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Facts
The assessee filed an ITR declaring loss for AY 2017-18, but the AO made significant additions and disallowances totaling Rs. 8,93,98,439/- due to alleged non-compliance during assessment proceedings. The CIT(A) subsequently dismissed the assessee's appeal ex-parte due to non-prosecution, without addressing the merits of the case.
Held
The ITAT held that the CIT(A) is statutorily obliged under Sections 250(6), 251(1)(a), 251(1)(b), and 251(2) of the Income Tax Act to dispose of appeals on merits, even in ex-parte proceedings, and cannot dismiss an appeal solely for non-prosecution. Consequently, the ITAT set aside the CIT(A)'s order and remitted the matter back for fresh adjudication on merits, providing the assessee a proper opportunity of being heard.
Key Issues
Whether the CIT(A) can dismiss an appeal for non-prosecution without considering the merits, and whether such a dismissal is contrary to the provisions of the Income Tax Act and principles of natural justice.
Sections Cited
46A(4), 68, 115BBE, 234B, 234C, 250(4), 250(5), 250(6), 251(1)(a), 251(1)(b), 251(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI AVDHESH KUMAR MISHRA
ORDER
PER AVDHESH KUMAR MISHRA, AM
The appeal for the Assessment Year (‘AY’) 2017-18 filed by the assessee is directed against the order dated 08.09.2023 of the Ld. Commissioner of Income Tax (Appeals), NFAC, New Delhi [‘CIT(A)’].
The assessee has raised following grounds of appeal: -
1. The Ld. CIT(A) has grossly erred in dismissing the Grounds of appeal suo moto and passed the order in contravention of the provisions of section 250(6) of the Act which makes it obligatory for the CIT(A) to pass speaking order deciding the points raised in appeal.
2. The Ld CIT(A) has erred in non-verifying the authenticity of various ad- hoc arbitrary additions of Rs. 8,93,98,439/- suo-moto from the AO within the provisions of section 250(4) & (6) and Rule 46A(4) of the Income Tax Act.
Promotional Club 3. The Ld. CIT(A) has erred in dismissing the grounds no. 3 & 4 suo-moto raised against the arbitrary addition of Rs.5.90 Cr made by AO invoking section 68 r.w.s. 115BBE and without appreciating the fact that it was contractual liability and refunded in subsequent year in consequence of Hon'ble Delhi High Court order dt. 25.08.2017 in IA No.9665/2017 in O.M.P.(I) (COMM.) 4/2017.
4. The Ld. CIT(A) has erred in law in observing that the appeal filed by the appellant is liable to be dismissed for non-prosecution as well as all the grounds of appeal without discussing anything on merits on the grounds raised by the assessee in appeal: i. That the AO erred in passing the order of assessment dated 19.12.2019 without providing proper opportunity to the appellant and also without appreciating the understanding the information submitted by the appellant and therefore, assessment order passed by him deserves to be quashed on the ground of principle of natural justice, ii. That the AO erred in making an ad-hoc addition of Rs.1,57,91,661/-, being 30 percent of difference between the trade creditors as on 31.03.2016 and 31.03.2017 of Rs.7,89,58,305/- (11,25,52,856 3,35,94,551) without any basis and appreciating the details submitted to him and also without providing any further opportunity for providing the information, if any, he required in this regard iii. a. That ch AO erred in considering amount of Rs.5.90 crores as addition u/s.68 of the Act, which amount as received by the appellant from Vardhman International on account of capital contribution of Mr. Sharad Raj Kasliwal and Mr. Anshul Jain on their introduction as partners in the firm and was also refunded/settled as per the order of the High Court of Delhi in the following years. b. That the AO also erred in applying provisions of section 115BBE in regard to addition made by him of Rs.5.90 crores u/s 68 of the Aca without correctly appreciating the facts of the case and the legal position in this regard. iv. That the AO erred in making Adhoc disallowance of Rs.73,75,346/being 15 percent of aggregate expenses of Rs.4,91,68,970/- incurred under various heads of expenses without appreciating that expenses were of routine nature and no ad-hoc disallowance could be made.
Promotional Club v. That the AO erred in making disallowance of depreciation of Rs.2,37,150/-, being 15 percent of Rs.15,81,000/- on the ground that there was difference in the closing written down value of plant and machinery as per ITR of AY 2016-17 and the opening WDV taken in ITR of AY 2017-18 without appreciating that in AY 2016-17 depreciation was not claimed on the above amount since the relevant plant and machinery was not put to use and there was no column in the return form to show the above amount but same as duly included in written down value as per statement with accounts and therefore, figure of opening WDV was correctly taken by the appellant and depreciation thereon was duly allowable in this year. vi. That the AO also erred in disallowing depreciation of Rs.69,94,282/- in respect of additions to fixed assets made during the year without providing sufficient opportunity to provide copy of bills and vouchers to him and also without appreciating that the auditor had duly verified the details of additions and depreciation allowable vide audited accounts as well as tax audit report. vii. That the AO also erred in determining tax liability with reference to amount of Rs.5.90 crores as per section 115BBE of the Act and also charging thereon surcharge at 25 percent, interest u/s.234B and 234C of the Act and raising a demand of Rs.6,11,02,707/- i.e. even more than the amount of addition made by him. viii. That the appellant submits that Honorable CIT(A) may be pleased to direct the AO to keep the demand in abeyance till the decision of appeal under reference for the reason that the demand has been raised with reference to addition of Rs.5.90 crores which addition has been wrongly made and demand with reference thereto of Rs.6.11 crores has also been wrongly calculated by applying provisions of section 115BBE of the Act and also levying surcharge at 25 percent and interest u/s.234B and 234C of the Act.
