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Facts
The assessee filed an appeal against an order of the CIT(A) which dismissed their appeal ex-parte. The assessee claimed that they did not receive effective service of notices, while the CIT(A) noted multiple opportunities and adjournments were granted, yet the assessee failed to respond. The CIT(A) upheld the disallowance of Rs. 15,00,000 for license fees and addition of Rs. 74,25,568 for undisclosed income.
Held
The Tribunal held that the CIT(A) order failed to meet the requirements of Section 250(6) of the Income Tax Act as it did not independently examine the issues on merits and lacked reasons. Although the assessee's conduct of not responding was not approved, it did not absolve the CIT(A) of its statutory obligation to adjudicate the appeal on merits.
Key Issues
Whether the CIT(A) order dismissing the appeal ex-parte without independent adjudication on merits and without providing reasons, violates the principles of natural justice and statutory requirements.
Sections Cited
250(6)
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI ANIKESH BANERJEE
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 11.07.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds:
The learned Commissioner of Income 1. The learned Commissioner of Income-tax (Appeals) erred in tax (Appeals) erred in upholding the disallowance of Rs. 15,00,000/ lding the disallowance of Rs. 15,00,000/- on account of on account of Provision for License Fees. The 4 Company has made provision as Provision for License Fees. The 4 Company has made provision as Provision for License Fees. The 4 Company has made provision as per consistently followed accounting policy. per consistently followed accounting policy.
The learned Commissioner of Income 2. The learned Commissioner of Income-tax (Appeals) erred in tax (Appeals) erred in upholding the addition of Rs. upholding the addition of Rs. 74,25,568/- as undisclosed income as undisclosed income arising on account of difference between the gross receipts from arising on account of difference between the gross receipts from arising on account of difference between the gross receipts from Hindustan Unilever Limited as per books of account and as per AIR Hindustan Unilever Limited as per books of account and as per AIR Hindustan Unilever Limited as per books of account and as per AIR Information/Form 26AS. It is submitted that the aforesaid difference Information/Form 26AS. It is submitted that the aforesaid difference Information/Form 26AS. It is submitted that the aforesaid difference was on account of err was on account of erroneous data entry in TDS Return by oneous data entry in TDS Return by Hindustan Unilever Limited which was subsequently rectified. Hindustan Unilever Limited which was subsequently rectified. Hindustan Unilever Limited which was subsequently rectified. The conclusion arrived at by the Learned CIT(A) is hasty and based The conclusion arrived at by the Learned CIT(A) is hasty and based The conclusion arrived at by the Learned CIT(A) is hasty and based on conjunctures and surmises and is contrary on conjunctures and surmises and is contrary to the facts. 2. At the outset, the learned Departmental Representative At the outset, the learned Departmental Representative At the outset, the learned Departmental Representative submitted that the assessee remained ex parte before the learned submitted that the assessee remained ex parte before the learned submitted that the assessee remained ex parte before the learned Commissioner of Income Commissioner of Income-tax (Appeals). The learned counsel for the tax (Appeals). The learned counsel for the assessee, however, contended that the notices issued by the learned assessee, however, contended that the notices issued by the learned assessee, however, contended that the notices issued by the learned CIT(A) could not be effectively served upon the assessee and, T(A) could not be effectively served upon the assessee and, T(A) could not be effectively served upon the assessee and, therefore, no representation could be made during the appellate therefore, no representation could be made during the appellate therefore, no representation could be made during the appellate proceedings. The learned CIT(A), while dismissing the appeal, proceedings. The learned CIT(A), while dismissing the appeal, proceedings. The learned CIT(A), while dismissing the appeal, recorded that several notices were issued to the assessee on recorded that several notices were issued to the assessee on recorded that several notices were issued to the assessee on different dates calling for submissions and that, despite grant of dates calling for submissions and that, despite grant of dates calling for submissions and that, despite grant of adjournments and a final opportunity specifically warning of adjournments and a final opportunity specifically warning of adjournments and a final opportunity specifically warning of adverse consequences, the assessee failed to respond. The learned adverse consequences, the assessee failed to respond. The learned adverse consequences, the assessee failed to respond. The learned CIT(A), thereafter, dismissed the appeal, holding that the assessee CIT(A), thereafter, dismissed the appeal, holding that the assessee CIT(A), thereafter, dismissed the appeal, holding that the assessee was not interested in prosecuting the same and that the not interested in prosecuting the same and that the not interested in prosecuting the same and that the assessment order did not suffer from any infirmity. The relevant assessment order did not suffer from any infirmity. assessment order did not suffer from any infirmity. finding of the Ld. CIT(A) is reproduced as under: finding of the Ld. CIT(A) is reproduced as under:
