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Facts
The assessee, a vegetable trader, had a cash deposit of Rs. 94.61 lakhs. After a notice under Section 148 of the Income-tax Act, the assessee filed a return. The Assessing Officer estimated profit at 10% on sales, making an addition to income. The CIT(A) dismissed the assessee's appeal for non-prosecution, as the assessee allegedly did not respond to notices, though the assessee claimed non-receipt due to an incorrect email ID provided by their accountant.
Held
The Income Tax Appellate Tribunal held that the CIT(A) does not possess the power to dismiss an appeal for non-prosecution and must decide cases on their merits. Consequently, the ITAT restored the appeal back to the CIT(A) with a direction to provide the assessee an opportunity for hearing and then decide the issue on its merits.
Key Issues
Whether the CIT(A) was legally empowered to dismiss the assessee's appeal for non-prosecution without deciding it on merits.
Sections Cited
147, 144B, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Shri Yeluvahalli Venkateshappa Lakshman (the assessee/appellant) for the assessment year 2015-16 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 16.6.2025 wherein the appeal filed by the assessee against the assessment order dated 21.3.2023 passed u/s. 147 r.w.s. 144B of the Income-tax Act, 1961 [the Act] by the Assessment Unit, Income Tax Department was dismissed.
The assessee is aggrieved and in appeal before us..
Briefly stated facts of the case show that assessee is a trader in fresh vegetables and owns a mandi at Agricultural Produce Marketing Committee [APMC] Yard, Bangarpet. Assessee is a trader in Potatoes during the year having a turnover of Rs.1,05,37,464 resulting into net profit of Rs.2,33,265. Information was received that assessee has made cash deposit in SB A/c with ICICI Bank Ltd., Kolar of Rs.94,61,122 and therefore notice u/s. 148 of the Act was issued on 30.3.2022. Assessee was issued several notices and a show cause notice to explain the details of cash deposit. It was noted that assessee has not filed any income-tax return during the year. However, in response to notice u/s. 148, assessee has filed return of income declaring total income of Rs.2,34,311. Show cause notice shows that assessee has turnover for 3 years and net profit is also in the range of 8 to 9%. As the assessee failed to make any explanation, it was asked that why profit on the sale of Rs.1,05,37,764 should not be considered at 10% and a sum of Rs.10,53,776 should not be added to the total income of the assessee.
The assessee submitted that he is a villager from a small village and doing business of trader in fresh vegetables, particularly Potatoes in the name & style of Laxman Traders. He was having a shop in the Mandi. It was submitted that he has purchased Potatoes of Rs.99,18,381 and sold them for Rs.1,05,37,764 earning a Net Profit of Rs.2,33,265. His income was below taxable limit. He submitted cash book and sales book, purchase register, details of expenditure, etc. The assessee also submitted the cash summary. He submitted that sale of Potatoes is generally made in cash. He mentioned that he has made sales of Rs.48,78,200 and withdrawn cash from the bank a/c of Rs.57,65,378. He also stated that his expenses are mostly in cash. The ld. AO disbelieved the statement and made an addition of Rs.8,20,511 by estimating the net profit @ 10% of total amount on sale of Rs.1,05,37,765 by reducing the actual profit shown by the assessee at Rs.2,33,265. Accordingly the total income was assessed at Rs.10,54,822.
The assessment order was challenged before the ld. CIT(A) who passed the order on 16.6.2025. The ld. CIT(A) noted that assessee has been issued several notices 4 times, but did not respond to any of the notices and therefore he dismissed the appeal of the assessee for non- prosecution by relying on the decision of Hon’ble Supreme Court in 118 ITR 461.
The assessee is aggrieved with the same and has preferred this appeal.
The assessee reiterated the same facts stating that he is a villager, while filing Form 35 he gave email id of ishrath.faroz.klr@gmail.com, which did not belong to him, but of an Accountant, who neither informed the assessee of any such notice. When the appellate order was passed, he came to know about the dismissal of the appeal ex parte. He submits that the CIT(A) has dismissed the appeal of the assessee for non- prosecution. This appellate order was received by Mr. Nadeem Lasani, Advocate appearing on behalf of the assessee.
The ld. DR, Shri Ganesh Ghale, Advocate, vehemently supported the order of ld. lower authorities.
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. Admittedly in this case the appeal of the assessee has been decided by the ld. CIT(A) not on the merits, but stating that assessee is not interested in prosecuting the appeal and therefore it was dismissed. We are of the view that the ld. CIT(A) does not have any power to dismiss the appeal for non-prosecution. He has to decide the appeal only on its own merits. In view of the above facts, we restore this appeal back to the ld. CIT(A) with a direction to the assessee that as soon as window is available, necessary representation before the CIT(A) should be made, if he wants the assessee for hearing, same should also be availed and thereafter the ld. CIT(A) should decide the issue on its merits.
Accordingly, the appeal by the assessee is allowed for statistical purposes.
Pronounced in the open court on this 25th day of September, 2025.