Background of the Case

The appellant, a registered taxpayer under the GST law, was subjected to search proceedings wherein its premises were raided and books of accounts were seized by the department. Subsequently, a show cause notice in Form GST DRC-01 dated 21.09.2023 was issued proposing action under Section 74 of the CGST/GGST Act. The petitioner duly filed a reply in Form DRC-06 on 21.11.2023 addressing the allegations raised in the notice. However, without granting any opportunity of personal hearing, the adjudicating authority proceeded to pass an adverse order dated 30.12.2023 under Section 74.

Aggrieved by such action, the petitioner approached the High Court contending violation of principles of natural justice and statutory mandate under Section 75(4) of the Act.

Arguments by the Appellant (Assessee)

The petitioner primarily contended that the impugned order was passed in complete violation of Section 75(4) of the GST Act, which mandates grant of opportunity of personal hearing before passing any adverse order. It was argued that despite filing a detailed reply to the show cause notice, no hearing opportunity was afforded, thereby rendering the order legally unsustainable. The petitioner emphasized that the requirement of personal hearing is not merely procedural but a substantive safeguard ensuring fair adjudication. It was further submitted that denial of such opportunity amounts to breach of principles of natural justice, particularly the doctrine of audi alteram partem, and hence the order deserved to be quashed.

Respondent’s Response (Revenue)

The Revenue defended its action by submitting that the petitioner, while filing reply in Form DRC-06, had opted “No” in the column relating to personal hearing, and therefore, no such opportunity was granted. It was argued that the adjudicating authority acted in accordance with the option exercised by the petitioner and there was no procedural lapse. However, the Revenue fairly acknowledged before the Court that Section 75(4) of the GST Act envisages grant of personal hearing opportunities, and the same were not provided in the present case. Despite this, the department attempted to justify that the petitioner’s own selection of “No hearing” disentitled it from claiming such opportunity.

Court Findings and Decision

The Hon’ble Gujarat High Court held that the statutory mandate under Section 75(4) of the GST Act cannot be overridden by any option selected by the assessee in Form DRC-06. The Court observed that it is incumbent upon the adjudicating authority to grant adequate opportunity of personal hearing before passing any adverse order, irrespective of such selection. Relying on settled principles of natural justice and earlier judicial precedents, the Court reiterated that fair hearing is a fundamental requirement and denial thereof vitiates the entire proceedings.

Accordingly, the impugned order was quashed and set aside, and the matter was remanded back to the adjudicating authority for fresh adjudication after granting proper opportunity of hearing within a stipulated time period.

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Background of the Case

The matter before the ITAT Panaji Bench involved multiple appeals filed by Rajesh Suhas Verenkar and Riya Rajesh Verenkar for Assessment Years 2013–14 to 2019–20. The Appellant was engaged in civil construction activities, labour contracting, and acting as an agent or broker in processing land allotment applications in Goa. A search and seizure operation under Section 132 of the Income Tax Act was conducted on 19 March 2019, during which certain incriminating documents were seized. Based on these materials and statements recorded during the search, the Assessing Officer initiated assessment proceedings under Sections 153A and 153C of the Act.

The Assessing Officer observed that only around 50–55% of the total business receipts were deposited into the appellant’s bank accounts while the remaining portion was allegedly kept outside the books and used for personal expenses or deposited in accounts of family members. Consequently, the Assessing Officer treated 50% of such alleged suppressed receipts as undisclosed income and made additions while completing the assessments.

Arguments by the Appellant (Assessee)

The Appellant challenged the assessment orders before the Commissioner of Income Tax (Appeals). However, during the appellate proceedings, several hearing notices were issued by the CIT(A). According to the Appellant, the appeals were ultimately dismissed ex-parte without granting a fair and adequate opportunity to present their case or submit supporting documents. The appellant contended before the Tribunal that the appellate authority proceeded without properly considering their submissions and without granting reasonable time to respond to the notices issued.

It was argued that the dismissal of the appeals without meaningful opportunity violated the principles of natural justice and resulted in confirmation of additions without proper examination of the facts and evidence.

Respondent’s Response (Revenue)

The Revenue relied upon the orders passed by the lower authorities and submitted that several opportunities were provided by the CIT(A) during the appellate proceedings. The department contended that notices were issued on multiple occasions and the appellant failed to effectively respond or produce the required evidence to support their claims. Therefore, according to the Revenue, the CIT(A) was justified in proceeding ex-parte and confirming the additions made by the Assessing Officer on the basis of the material available on record.

