Case Law Analysis

Section 143(3) r.w.s. 144B IT Act | Non-Consideration of Assessee's Submissions Violates Natural Justice : ITAT Ahmedabad

ITAT Ahmedabad quashed an appellate order for failing to address the assessee's submissions, reinforcing that procedural fairness mandates a full hearing before adjudication. The ruling underscores that tax authorities must engage with evidence submitted by taxpayers, not just dismiss appeals mechanically.

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Jun 15, 2026, 7:41 PM(Updated: Nov 3, 2026)
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Section 143(3) r.w.s. 144B IT Act | Non-Consideration of Assessee's Submissions Violates Natural Justice : ITAT Ahmedabad

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, recently underscored the fundamental principle of natural justice in tax proceedings. In a case involving disputed purchases, the Tribunal set aside an appellate order that dismissed the assessee's appeal without considering crucial submissions, highlighting the imperative of affording a fair hearing before adjudication.

Background & Facts

The Dispute

The assessee, Ahad Rajakbhai Lakhani, filed his return of income for Assessment Year (A.Y.) 2021-22 on 11.03.2022, declaring a total income of Rs. 4,85,230. The case was selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS) to verify purchases from suppliers who were either non-filers or had filed non-business returns.

Key Facts

  • The Assessing Officer (AO) examined purchases totaling Rs. 6,10,54,737 from six parties, which were deemed unexplained transactions.
  • Notices under Section 133(6) of the Income Tax Act were issued to investigate the genuineness of these transactions.
  • The AO completed the assessment under Section 143(3) read with Section 144B of the Act on 17.12.2022, adding the disputed purchases as unexplained expenditure and determining the total income at Rs. 6,15,41,250.

Procedural History

  • 11.03.2022: Return of income filed by the assessee.
  • 17.12.2022: Assessment order passed by the AO.
  • 06.02.2026: The Commissioner of Income Tax (Appeals) [CIT(A)], operating under the National Faceless Appeal Centre (NFAC), dismissed the assessee's appeal.
  • 03.11.2025, 02.12.2025, 08.12.2025: The CIT(A) issued three opportunities for compliance, none of which were availed by the assessee.
  • 11.12.2025: The NFAC issued another notice, allowing the assessee time until 18.12.2025 to furnish submissions.
  • 27.12.2025: The assessee filed detailed submissions online, which were acknowledged.
  • 06.02.2026: The CIT(A) passed the impugned order, stating no compliance was made by the assessee.

The Parties' Positions

For the Assessee

  • The Learned Authorized Representative (Ld. AR), Shri Varish Isani, contended that the CIT(A) dismissed the appeal without adjudicating the merits of the grounds raised.
  • The assessee had filed submissions on 27.12.2025, which were available on record but ignored by the CIT(A).
  • The assessee argued that the dismissal violated principles of natural justice, as the submissions were not considered despite being viewed by the CIT(A) on 06.02.2026.
  • The assessee sought remand of the matter to the CIT(A) for re-adjudication after considering the submissions.

For the Revenue

  • The Learned Commissioner of Income Tax - Departmental Representative (Ld. CIT-DR), Shri Ashesh R Rewar, did not object to the assessee's request for remand.

Relief Sought

The assessee sought:

  • Setting aside of the CIT(A)'s order dated 06.02.2026.
  • Remand of the matter to the CIT(A) for fresh adjudication after considering the submissions filed on 27.12.2025.
  • Opportunity to furnish further explanations or documents as required by the CIT(A).

The Legal Issue

The central question was whether the CIT(A) could dismiss the assessee's appeal without considering submissions filed by the assessee, thereby violating the principles of natural justice and the right to a fair hearing.

Arguments Presented

For the Appellant

  • The assessee argued that the CIT(A) erred in dismissing the appeal without adjudicating the merits of the grounds raised.
  • The submissions filed on 27.12.2025 were available on record and had been viewed by the CIT(A) but were ignored.
  • The dismissal of the appeal without considering these submissions was a gross violation of natural justice.
  • The assessee contended that the purchases were supported by valid documents, and the corresponding sales were accepted by the AO and CIT(A).
  • The assessee also raised concerns about the opportunity of cross-examination not being afforded regarding the third-party investigation reports.

For the Respondent

  • The Revenue did not oppose the assessee's request for remand, indicating no objection to the matter being reconsidered by the CIT(A).

The Court's Analysis

The ITAT observed that while the CIT(A) had allowed three opportunities for compliance (03.11.2025, 02.12.2025, and 08.12.2025), the assessee had not availed of these. However, the NFAC had issued another notice on 11.12.2025, allowing the assessee time until 18.12.2025 to furnish submissions. The assessee filed detailed submissions on 27.12.2025, which were acknowledged.

The Tribunal noted:

"Even though this submission was made by the assessee after the time as allowed by the Ld. CIT(A), the same was available with him on the date of passing of this order. Further, this submission of the assessee was also viewed by the Ld. CIT(A) on 06.12.2026 but was not considered in his order passed on the same day. Merely because the submission was filed by the assessee after the timeline as allowed, the same should not have been ignored, particularly when the same was viewed by the Ld. CIT(A) while passing his order."