“4.1 During the appellate proceedings, the appellant was issued 4.1 During the appellate proceedings, the appellant was issued 4.1 During the appellate proceedings, the appellant was issued notices on 19.04.2017, 1 notices on 19.04.2017, 18.01.2018, 19.01.2018 and 08.01.2021 8.01.2018, 19.01.2018 and 08.01.2021 requiring submission of a response. However, in the response no requiring submission of a response. However, in the response no requiring submission of a response. However, in the response no reply submitted and adjournment sought by the appellant. reply submitted and adjournment sought by the appellant. reply submitted and adjournment sought by the appellant. Subsequently, in the interest of natural justice, an adjournment Subsequently, in the interest of natural justice, an adjournment Subsequently, in the interest of natural justice, an adjournment granted through notices dated 07. granted through notices dated 07.05.2025 issued to appellant with 05.2025 issued to appellant with compliance date 13.05.2025 to submit the reply. The notice compliance date 13.05.2025 to submit the reply. The notice compliance date 13.05.2025 to submit the reply. The notice explicitly stated: "You are requested to furnish your detailed replies explicitly stated: "You are requested to furnish your detailed replies explicitly stated: "You are requested to furnish your detailed replies on the points (mentioned in the notice) within the specified time on the points (mentioned in the notice) within the specified time on the points (mentioned in the notice) within the specified time frame mentioned in the noti frame mentioned in the notice. Non-compliance may result in the compliance may result in the case being decided on merits or dismissed accordingly." It was case being decided on merits or dismissed accordingly." It was case being decided on merits or dismissed accordingly." It was further highlighted that timely submission of the response would further highlighted that timely submission of the response would further highlighted that timely submission of the response would ensure a fair and just examination of the appellant's case. Despite ensure a fair and just examination of the appellant's case. Despite ensure a fair and just examination of the appellant's case. Despite this opportunity, the a this opportunity, the appellant once again failed to comply with the ppellant once again failed to comply with the notice. 4.2 In this context, reference may be made to the ratio of various 4.2 In this context, reference may be made to the ratio of various 4.2 In this context, reference may be made to the ratio of various judicial pronouncements where it has been held that: judicial pronouncements where it has been held that: "natural justice are not codified nor are they unvarying in all "natural justice are not codified nor are they unvarying in all "natural justice are not codified nor are they unvarying in all situations, rather situations, rather they are flexible. It has to be adhered from both they are flexible. It has to be adhered from both ends i.e. from the assessee as well as from the authority. They ends i.e. from the assessee as well as from the authority. They ends i.e. from the assessee as well as from the authority. They may, however, be summarized in one word: 'fairness'. In other may, however, be summarized in one word: 'fairness'. In other may, however, be summarized in one word: 'fairness'. In other words, what they require is fairness by the authority concerned. Of words, what they require is fairness by the authority concerned. Of words, what they require is fairness by the authority concerned. Of course, what is fair would depend on the situation and the context. t is fair would depend on the situation and the context. t is fair would depend on the situation and the context. Lord Esher M.R. in Voinet vs. Barrett (1885) 55 L.J. QB 39, Lord Esher M.R. in Voinet vs. Barrett (1885) 55 L.J. QB 39, Lord Esher M.R. in Voinet vs. Barrett (1885) 55 L.J. QB 39, observed: "Natural justice is the natural sense of what is right and observed: "Natural justice is the natural sense of what is right and observed: "Natural justice is the natural sense of what is right and wrong." In this context, we may refer to observations of the Hon'ble wrong." In this context, we may refer to observations of the Hon'ble wrong." In this context, we may refer to observations of the Hon'ble Justice Krishna lyer J..... opportunity should be real and not ustice Krishna lyer J..... opportunity should be real and not ustice Krishna lyer J..... opportunity should be real and not ritualistic, effective and not illusory and must be followed by a fair ritualistic, effective and not illusory and must be followed by a fair ritualistic, effective and not illusory and must be followed by a fair consideration of the explanation offered and the materials available, consideration of the explanation offered and the materials available, consideration of the explanation offered and the materials available, culminating in an order