Section 251 – An order enhancing the assessment made, passed by CIT(A), without giving an opportunity of being heard to the assessee, violates the principles of natural justice and is bad in law and cannot be sustained.

10. Jagat P. Shah (HUF) v.
ACIT (Mum)

Members : Mahavir Singh
(JM) and Rajesh Kumar (AM)

ITA No.: 2584/Mum/2015

A.Y.: 2009-10.  Date of Order: 21^st March, 2017

Counsel for assessee /
revenue: Rahul Hakani / M. C. Om Ningshen

FACTS  

The assessee disclosed net income in F & O transactions
amounting to Rs. 90,017. According to the assessee, the unexpired future &
option contract as on 1.4.2008 was Rs. 50,93,939 which was added to the
business loss of Rs. 5,82,655 thereby reducing the said loss to be carried forward. 

The AO in the remand report changed the valuation of
unexpired contract and came to the conclusion that the net profit should be
calculated at Rs. 6,48,780 by way of enhancement or net profit should be
sustained at Rs. 40,89,667 instead of Rs. 50,93,939 as made by the AO while
framing the original assessment.

The CIT(A), without giving any notice of enhancement u/s. 251
of the Act passed an order enhancing the net profit to Rs. 66,48,780.

Aggrieved, the assessee preferred an appeal to the Tribunal
where as an additional ground it was contended that the action of CIT(A) in
enhancing the assessment without giving an opportunity to the assessee violated
the principles of natural justice.

HELD  

The Tribunal noted that the CIT(A) has passed the order on
the basis of remand report of the AO enhancing the assessment by taking net
profit to Rs. 66,48,780 without issuing any show cause notice u/s. 251 of the
Act. The Tribunal held that CIT(A) should have given opportunity to the
assessee to present his case which was not given and therefore violated the
principles of natural justice. It held that, the order passed by CIT(A) without
giving opportunity to the assessee is bad in law and cannot be sustained. The
Tribunal set aside the order passed by CIT(A) and restored the matter back to
the file of the AO to decide the same as per law after providing fair and
reasonable opportunity to the assessee.

Compiler’s note: The amounts stated under the caption “Facts”
are not reconciling / clear but the same are as mentioned in the order of the
Tribunal.