Court Findings and Decision

The ITAT Panaji observed that although the CIT(A) had issued multiple notices, the time provided to the appellant to respond was significantly short and did not constitute a real or reasonable opportunity of being heard. The Tribunal noted that in several instances less than fifteen days were granted for compliance and both appellants were called upon to represent multiple appeals on the same dates. Relying on various judicial precedents, the Tribunal emphasized that the opportunity of being heard must be real, reasonable, and effective rather than a mere formality. The Tribunal also observed that certain submissions and documents had been placed on the e-portal but were not considered by the appellate authority while passing the ex-parte orders.

Considering these circumstances, the Tribunal held that the principles of natural justice had not been adequately followed and therefore set aside the orders of the CIT(A). The matter was remanded back to the CIT(A) with directions to adjudicate the appeals afresh after providing proper opportunity to the appellant and to pass a reasoned order in accordance with law.

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Background of the Case

The case before the Income Tax Appellate Tribunal (ITAT), Mumbai involved TML Benefit Trust, which was created to hold equity shares of Tech Mahindra Limited pursuant to a scheme of amalgamation approved by the Bombay High Court. During Assessment Year 2018–19, the Trust received dividend income amounting to Rs.86.40 crore from Tech Mahindra Limited. At that time, dividends distributed by domestic companies were subject to Dividend Distribution Tax (DDT) under Section 115-O of the Income Tax Act, while the corresponding dividend income in the hands of the recipient was exempt under Section 10(34).

The Appellant accordingly disclosed the dividend income as exempt in its return of income. However, while processing the return under Section 143(1), the Central Processing Centre (CPC) treated the exemption claim as an “incorrect claim” due to an alleged mismatch in reporting within the return schedules and added the entire amount of Rs.86.40 crore to the taxable income.

Arguments by the Appellant (Assessee)

The Appellant contended that the dividend income was fully disclosed in the return and was correctly claimed as exempt under Section 10(34) since the distributing company had already paid DDT. It was argued that the adjustment made during processing under Section 143(1) was beyond the scope of the provision, which allows only prima facie adjustments apparent from the return. The Appellant emphasized that determining whether dividend income is exempt involves interpretation of statutory provisions and cannot be decided merely on the basis of an algorithmic mismatch or technical reporting issue in return schedules. It was further submitted that during subsequent scrutiny proceedings under Section 143(3), the Assessing Officer specifically examined the exemption claim, raised queries, and ultimately accepted the Appellant’s explanation without making any addition.

Respondent’s Response (Revenue)

The Revenue defended the adjustment made under Section 143(1) by pointing to inconsistencies in how the exempt income was reported within different schedules of the return. According to the department, the CPC had correctly identified the claim as an incorrect claim apparent from the return and therefore made an adjustment while processing the return. The department argued that the adjustment was justified based on the reporting mismatch and that the addition was consistent with the automated processing mechanism designed to identify discrepancies in filed returns.

Court Findings and Decision

The ITAT Mumbai held that the scope of Section 143(1) is limited to making adjustments that are apparent from the return itself and does not extend to adjudicating substantive legal issues such as the taxability of dividend income. The Tribunal observed that whether dividend income qualifies for exemption under Section 10(34) is a matter requiring interpretation of law and cannot be rejected through summary processing merely because of a reporting mismatch. Importantly, the Tribunal noted that during scrutiny assessment under Section 143(3), the Assessing Officer had specifically examined the dividend income issue and accepted the exemption claim after considering the Appellant’s explanation. Once a regular assessment has consciously examined and accepted a claim, a contrary adjustment made earlier under Section 143(1) cannot survive.

Accordingly, the Tribunal quashed the adjustment of Rs.86.40 crore made during processing under Section 143(1) and directed that the exempt dividend income be deleted from the computation of total income.

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Background of the Case

The present case relates to Sonmrug Co-operative Housing Society Ltd. vs. CIT(A) before the Income Tax Appellate Tribunal (ITAT), Mumbai, concerning Assessment Years 2012-13 to 2015-16. The Appellant, a registered co-operative housing society, had filed its return claiming deduction under Section 80P(2)(d) of the Income Tax Act. While processing the return under Section 143(1), the Central Processing Centre disallowed the deduction and made an addition of Rs.2,15,083. Aggrieved by the adjustment, the Appellant preferred an appeal before the Commissioner of Income Tax (Appeals). However, the appeal before the CIT(A) was filed with an extraordinary delay of 3615 days, far beyond the statutory limitation period. The CIT(A) dismissed the appeal solely on the ground of delay without examining the merits. Subsequently, the Appellant approached the ITAT challenging the dismissal order of the CIT(A).