On facts and circumstances of the case, the Ld CIT(A) as well AO has failed in appreciating the documents information submitted in assessment and available on portal of the department and passed the order without providing proper opportunity hence the order of assessment as well CIT(A) liable to be set aside/quashed/cancelled as the same are passed against the principle of natural justice.
6. That the appellant craves the leave to add, amend, vary, withdraw or modify all or any of the grounds on or before the date of hearing.”
Promotional Club 3. The relevant facts giving rise to this appeal are that the assessee filed its Income Tax Return (‘ITR’) on 18.12.2017 declaring loss of (-) Rs.3,04,62,674/-. The case was picked up for scrutiny and consequential assessment was completed at income of Rs.5,90,00,000/-. The assessee did not ensure full compliance to various queries of the Assessing Officer (‘AO’) even though many opportunities of being heard were provided to the assessee during the course of assessment proceedings. Therefore, the AO disallowed and taxed 20% of sundry creditors, unexplained unsecured loan of Rs.5,90,00,000/-, 15% of other expenses, depreciation on assets purchased in the relevant year and difference in opening WDV. All of the disallowances/additions of Rs.8,93,98,439/- were made due non- compliance of the assessee. Aggrieved, the assessee filed appeal before the CIT(A), who dismissed the appeal due to non-prosecution.
Before us, none appeared on behalf of the assessee. Therefore, we heard the Ld. Sr. Departmental Representative (‘Sr. DR’). With the help of facts mentioned in orders of the Authorities below, the Ld. Sr. DR submitted that sufficient opportunities of being heard were provided to the appellant assessee not only by the AO but also by the Ld. CIT(A) but in vain. He submitted that the appellant assessee tactfully ensured noncompliance to avoid proper investigations. Hence, he prayed for dismissal of the appeal. On specific query by us, the Sr. DR admitted that the issue in dispute had not been decided on merit by the Ld. CIT(A).
Promotional Club 5. We have heard Ld. Sr. DR and have perused the material available on the record. The impugned order is dated 08.09.2023. However, the appeal before us has been filed on 28.11.2024. The assessee has filed an affidavit stating that there is no delay in filing this appeal on the reasoning that the impugned order was never received earlier either on its email. The email of its CA; amar.mittal@sharmagoel.in was not functional as the said CA expired in October 2020 due to Covid. In view of these facts, we take this appeal having filed in time.
We take note of the fact that the Ld. CIT(A) has dismissed the appeal ex-parte due to non-prosecution and has not adjudicated the case on merits. It has been mentioned in the assessee’s affidavit that the Ld. CIT(A) has sent all notices on email id: amar.mittal@sharmagoel.in, hence, the same was not compiled with.
We take note of the fact that the Ld. CIT(A) has not decided each ground of appeal after discussing the issues in detail and his reasons for agreeing with the assessment order though he, as per provisions of section 250(6) of the Act, is obliged to dispose of the appeal in writing with well- reasoned order on each point of determination arisen for his consideration. It is evident from the perusal of section 251(1)(a), 251(1)(b) and Explanation of section 251(2) of the Act that the CIT(A) is required to apply his/her mind to all the issues which arise from the impugned order before him/her,
8. Section 251(1)(a) of the Act provides that while disposing of an appeal against assessment order, the Ld. CIT(A) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1) (b) of the Act provides that in disposing of an appeal against an order imposing a penalty, the Ld. CIT(A) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty. On cumulative consideration of the provisions of section 250(6) of the Act read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) of the Act and Explanation of section 251(2) of the Act, it is concluded that the Ld. CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merits. In this regard, the finding of the coordinate bench in the case of MARC Laboratories Ltd. in 2732, 2733, 2730, 2734 & 2735/DEL/ 2022 is worth extracting as under:
“5. We straightway refer to Section 250(6) of the Act which enjoins that the CIT(A) shall state the points for determination before it and the decision shall be rendered on such points along with reasons for the decision. Thus, it is incumbent upon the CIT(A) to deal with the grounds on merits even in ex parte order. In view of Section 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non-prosecution. This view is also taken by the Hon'ble Bombay High Court in case of CIT vs. Premkumar Arjundas Luthra HUF, (2017) 291 CTR 614 (Bom.). A bare glance of the order of the CIT(A) shows that CIT(A) has not addressed itself on various points placed for its determination at all and dismissed the appeal of assessee for default in non-appearance. Needless to say, the CIT(A) plays Promotional Club role of both adjudicating authority as well as appellate authority. Thus, the CIT(A) could not have shunned the appeal for non-compliance without addressing the issue on merits.
6. In the totality of the circumstances, we consider it just and expedient to restore the matter back to the CIT(A) in the larger interest of justice with a view to enable the assessee to avail proper opportunity for disposal of appeal by the CIT(A) on various points. The assessee is cautioned to extend full co-operation to the CIT(A) without any demur, failing which, the CIT(A) shall be at liberty to conclude the appellate proceedings in accordance with law. Hence, the order of the CIT(A) appealed against, is set aside and all the issues raised in the impugned appeal are restored back to the file of the CIT(A) for fresh adjudication in accordance with law after giving reasonable opportunity of hearing to the assessee.”
In view the above, without offering any comment on merit of the case, we deem it fit to set aside the impugned order and remit the matter back to the file of the CIT(A) for deciding the case afresh, in accordance with law, after providing adequate opportunity of being heard to the appellant assessee. Ordered accordingly. The appellant assessee, no doubt, shall cooperate in remitted appellate proceedings.
In the result, the assessee’s appeal is allowed for statistical purposes.
Order pronounced in open Court on 28th July, 2025