which discloses reasons for t culminating in an order which discloses reasons for t culminating in an order which discloses reasons for the decision sufficient to show that the mind of the authority has been applied sufficient to show that the mind of the authority has been applied sufficient to show that the mind of the authority has been applied relevantly and rationally and without reliance on facts not furnished relevantly and rationally and without reliance on facts not furnished relevantly and rationally and without reliance on facts not furnished to the affected party. Natural justice, must warn, cannot be to the affected party. Natural justice, must warn, cannot be to the affected party. Natural justice, must warn, cannot be perverted into anything unnatural or unjust an perverted into anything unnatural or unjust and cannot therefore be d cannot therefore be treated as a set of dogmatic prescriptions applicable without treated as a set of dogmatic prescriptions applicable without treated as a set of dogmatic prescriptions applicable without reference to the circumstances of the case. The question merely is, reference to the circumstances of the case. The question merely is, reference to the circumstances of the case. The question merely is, in all conscience have you been fair in dealing with that man? If you in all conscience have you been fair in dealing with that man? If you in all conscience have you been fair in dealing with that man? If you have not been arbitrary, not absen have not been arbitrary, not absent-minded, not unreasonable or minded, not unreasonable or not unspeaking, you cannot deny that there has been no 'natural not unspeaking, you cannot deny that there has been no 'natural not unspeaking, you cannot deny that there has been no 'natural justice' breached, rather fullest natural justice has been followed justice' breached, rather fullest natural justice has been followed justice' breached, rather fullest natural justice has been followed but it is the person who has not availed any chances for the but it is the person who has not availed any chances for the but it is the person who has not availed any chances for the reasons best known to him." reasons best known to him." Despite providing ample opportunities of being heard and following te providing ample opportunities of being heard and following te providing ample opportunities of being heard and following the principle of natural justice, the assessee chose not avail the the principle of natural justice, the assessee chose not avail the the principle of natural justice, the assessee chose not avail the same by failing to comply with the notices of the appellant same by failing to comply with the notices of the appellant same by failing to comply with the notices of the appellant authority. 4.3 The aforesaid mentioned circumstances show that the 4.3 The aforesaid mentioned circumstances show that the 4.3 The aforesaid mentioned circumstances show that the appellant is not interested in pursuing its appeal. The maxim 'vigilantibus is not interested in pursuing its appeal. The maxim 'vigilantibus is not interested in pursuing its appeal. The maxim 'vigilantibus non-dormientibus jura subvenunť i.e. the law assists those who are dormientibus jura subvenunť i.e. the law assists those who are dormientibus jura subvenunť i.e. the law assists those who are vigilant and not those who sleep over their right, is applicable in this vigilant and not those who sleep over their right, is applicable in this vigilant and not those who sleep over their right, is applicable in this case. The Hon'ble ITAT in The Hon'ble ITAT in for the AY 027/CHD/2005 for the AY 2002-03 in the case of M/s Chhabra Land & Housing Ltd. after 03 in the case of M/s Chhabra Land & Housing Ltd. after 03 in the case of M/s Chhabra Land & Housing Ltd. after following the decision of Hon'ble Supreme Court in the case of B.N. following the decision of Hon'ble Supreme Court in the case of B.N. following the decision of Hon'ble Supreme Court in the case of B.N. Bhattacharjee & other 118 ITR 461 [SC] held that the appeal does Bhattacharjee & other 118 ITR 461 [SC] held that the appeal does Bhattacharjee & other 118 ITR 461 [SC] held that the appeal does not mean merely filing of the appeal b not mean merely filing of the appeal but effectively pursuing the ut effectively pursuing the same. Considering the above facts and material on record, it is held that Considering the above facts and material on record, it is held that Considering the above facts and material on record, it is held that the Assessing Officer has made the addition on merits after the Assessing Officer has made the addition on merits after the Assessing Officer has made the addition on merits after thoroughly analyzing the facts of the case. No infirmity or error is thoroughly analyzing the facts of the case. No infirmity or error is thoroughly analyzing the facts of the case. No infirmity or error is observed observed in in the the order order pas passed sed by by the the Assessing Assessing Officer. Officer. Consequently, the appeal filed by the assessee lacks merit and is Consequently, the appeal filed by the assessee lacks merit and is Consequently, the appeal filed by the assessee lacks merit and is hereby dismissed. hereby dismissed. In the result, the appeal of the assessee stands In the result, the appeal of the assessee stands dismissed. dismissed.”
