RAMESH MADHUKAR DEOLE ,MUMBAI vs. ITO WARD 22(3)6, MUMBAI

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ITA 8903/MUM/2025Status: DisposedITAT Mumbai12 May 2026AY 2018-196 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that dismissing an appeal without adjudicating on merits, even for non-prosecution, violates principles of natural justice. While acknowledging the assessee's negligence, the Tribunal decided to remand the case for fresh adjudication.

What were the facts?

The assessee's appeal against a penalty was dismissed ex-parte by the CIT(A) for non-prosecution. The assessee contended that the non-appearance was due to the demise of the person handling their affairs and that the underlying addition, which formed the basis of the penalty, was later set aside by the CIT under Section 264.

What were the issues?

Whether an appeal can be dismissed solely on grounds of non-prosecution without considering the merits, especially when the basis for the penalty is subsequently nullified. The issue also involves the assessee's right to natural justice despite their non-compliance.

Which sections of the Income-tax Act were involved?

Section 271AAC(1),Section 144,Section 69,Section 264,Section 250

AI-generated summary — verify with the full judgment below

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR

For Respondent: Shri Umashankar Prasad, (CIT-DR)
Hearing: 26.03.2026Pronounced: 12.05.2026

PER PRABHASH SHANKAR [A.M.] :- The present appeal emanating from the appellate order dated 30.10.2025 is preferred by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to penalty levied u/s. 271AAC(1) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 13.01.2022 for the Assessment Year [A.Y.] 2018-19. P a g e | 2 A.Y. 2018-19 Ramesh Madhukar Deole

2.

The grounds of appeal are as under:

1.

On the facts and in the circumstances of the case and in law, the National Faceless Appeal Centre (CIT(A)) has erred in: a) Dismissing the appeal ex-parte for non-prosecution vide order dated 30/10/2025. The said order is bad in law, void ab-initio, and passed in gross violation of the principles of natural justice. The appellant had sufficient and reasonable cause for the non-appearance, which was due to the unfortunate demise of the person handling the appellant's affairs in his Chartered Accountant's office, a reason entirely beyond the appellant's control. b) Confirming the penalty of Rs. 1,52,376/- levied u/s.271AAC(1) of the Income Tax Act, 1961 (ITA), without adjudicating the appeal on its merits. c) Not appreciating that the very basis for the levy of penalty, i.e., the quantum addition made in the ex-parte assessment order dated 02.06.2021, was set aside by the Ld. Commissioner of Income Tax (CIT) in an order dtd. 30.01.2025 passed u/s.264 of the ITA. The fact that the appellant was preferring to file petition u/s.264 of the ITA in respect of the quantum was mentioned in the statement of facts filed before the NFAC - (Appeals). d) Not taking cognizance of the order passed u/s.264 of the ITA by the CIT, which was available on the Income Tax Business Application (ITBA) portal and formed part of the departmental records. The NFAC (Appeals), being a quasi-judicial authority, cannot function capriciously without regard to available material, as held by the Hon'ble Supreme Court in State of Kerala v. C. Velukutty [60 ITR 239] The failure to consider the said order dtd.30.01.2025, which nullified the very basis of the penalty, renders the impugned appellate order arbitrary, unjust, and legally unsustainable. e) Not appreciating that the penalty levied u/s. 271AAC(1) of the ITA is legally unsustainable and premature, as the underlying quantum addition does not survive in the eyes of the law.

3.

Relevant facts of the case are that the return of income was filed declaring income of Rs 3,57,235/- and the assessment was made at Rs 80,99,906/- u/s 144 of the Act by making certain addition u/s 69 of the Act and also capital gains. In the subsequent appeal, the ld.CIT(A)

P a g e | 3 A.Y. 2018-19 Ramesh Madhukar Deole issued notices of hearing on at least three occasions which remained non complied. Accordingly, the appeal was dismissed upholding the addition.

4.

When the case was called out by the Bench, none attended for the asessee. In the appeal memo, it is inter alia requested to restore the appeal to the ld.CIT(A)for fresh consideration.

5.

In this case, the assessment order was passed ex-parte invoking the provisions of section 144 of the Act since there was no compliance by the assessee during assessment proceedings. The assessee did not come forward with any explanation to the impugned addition despite adequate opportunity of hearing. Accordingly, the ld.CIT(A) dismissed the appeal on account of non-prosecution. It is observed that the ld.CIT(A) dismissed the appeal solely on the ground of non-prosecution. He failed to adjudicate the issues raised in the grounds of appeal and did not examine the material available on record. Such dismissal without deciding the appeal on merits is contrary to the principles of natural justice. It is settled law that it is the duty of the appellate authority to dispose of an appeal on merits after considering the material on record, even if the appellant fails to appear.

P a g e | 4 A.Y. 2018-19 Ramesh Madhukar Deole 5. 1. However, it is equally true that it is the fundamental duty of the assessee to diligently pursue the appeal and comply with the notices and proceedings initiated by the Revenue authorities. The framework of the Act and the e-proceedings system rely heavily on the co-operation and active participation of the taxpayer. Despite the notices under section 250 of the Act by the CIT(A), no substantive explanation was submitted. The failure of the assessee to make any response before both the authorities below reflects gross negligence and an indifference that is unacceptable. The principles of natural justice operate both ways, while the Revenue authorities are required to provide a reasonable opportunity of being heard, the taxpayer is equally obligated to co- operate with the authorities and utilize the opportunities extended. In the present case, despite receiving adequate opportunities, the assessee displayed a casual approach and indifference, which not only delayed the appellate proceedings but also burdened the judicial system. Such conduct cannot be condoned.

5.

2 In light of the non-compliant attitude of the assessee, levy of cost needs to be evaluated in this case as cost serves as a necessary deterrent to ensure that taxpayers act with due diligence in pursuing their appeals and respecting the timelines and processes laid down under the law. It also emphasizes the principle that while justice must be P a g e | 5 A.Y. 2018-19 Ramesh Madhukar Deole ensured, the system cannot cater to indolence or negligence on the part of the assessee. 5.3 As the assessee has requested for one more opportunity and this request was not objected by the ld.DR, we are of the opinion that the scales of justice demand that the matter should be verified and revisited at the level of ld. CIT(A) and accordingly, the matter should be remanded back to the file of ld. CIT(A) for de novo adjudication by him while applying the principles of natural justice after affording sufficient opportunity of being heard to the assessee. We order accordingly.

5.

4 Moreover, considering assessee’s non-compliant and non-co- operative attitude and lack of diligence in pursuing the appeal, we impose a cost of Rs.11,000/- on him. The cost shall be deposited to the credit of the Income Tax Department within 15 days of the receipt of this order and proof of payment shall be submitted before the ld.CIT(A).

6.

In the result, the appeal stands allowed for statistical purposes. Order pronounced in the open court on 12/05/2026. NARENDER KUMAR CHOUDHRY PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)

P a g e | 6 A.Y. 2018-19 Ramesh Madhukar Deole Place: म ुंबई/Mumbai ददनाुंक /Date 12.05.2026 Lubhna Shaikh / Steno

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.

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