Arguments by the Appellant (Assessee)

The Appellant contended that the CIT(A) erred in dismissing the appeal without considering the merits of the case. It was submitted that the society was eligible for deduction under Section 80P(2)(d) and that the adjustment made during processing under Section 143(1) was beyond the jurisdiction of the CPC. The Appellant further explained that the delay in filing the appeal occurred due to internal disputes between the former committee members and the existing management of the society, which created a hostile environment and lack of cooperation in accessing records. Because of these conflicts, the society claimed it could not file the appeal and supporting documents within the prescribed time. The Appellant therefore requested the Tribunal to condone the delay and restore the matter so that the case could be examined on merits.

Respondent’s Response (Revenue)

The Respondent opposed the Appellant submissions and supported the order passed by the CIT(A). It was argued that the delay of more than nine years in filing the appeal was extremely excessive and no convincing or legally sustainable reason had been provided for such delay. The Respondent contended that mere internal disputes among committee members of the society cannot be treated as a sufficient cause for condonation of delay under the law. It was further submitted that limitation provisions are mandatory and must be strictly followed. The Respondent therefore argued that the CIT(A) had rightly dismissed the appeal as time-barred and that there was no justification for the Tribunal to interfere with the order.

Court Findings and Decision

After considering the rival submissions and examining the record, the ITAT Mumbai observed that the appeal before the CIT(A) had been filed after a delay of 3615 days, which was extraordinarily long. The Tribunal noted that the explanation provided by the Appellant regarding disputes between committee members did not constitute a reasonable or sufficient cause to justify such an inordinate delay. Referring to settled legal principles governing limitation, the Tribunal emphasized that courts cannot extend statutory time limits on equitable or sympathetic grounds. The Tribunal reiterated the legal maxim “dura lex sed lex”, meaning that the law may be harsh but it must be applied as it stands.

In view of the absence of any convincing explanation for the delay, the Tribunal upheld the decision of the CIT(A) and dismissed the appeal in limine. The same reasoning was also applied to the connected appeals for other assessment years, which were consequently dismissed as well.

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Background of the Case

The Appellant sold a plot of land for Rs.3.21 crores on 18.03.2014 and earned long-term capital gains. Subsequently appellant purchased a residential flat for Rs.4 crores on 25.02.2015 and claimed deduction under Section 54F of the Income Tax Act, 1961. During assessment proceedings, the Assessing Officer observed that although the Appellant had invested in a new residential property within the prescribed period, he had deposited only Rs.2.25 crores in the Capital Gains Account Scheme before filing his return of income. Since the entire capital gain was not deposited in the specified account before the due date under Section 139(1), the Assessing Officer disallowed Rs.91,45,450 and completed the assessment under Section 143(3) at a higher income. The Ld. CIT(A)/NFAC confirmed the disallowance, and the matter was carried in appeal before the ITAT Pune.

Arguments by the Appellant (Assessee)

The Appellant contended that the entire sale consideration of Rs.3.21 crores had been invested in purchase of the residential flat within one year from the date of transfer, thereby satisfying the substantive condition prescribed under Section 54F(1). It was argued that Section 54F(4) requiring deposit in the Capital Gains Account Scheme applies only when the net consideration remains unutilized before the due date of filing the return. Since the whole amount was ultimately invested within the statutory time limit, denial of deduction merely for non-deposit of a portion in the specified scheme was unjustified. The Appellant relied upon judicial precedents to submit that procedural non-compliance cannot defeat a substantive exemption when the legislative intent stands fulfilled.

Respondent’s Response (Revenue)

The Respondent supported the orders of the lower authorities and submitted that Section 54F(4) clearly mandates deposit of the unutilized net consideration in the Capital Gains Account Scheme before the due date under Section 139(1). As the Appellant failed to deposit the entire capital gain amount prior to filing the return, the condition prescribed under the statute was not complied with. Therefore, according to the Department, the deduction to the extent of Rs.91,45,450 was rightly disallowed and the order of the CIT(A)/NFAC required no interference.

Court Findings and Decision

The ITAT Pune examined the provisions of Section 54F and observed that the purpose of sub-section (4) is to ensure that the sale consideration is ultimately invested in a residential house within the stipulated period. The Tribunal noted that in the present case it was undisputed that the appellant had invested the entire sale consideration in purchase of a residential flat within the permissible time. Relying on judicial precedents, the Tribunal held that where the full amount is invested within the prescribed period, exemption under Section 54F cannot be denied merely because the amount was not fully deposited in the Capital Gains Account Scheme before filing the return. The Tribunal accordingly directed the Assessing Officer to allow the deduction and decided the issue in favour of the appellant.

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