We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and perused the material pl perused the material placed on record. The Ld. counsel for the The Ld. counsel for the assessee filed a Paper Book containing pages 1 to 247 and assessee filed a Paper Book containing pages 1 to 247 and assessee filed a Paper Book containing pages 1 to 247 and submitted that issue might be decided on the merit of the case. It is submitted that issue might be decided on the merit of the case. submitted that issue might be decided on the merit of the case. not in dispute that the assessee did not file any written not in dispute that the assessee did not file any written not in dispute that the assessee did not file any written submissions submissions before before the the learned learned CIT(A) CIT(A) despite despite repeated repeated opportunities. However, the statutory duty cast upon the first opportunities. However, the statutory duty cast upon the first opportunities. However, the statutory duty cast upon the first appellate authority under section 250(6) of the Act is to dispose of appellate authority under section 250(6) of the Act is to dispose of appellate authority under section 250(6) of the Act is to dispose of the appeal on merits by passing a speaking order, setting out the the appeal on merits by passing a speaking order, setting out the the appeal on merits by passing a speaking order, setting out the points for determination, the dec points for determination, the decision thereon, and the reasons for ision thereon, and the reasons for such decision.
3.1 The power exercised by the learned CIT(A) is quasi The power exercised by the learned CIT(A) is quasi The power exercised by the learned CIT(A) is quasi-judicial in nature. It is well-settled that a quasi settled that a quasi-judicial order must disclose judicial order must disclose due application of mind and must be supported by reasons. An due application of mind and must be supported by reasons. An due application of mind and must be supported by reasons. An order which merely records non ch merely records non-appearance of the appellant and appearance of the appellant and proceeds proceeds proceeds to to to affirm affirm affirm the the the assessment, assessment, assessment, without without without independent independent independent examination of the issues on merits, does not meet the mandate of examination of the issues on merits, does not meet the mandate of examination of the issues on merits, does not meet the mandate of section 250(6) of the Act. section 250(6) of the Act.
3.2 The recording of reasons is an indispensable part The recording of reasons is an indispensable part The recording of reasons is an indispensable part of the rule of law and is a necessary safeguard against arbitrariness in decision- law and is a necessary safeguard against arbitrariness in decision law and is a necessary safeguard against arbitrariness in decision making by judicial and quasi making by judicial and quasi-judicial authorities. An unreasoned judicial authorities. An unreasoned order is inherently vulnerable, as it deprives the affected party of order is inherently vulnerable, as it deprives the affected party of order is inherently vulnerable, as it deprives the affected party of the right to know the basis of the decis the right to know the basis of the decision and renders effective ion and renders effective appellate scrutiny illusory. appellate scrutiny illusory.
3.3 While the conduct of the assessee in not responding to notices While the conduct of the assessee in not responding to notices While the conduct of the assessee in not responding to notices cannot be approved, such conduct does not absolve the appellate cannot be approved, such conduct does not absolve the appellate cannot be approved, such conduct does not absolve the appellate authority of its statutory obligation to adjudicate the appeal on authority of its statutory obligation to adjudicate the appeal on authority of its statutory obligation to adjudicate the appeal on merits. Principles of natural justice require fairness not only in ts. Principles of natural justice require fairness not only in ts. Principles of natural justice require fairness not only in granting opportunity but also in consideration and adjudication. An granting opportunity but also in consideration and adjudication. An granting opportunity but also in consideration and adjudication. An order passed without discussing the issues arising from the order passed without discussing the issues arising from the order passed without discussing the issues arising from the assessment and the grounds of appeal cannot be sustained in law. assessment and the grounds of appeal cannot be sustained in law. assessment and the grounds of appeal cannot be sustained in law.
3.4 In view of the above legal position, we are of the considered In view of the above legal position, we are of the considered In view of the above legal position, we are of the considered opinion that the order passed by the learned CIT(A) does not satisfy opinion that the order passed by the learned CIT(A) does not satisfy opinion that the order passed by the learned CIT(A) does not satisfy the requirements of section 250(6) of the Act. Accordingly, the the requirements of section 250(6) of the Act. Accordingly, the the requirements of section 250(6) of the Act. Accordingly, the impugned order is set aside and the matter is restored to the file of impugned order is set aside and the matter is restored to impugned order is set aside and the matter is restored to the learned CIT(A) with a direction to adjudicate the appeal afresh the learned CIT(A) with a direction to adjudicate the appeal afresh the learned CIT(A) with a direction to adjudicate the appeal afresh on merits by passing a reasoned and speaking order in accordance on merits by passing a reasoned and speaking order in accordance on merits by passing a reasoned and speaking order in accordance with law, after granting reasonable opportunity of being heard to with law, after granting reasonable opportunity of being heard to with law, after granting reasonable opportunity of being heard to the assessee.
3.5 The ground of appeal of th The ground of appeal of the assessee is accordingly allowed for e assessee is accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.