A ATHIYANNAN,SALEM vs. ACIT, CIRCLE-II,, SALEM

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ITA 1029/CHNY/2026Status: DisposedITAT Chennai21 May 2026AY 2007-087 pages
AI SummaryRemanded

What did the Tribunal hold?

The tribunal held that the CIT(A) is obligated to dispose of appeals on merits, even if ex parte, and cannot dismiss them solely for non-prosecution. The matter was remanded for de novo disposal.

What were the facts?

The assessee's appeal before the CIT(A) was dismissed for non-prosecution. The CIT(A) did not adjudicate the addition of Rs. 34,19,016 made by the AO on account of excess stock found during a survey.

What were the issues?

Whether the CIT(A) can dismiss an appeal for non-prosecution without deciding the merits of the case, and if an opportunity for hearing should be provided.

Which sections of the Income-tax Act were involved?

Section 250,Section 251

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI BENCHES, CHENNAI

Before: HON’BLE ABY T VARKEY & HON’BLE INTURI RAMA RAO

For Respondent: Ms. R Anitha,Addl.CIT

आदेश / ORDER PER INTURI RAMA RAO, ACCOUNTANT MEMBER: This appeal filed by the Assessee directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], dated 26.06.2025 passed under section 250 of the Income Tax Act, 1961 for the 2007-08

2.

The Assessee raised the following grounds of appeal : “ 1. The order of the Commissioner of Income Tax(Appeals) dismissing the appeal ex parte is contrary to law, erroneous and unsustainable on the facts of the case.

2.

The CIT(A) erred in dismissing the appeal for non-prosecution without adjudicating the issue on merits and is in violation of principles of natural justice.

3.

The CIT(A) ought to have appreciated that the notices sent were inadvertently not attended by the auditor and assessee was unaware of the ex parte order and hence an opportunity of hearing be provided to assessee.

4.

The CIT(A) erred in confirming the addition of Rs.34,19,016 as difference in stock.

5.

The CIT(A) was not justified confirming the addition only based on the survey record without giving due credence to the reconciliation statement filed by the assessee before the assessing officer.

6.

The CIT(A) failed to appreciate that the reconciliation statement filed before the AO on 16.12.2007 clearly exhibits there is no excess stock between the physical stock and book figures and hence sustaining the addition was unjustified.

7.

The CIT(A) further failed to appreciate that the difference during survey arose because of overlooking two bills which was truly reflected in the tally ledger extract and therefore the addition was unjustifiable on the facts of the case.

8.

The CIT(A) further failed to appreciate that the AO cannot ignore the discrepancies pointed out in the survey report and the reconciliation provided the true and fair picture of the stock position of the assessee and hence the addition was to be deleted.

9.

The CIT(A), in any event, ought to have afforded adequate opportunity and also considered the reconciliation statement of assessee and deleted the addition.”

3.

Briefly stated facts of the case are that the appellant is an Individual engaged in the business of textiles. The return of income was filed u/s.139(1) of the Act on 31.10.2007 for the Assessment Year 2007-08. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Circle-II, Salem (hereinafter called ‘AO’) at a total income of Rs.46,95,860/-. While doing so, the Assessing Officer made addition of Rs.34,19,016/- on account of excess stock found during the course of verification of vehicle stock conducted during the course of 133A proceedings.

4.

Being aggrieved by the above assessment order, the appellant preferred an appeal before ld.CIT(A) who vide impugned order dismissed the appeal for non- prosecution without entering into the merits of the addition.

5.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal.

6.

On the other hand, the ld.Sr.Departmental Representative opposed the above submissions and submits that the order passed by ld.CIT(A) is justified as the appellant had not caused appearance before the ld.CIT(A).

7.

We heard rival submissions and perused the material available on record. We find that the ld.CIT(A) dismissed the appeal of the appellant for non- prosecution without entering into the merits of the addition. The ld.CIT(A)

without dealing with the contentions of the appellant merely dismissed the appeal in limine for non-prosecution. As contemplated u/s.250(6) of the Act the ld.CIT(A) is required to frame points of determination followed by a detailed discussion thereupon before passing the order. It is the settled position of law that the ld.CIT(A), even while disposing of the appeal ex-parte, he is duty bound to dispose of the appeal on merits. Reliance in this regard can be placed on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Premkumar Arjundas Luthra 279 CTR 614. The Hon’ble Bombay High Court has held in the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF) [2017] 297 CTR 614 (Bombay) as under : Quote, “8.From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act.

Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A)

would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn.

Therefore, it would be noticed that the powers of the CIT(A) is coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.” Unquote.

8.

Therefore, in the light of above legal position, we are of the considered opinion and deem it proper to remit the matter requires to be remanded to the file of Learned CIT(A)/NFAC for de novo disposal of the issue on merits by passing a speaking order after allowing reasonable opportunity to the appellant, in accordance with law. All the contentions raised by the appellant are left open for consideration before the ld.CIT(Appeals).

9.

In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.

Order pronounced in the open court on 21st May, 2026.

Sd/- Sd/- (ABY T VARKEY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai; �दनांक / Dated : 21st May, 2026 SGR, Sr.PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT Chennai/Madurai/Coimbatore/Salem. 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “सी” ब�च, चे�नई / DR, ITAT Chennai. गाड� फ़ाइल / Guard File. 5.

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