The ITAT emphasized that the principles of natural justice require that an adjudicating authority must consider all submissions made by a party before passing an order. Ignoring submissions already available on record, even if filed beyond the stipulated timeline, constitutes a violation of procedural fairness. The Tribunal held that the CIT(A)'s action in dismissing the appeal without considering the assessee's submissions was unjustifiable and unlawful.

The Verdict

The ITAT allowed the assessee's appeal for statistical purposes and set aside the CIT(A)'s order dated 06.02.2026. The matter was remanded to the file of the CIT(A) with the following directions:

  • The CIT(A) must consider the submissions filed by the assessee on 27.12.2025.
  • The CIT(A) must re-adjudicate the grounds raised by the assessee on merits.
  • The CIT(A) has the liberty to call for further explanations or details from the assessee as deemed necessary.
  • The assessee is directed to comply with the CIT(A)'s requirements during the remand proceedings.

What This Means For Similar Cases

Natural Justice Is Non-Negotiable

  • Procedural fairness is a cornerstone of adjudication under the Income Tax Act. Adjudicating authorities, including the CIT(A), must ensure that all submissions made by a party are duly considered before passing an order.
  • Even if submissions are filed beyond the stipulated timeline, they cannot be ignored if they are available on record and have been viewed by the authority.
  • Practitioners should emphasize the right to a fair hearing in appeals, especially when submissions are ignored or procedural lapses occur.

Remand as a Remedy for Procedural Violations

  • Where an appellate authority fails to consider submissions or violates natural justice, remand to the same authority for fresh adjudication is a viable remedy.
  • The ITAT's decision reinforces that statistical allowance of appeals (i.e., setting aside orders without a final determination on merits) is appropriate where procedural fairness is compromised.
  • Assessees should ensure that all submissions are properly acknowledged and documented to avoid dismissal on technical grounds.

Opportunity of Cross-Examination

  • The assessee's contention regarding the lack of opportunity for cross-examination of third-party investigation reports highlights a critical aspect of evidentiary fairness.
  • While not directly addressed in this order, practitioners should argue for the right to confront and cross-examine adverse evidence, especially in cases involving allegations of bogus transactions or unexplained expenditure.
  • The principles of audi alteram partem (hear the other side) extend beyond mere submission of documents and include the right to test evidence through cross-examination.

Compliance with Timelines

  • While the ITAT showed leniency in this case, assessees must strive to comply with timelines set by adjudicating authorities.
  • Late submissions, even if considered, may not always be viewed favorably, and practitioners should ensure timely compliance to avoid procedural hurdles.
  • Where compliance is not possible within the given timeline, assessees should seek extensions in writing and document all efforts to furnish submissions.

Case Details

Ahad Rajakbhai Lakhani Vs. Income Tax Officer

Judgment
Court
Income Tax Appellate Tribunal, Ahmedabad Bench
Date
12 June 2026
Case Number
ITA No. 385/AHD/2026
Bench
Shri TR Senthil Kumar, Judicial Member, Shri Narendra Prasad Sinha, Accountant Member
Counsel
Pet: Shri Varish Isani, Advocate
Res: Shri Ashesh R Rewar, CIT-DR

Frequently Asked Questions

The principles of natural justice in tax proceedings require that an adjudicating authority, such as the CIT(A), must afford a fair hearing to the assessee. This includes: - Right to be heard: The assessee must be given an opportunity to present their case and submissions. - Right to fair consideration: All submissions made by the assessee must be duly considered before passing an order. - Right to cross-examination: Where adverse evidence (e.g., third-party reports) is relied upon, the assessee must be afforded an opportunity to cross-examine witnesses or challenge the evidence. In this case, the ITAT held that ignoring submissions already available on record, even if filed beyond the stipulated timeline, violates these principles.
Section 69C of the Income Tax Act deals with unexplained expenditure. It provides that where an assessee incurs any expenditure in a financial year and does not offer any explanation about the source of such expenditure, or the explanation offered is not satisfactory, the amount of such expenditure may be deemed as the assessee's income for that year. In this case, the AO added purchases totaling Rs. 6,10,54,737 as unexplained expenditure under Section 69C, which the assessee contested as being supported by valid documents.
No. The ITAT Ahmedabad held that dismissing an appeal without considering submissions filed by the assessee constitutes a violation of natural justice. Even if submissions are filed beyond the stipulated timeline, they cannot be ignored if they are available on record and have been viewed by the adjudicating authority. The CIT(A) must consider all submissions before passing an order.
Where an appellate authority, such as the CIT(A), violates the principles of natural justice by ignoring submissions or failing to afford a fair hearing, the aggrieved party can seek remand of the matter for fresh adjudication. The ITAT may set aside the impugned order and direct the authority to reconsider the appeal on merits, as was done in this case.
#procedural fairness#Income Tax Appeal#tax assessment#Section 69C#Tax Law#ITAT Ahmedabad#[Banking & Finance Law]#natural justice
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Disclaimer

This article is for informational purposes only and does not constitute legal advice. The views expressed are based on the judgment analysis and should not be taken as professional counsel. Please consult with a qualified attorney for advice specific to your situation.

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