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Facts
The assessee, a primary agricultural cooperative society, declared NIL income after claiming deduction under Section 80P. The AO disallowed the deduction on interest and dividend income, treating it as income from other sources. The CIT(A) dismissed the assessee's appeal ex-parte.
Held
The Tribunal held that the CIT(A) should have examined the issues on merits after granting an adequate opportunity of hearing. Passing an ex-parte order without considering the merits defeats the purpose of appellate proceedings.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte without providing a proper opportunity of being heard.
Sections Cited
80P, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The present appeal has been filed by the assessee against the order passed by the NFAC, Delhi under section 250 of the Act dated 24.07.2024 for the assessment year 2020-21.
The first issue raised by the assessee is that the learned CIT(A) erred in deciding the appeal ex-parte without providing a proper opportunity of being heard.
The facts in brief are that the assessee, a primary agricultural cooperative society, is engaged in several activities such as providing credit facility to the members, accepting deposits from the member, trading in Kirana, trading of fertilizers & pesticides, trading of steel, trading of controlled goods supplied by Government of Karnataka under public distribution, trading of plastic materials & cloth etc.
For the year under consideration, the assessee declared NIL income after claiming deduction under section 80P of the Act for Rs. 80,23,366/- only. The return of the assessee was selected for the scrutiny assessment. The AO during the assessment noticed that the assessee has earned interest income for a sum of Rs. 30,0,737/- from fixed deposit and saving bank account with the banks and cooperative bank. The assessee also earned dividend income of Rs. 2,24,485/-.
The AO after detailed inquiry and after considering the submission of the assessee and other materials proceeded to disallow the deduction under section 80P of the Act to the extent of interest income and dividend income of Rs. Rs. 30,0,737/- & Rs. 2,24,485/- respectively and added the same to total income of the assessee as income from other sources.
The aggrieved assessee preferred an appeal before the learned CIT(A) who dismissed the appeal in ex parte order by observing that the assessee has not responded to the notice issued. Hence, the assessee has nothing to say against the disallowances made by the AO.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us submitted that the learned CIT(A) has dismissed the appeal of the assessee ex-parte without granting a proper and effective opportunity of being heard. It was contended that the assessee is a primary agricultural co-operative society carrying on various activities such as providing credit facilities to members and trading in fertilizers, pesticides and other goods. The assessee had claimed deduction u/s 80P of the Act and the AO disallowed deduction in respect of interest income of Rs. 30,00,737 and dividend income of Rs. 2,24,485 by treating the same as income from other sources.
8.1 The learned AR submitted that the assessee had filed an appeal before the learned CIT(A) challenging the said disallowance. However, the learned CIT(A) passed an ex-parte order on the ground that the assessee did not respond to the notices. It was argued that the assessee was prevented by sufficient cause from appearing and therefore the matter was decided without considering the submissions and evidence of the assessee. The learned AR contended that the impugned order is against the principles of natural justice.
8.2 The learned AR therefore prayed that the order passed by the learned CIT(A) may be set aside and the matter may be restored to the file of the learned CIT(A) for fresh adjudication.
Per contra, the learned DR supported the order passed by the learned CIT(A). It was submitted that the learned CIT(A) had issued . notices to the assessee, but the assessee failed to respond to the same. Therefore, the learned CIT(A) was justified in deciding the appeal based on the materials available on record.
9.1 However, the learned DR fairly submitted that if the Tribunal considers it appropriate to restore the matter to the file of the learned CIT(A), suitable directions may be issued to the assessee to cooperate in the proceedings and not to seek unnecessary adjournments.
We have heard the rival contentions of both the parties and perused the materials available on record. The short issue before us is whether the learned CIT(A) was justified in dismissing the appeal of the assessee ex-parte.
10.1 From the record, it is observed that the AO had disallowed deduction u/s 80P of the Act in respect of interest income of Rs. 30,00,737/- and dividend income of Rs. 2,24,485/- and assessed the same as income from other sources. Aggrieved by the said disallowance, the assessee preferred an appeal before the learned CIT(A). However, the learned CIT(A) dismissed the appeal ex-parte by observing that the assessee had not responded to the notices issued during the appellate proceedings.
10.2 In our considered view, the learned CIT(A) being the first appellate authority is required to examine the issues on merits after considering the submissions of the assessee. The powers of the learned CIT(A) are co-terminus with that of the AO and therefore the learned CIT(A) is expected to adjudicate the matter after granting adequate . opportunity of hearing. Passing an ex-parte order without examining the issues on merits defeats the purpose of appellate proceedings.
10.3 Considering the facts and circumstances of the case, we are of the view that the assessee deserves one more opportunity to present its case before the learned CIT(A). At the same time, the assessee is also directed to cooperate in the appellate proceedings and furnish the necessary details and evidence as may be required.
10.4 Accordingly, in the interest of justice, we set aside the impugned order of the learned CIT(A) and restore the matter to the file of the learned CIT(A) for fresh adjudication in accordance with law after providing a proper and reasonable opportunity of being heard to the assessee. The assessee is directed to fully cooperate in the proceedings and furnish all the required details without seeking unnecessary adjournments. Hence the ground of appeal of the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in court on 12th day of March, 2026