Mistakes must be Expected during Migration from Physical Hearing to Faceless: ITAT Imposes Cost of Rs. 25,000 on Assessee for Restoration of Ex-Parte Order [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Cuttack Bench, has recently, in an appeal filed before it, while imposing a cost of Rs 25,000 on the assessee, for restoration of ex- parte order, held that mistakes must be expected during migration from physical hearing to faceless.

The aforesaid observation was made by the Cuttack ITAT, when appeals were filed before it by the assessee M/S Raghunath Jew School of Management Studies, as against the separate orders of the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, all dated 30.09.2022, passed in DIN & Orders for the assessment years 2009-2010, 2010-2011, 2011-2012 & 2012-2013, respectively.

The facts of the case were that the assessee was a society registered under the Societies Registration Act, whose chairman had appeared before the AO, with his statement being recorded.

However, subsequently due to his ill-health, he could not cooperate in the assessment proceedings, and the assessment came to be completed on 23.03.2016. The assessee filed an appeal against the assessment orders on 29.04.2016, which were filed manually.

It was the submission of the assessee via Shri Basudev Panda, Senior Advocate with Shri B.R.Panda, Advocate appeared , on behalf of the assessee that the physical hearing notice had also been issued on the assessee on 06.02.2019, and that in the meantime the migration of the appeals from the physical hearing to the faceless hearing was initiated.

Consequently, e-filing of the appeals having been directed from 01.03.2016 and the said being extended to 15.06.2016, it was the submission on behalf of the assessee that as the assessee was unaware that the appeals already manually filed were also to be filed electronically, there was failure on the part of the assessee to do so.

It was also submitted that; however, it seemed that the revenue records itself had been electronically converted and the CIT(A), NFAC had issued notice of hearing on 07.01.2022, and that on the ground that the appeals of the assessee had not been filed electronically, the CIT(A), NFAC had dismissed the assessee’s appeal.

With the counsels for the assessee further submitting that the same was only a technical breach, that the fact that the assessee has filed appeals in the physical form within time itself showed the intention of the assessee that he disputed the assessment, and further that restoring theappeals to the file of the ld. CIT(A) NFAC would also be of no help insofar as the assessments are ex-parte assessments and all details had not been produced before the AO,

 Shri M.K.Gautam, CIT-DR with Shri S.C.Mohanty, Sr. DR, supported the orders of the  AO & CIT(A), NFAC , thereby jointly submitting that a punitive cost of Rs.25,000/- must be levied for each of the assessment year under consideration insofar as the assessee has not cooperated in the assessment proceedings.

Hearing the opposing contentions of either sides and perusing the materials available on record, the ITAT Bench consisting of Arun Khodpia, the Accountant Member, along with George Mathan, the Judicial Member, observed:

“We have considered the rival submissions. The facts in the present appeals clearly show that the assessments have been done ex-parte on account of the fact that the books of accounts and bills & vouchers were not produced before the AO. It is also an admitted fact that the assessee has not filed the appeal electronically but the appeals have been filed manually within time. Admittedly, this is a period where the migration from the physical hearing to the faceless hearing took place, for which mistakes must be expected.”

“Under normal circumstances, the issues in the appeals would have to be restored to the file of the ld.CIT(A), NFAC to grant the assessee adequate opportunity to file the appeal electronically. However, by doing so and restoring the issues back to the file of the ld.CIT(A), NFAC would not serve any purpose insofar as the evidences have not been produced before the AO and it would be practically very difficult for the assessee to produce any fresh evidence before the ld. CIT(A), NFAC.”, the Cuttack ITAT added.

Thus, allowing the assessee’s appeals the ITAT Bench held:

“This being so, in the interest of justice and to reduce the possible round of litigation, the issues on merits in these appeals are restored to the file of the ld. AO for re adjudication after granting the assessee adequate opportunity of being heard. As the assessments have been done ex-parte, the assessee shall pay cost of Rs.25,000/- (Rupees Twenty five Thousand only) per assessment year under consideration to the Income Tax Department and copy of the challan may be produced before the AO. It is hereby clarified that the cost of Rs.25,000/- per assessment year under consideration is not adjustable against any tax liabilities or dues for any of the assessment years.”

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