- Restoration of both appeals to the file of the Assessing Officer for fresh adjudication
- Opportunity to produce evidence and substantiate claims
The Revenue opposed restoration and sought imposition of exemplary costs if the matter were remanded.
The Legal Issue
The central question was whether an order passed by the Assessing Officer and upheld by the CIT(A) without providing the assessee a reasonable opportunity of hearing violates the principles of natural justice, and whether such a defect can be cured by restoration of proceedings with imposition of costs.
Arguments Presented
For the Appellant/Petitioner
The assessee’s representative argued that the right to be heard is a fundamental aspect of natural justice under Article 14 of the Constitution and Section 127 of the Income Tax Act, 1961. He submitted that the Assessing Officer had issued notices but failed to record any statement or allow the assessee to present documents. The CIT(A) did not examine whether the assessee had been given a fair chance to respond. The Tribunal, he urged, must restore the matter to ensure procedural fairness.
For the Respondent/State
The Revenue contended that the assessee had been given multiple opportunities to file documents and respond to notices but chose not to. The failure to cooperate, it argued, cannot be rewarded by restoration. The Revenue supported the CIT(A)’s decision to dismiss the appeals on merits due to non-production of evidence and opposed any remand unless costs were imposed.
The Court's Analysis
The Tribunal acknowledged that while the assessee had not produced evidence, the absence of a hearing before the Assessing Officer and the CIT(A) rendered the orders legally unsustainable. The Tribunal emphasized that the principle of audi alteram partem is not contingent upon the strength of the claim but on the process followed.
"The right to be heard is not a mere formality; it is a substantive right that must be afforded even when the claim appears weak on the face of it."
The Tribunal noted that the assessee’s non-cooperation was admitted by its own representative, which justified the imposition of costs. However, it held that the denial of hearing could not be condoned merely because the assessee was dilatory. The interests of justice required that the matter be restored to allow the assessee to present its case, provided it was penalized for its past conduct.
The Tribunal distinguished this from cases where the assessee had actively participated but failed on merits. Here, the process itself was flawed. The Tribunal held that restoration was the only remedy consistent with natural justice, but costs were necessary to deter future non-cooperation.
The Verdict
The appeals were partly allowed for statistical purposes. The orders of the CIT(A) dated 08/08/2025 were set aside. The matters were restored to the file of the Jurisdictional Assessing Officer for fresh adjudication after providing the assessee a full opportunity of hearing. A cost of Rs. 10,000 per appeal (total Rs. 20,000) was imposed on the assessee, to be deposited with the Jharkhand Income Tax Bar Association within 60 days of the order. Failure to pay the cost within 60 days shall result in confirmation of the CIT(A)’s orders.
What This Means For Similar Cases
Opportunity of Hearing Is Non-Negotiable
- Practitioners must insist on a formal hearing before the Assessing Officer, even if the case appears weak
- Orders passed ex-parte without recording submissions are vulnerable to being set aside on appeal
- The mere absence of documents does not justify denial of hearing
Costs Can Be Imposed for Non-Cooperation
- Tribunals may impose costs even while restoring proceedings to cure procedural defects
- Costs are not punitive but corrective - meant to discourage dilatory conduct
- Payment deadlines are enforceable; non-compliance leads to confirmation of adverse orders
Restoration Is Not a Right - It Is a Remedy for Procedural Failure
- Restoration is granted only when the defect is procedural, not substantive
- The assessee must demonstrate willingness to cooperate going forward
- Courts will not reward repeated non-cooperation, even while upholding natural justice
