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Facts
The assessee engaged in construction and civil project works filed an appeal against the CIT(A)'s order which dismissed the appeal due to non-compliance. The CIT(A) had dismissed the appeal on grounds of non-prosecution, without adjudicating on merits, citing repeated failure of the assessee to comply with notices.
Held
The Tribunal held that dismissing an appeal without deciding on merits, especially when the assessee failed to appear or comply, violates principles of natural justice. While the assessee has a duty to comply, the appellate authority must decide on merits. The order of CIT(A) was set aside for fresh adjudication.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal for non-prosecution without deciding on merits, and whether the principles of natural justice were violated.
Sections Cited
144, 56(2)(x), 250
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Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 10.10.2024 is filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 144 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 27.04.2021 for the Assessment Year [A.Y.] 2018-19. P a g e | 2 A.Y. 2018-19 Vinayaka Enterprises 2. The grounds of appeal are as under:- Ground No.1: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has overlooked the principles of natural justice and has passed the order u/s. 250 without giving enough opportunities of being heard and presenting the case.
Ground No.2: On the facts and in the circumstances of the case and in law, the Ld. A.O. erred in making an addition of Rs. 4,19,23,500 u/s 56(2)(x) of the Act, on account of the difference between the purchase price of the properties purchased by the appellant and the value as per the stamp valuation authority. The appellant prays that the addition of Rs. 4,19,23,500 may kindly be deleted.
Ground No. 3: On the facts and in the circumstances of the case and in law, the Ld. A.O. erred in making an addition of Rs. 11,09,90,819 on account of the outstanding balance of sundry creditors for the year under consideration. The appellant prays that the addition of Rs. 11,09,90,819 may kindly be deleted.
Brief facts of the case are that the assessee is engaged in the business of Construction and Civil Project works. Assessment order was passed u/s 144 of the Act by making an addition of Rs 4,19,23,500/- and invoking the provisions of section 56(2)(x) of the Act, on account of difference in the purchase price of certain properties purchased by the assessee vis-à-vis the stamp duty value thereof. Besides, an addition of Rs 1,10,09,819/- was also made by the ld.AO in respect of outstanding
P a g e | 3 A.Y. 2018-19 Vinayaka Enterprises ‘Sundry Creditors’. The additions were made on account of lack of proper compliance by the assessee during assessment proceedings. The assessee filed appeal against the said order before the ld.CIT(A) who also dismissed the appeal on account of repeated non-compliance of notices sent to the assessee for hearing of the appeal. It is is stated that as many as seven notices sent through e-portal were duly served on the assessee who chose not to make any compliance. Accordingly, he upheld the assessment order dismissing the appeal of the assessee.
Before us, the ld.DR has relied on the orders of authorities below while the ld.AR has requested for restoration of the appeal before the ld.CIT(A) claiming that the non compliance was not deliberate.
We have heard the rival sides and have also gone through the materials on records. Evidently, the ld.CIT(A) dismissed the appeal mainly on the ground of non-prosecution though he took into consideration the Statement of Facts and the contents of the assessment order. Thus, the ld.CIT(A) failed to adjudicate the issues raised in the grounds of appeal. 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 Vinayaka Enterprises 5.1 However, it is equally true that it is a fundamental duty of the assessee as well 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 cooperation and active participation of the taxpayer. In the present case, the assessee not only failed to properly comply in the assessment proceedings but during appeal proceedings also, failed to demonstrate even a minimal level of responsibility in monitoring the e-filing portal for updates and notices related to its appeal. Despite the issuance of multiple notices under section 250 of the Act by the ld.CIT(A) as stated above, no compliance was made in any manner whatsoever by the assessee. The failure of the assessee to take any initiative reflects gross negligence and an indifference that is unacceptable, particularly when the appeal involves significant additions and disallowances amounting.
2 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 clogs the judicial system.
P a g e | 5 A.Y. 2018-19 Vinayaka Enterprises 5.3 In view of the peculiar facts and the circumstances of the case, the levy of costs would be fully justified as imposition of cost would serve 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 ensured, the system cannot cater to indolence or negligence on the part of the assessee.
4 However, following the principles of natural justice, we are of the considered opinion that the assessee should be allowed a final opportunity of hearing for judicious adjudication of its grounds of appeal. We therefore, set aside the appellate order and restore the matter to him for de novo consideration with a direction to decide the appeal on merits after providing a reasonable opportunity of being heard to the assessee.
5 Considering assessee’s failure to monitor the e-filing portal and lack of diligence in pursuing the appeal, we impose a cost of Rs.25,000/- on it. 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).
P a g e | 6 A.Y. 2018-19 Vinayaka Enterprises 6. In the result, the appeal of the assessee is allowed for statistical purposes, subject to the levy of costs as specified above.
Order pronounced in the open court on 28/03/2025. NARENDER KUMAR CHOUDHRY PRABHASH SHANKAR ( (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)
Place: म ुंबई/Mumbai ददनाुंक /Date 28.03.2025 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.