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Facts
The Assessing Officer disallowed ₹49,86,106/- (5% of total business expenses) for the AY 2021-22. The CIT(A) upheld this disallowance by passing an ex parte order, as the assessee repeatedly sought adjournments but failed to provide submissions or documentary evidence, treating the AO's order as reasoned.
Held
The Tribunal held that the CIT(A) erred by not adjudicating the appeal on its merits and failing to pass a reasoned order, which is a statutory duty under Section 250(6) of the Income Tax Act. Citing judicial precedents, the Tribunal stated that a CIT(A) cannot dismiss an appeal for non-prosecution. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the matter back for fresh disposal on merits after providing the assessee a reasonable opportunity of being heard.
Key Issues
Whether the CIT(A) properly discharged its statutory duty under Section 250(6) by passing an ex parte order and upholding disallowance without adjudicating on merits, and if an appeal can be dismissed for non-prosecution.
Sections Cited
250, 143(3), 144B, 250(6), 250(4), 251(1)(a), 251(1)(b), 251(2), 246A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2021-22 dated 27.05.2025, which has been passed against the assessment order u/s 143(3) r.w.s. 144B of the Act, dated 16.12.2022. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in passing an ex parte order.
For that on the facts and circumstances of the case, the Ld. CIT(A) erred in law and on facts in upholding the disallowance of 249,86,106/-, being I.T.A. No.: 1356/KOL/2025 Assessment Year: 2021-22 Jai Matadi Enterprise. 5% of total expenses of ₹9,97,22,125/- under various heads (Driver & Helper Salary, Lorry Running Expenses, and Spare Parts & Repair Expenses).
That the Ld. CIT(A) ought to have appreciated that the said expenses were incurred wholly and exclusively for the purpose of business and were duly reflected in the audited books of accounts filed with the return of income. The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal at or before the time of hearing.”
Brief facts of the case are that the assessee has e-filed its return of income on 25.01.2022 showing total income of ₹4,34,350/-. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (in short 'CASS') to examine the issues of ‘business expenses’. The Assessing Officer (hereinafter referred to as Ld. 'AO'), disallowed 5% of the unverified expenses totalling to ₹9,97,22,125/- i.e. ₹49,86,106/- and accordingly made an addition of ₹49,86,106/- to the total income declared by the assessee and assessed the total income of the assessee at ₹54,20,456/- u/s 143(3) r.w.s. 144B of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who issued several notices, in response to which the assessee sought adjournment but no response was filed till the date of disposal of the appeal. Accordingly, the Ld. CIT(A) held that there was no merit in the contention raised by the assessee in the absence of any plausible explanation and documentary evidences in support of the claims made. As the assessee had not responded with any submission, the Ld. CIT(A) treated the assessment order a reasoned order and upheld the addition made by the Ld. AO.
Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. I.T.A. No.: 1356/KOL/2025 Assessment Year: 2021-22 Jai Matadi Enterprise.
Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that the assessee had filed an adjournment application and the acknowledgement of adjournment sought was filed. The assessee filed an affidavit dated 11.08.2025 that the hearing was fixed for 13.05.2025 and the assessee had sought an adjournment for a long date on the ground that the Accountant of the firm who looked after the taxation matter was seriously ill and had undergone eye surgery and the adjournment was not given credence before passing the ex parte order on 27.05.2025 nor the assessee was informed that the adjournment petition was rejected. It is submitted that the assessee gives an undertaking that proper compliance shall be made in case the abovementioned case is restored back to the lower authorities by the Hon’ble Tribunal.
We have considered the submissions made. A perusal of the appellate order shows that while the Ld. CIT(A) has discussed non- compliance on the part of the assessee as the notices sent were not complied with but he has not adjudicated the appeal on merit. In this respect, it is relevant to examine the provisions of section 250(6) which are reproduced as under: “250(6) – The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.”
Thus, section 250(6) of the Act casts a duty on the Ld. CIT(A) to pass an order in appeal which should state the points for determination and the decision as well as the reason for arriving at such decision. The Ld. CIT(A) has neither adjudicated various grounds of appeal nor has passed a reasoned order for arriving at the decision, as is required u/s 250(6) of the Act. We further note that in Ajji Basha Vs. CIT (2019) 111 I.T.A. No.: 1356/KOL/2025 Assessment Year: 2021-22 Jai Matadi Enterprise. taxmann.com 348 (Madras) it has been held that a speaking order on merits with reasons and findings is to be passed by Commissioner (Appeals) on basis of ground raised in assessee's appeal; he cannot dispose the assessee's appeal merely by holding that Assessing Officer's order is a self-speaking order which requires no interference. The relevant extract from the order is as under: 6. … The first respondent is the appellate authority. Needless to state that the Appellate Authority is also a fact finding authority and therefore, he has to consider the order of assessment on the grounds raised in the appeal and thereafter, pass a speaking order on merits and in accordance with law by giving his own reasons and findings as to whether the order of assessment can be sustained or not. In other words, the order passed by the Appellate Authority should explicitly exhibit his application of mind to the facts and circumstances and the objections raised in the grounds of appeal, also by expressing his reasons and findings in support of his conclusion.
In this case, the Appellate Authority, after extracting the order of the Assessing Officer in full, has not given any other reason or finding to dismiss the appeal except by stating that he is of the considered view that the Assessing Officer's order is a self speaking order and does not call for any interference. In my considered view, such single line finding of the Appellate Authority, cannot be sustained as a proper exercise of the Appellate Authority, while disposing the appeal. Therefore, it is apparent that the order impugned in this writ petition is an outcome of total non-application of mind. Consequently, the impugned order cannot be sustained. It is further contended that before passing the order, the petitioner was not heard.
1 It has also been held in the case of Commissioner of Income-tax (Central) Nagpur v. Premkumar Arjundas Luthra (HUF) [2016] 69 taxmann.com 407 (Bombay) that the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act. The relevant extract is as under:
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 I.T.A. No.: 1356/KOL/2025 Assessment Year: 2021-22 Jai Matadi Enterprise. 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 co-terminus 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.
After examining the facts of the case and the law, we deem it appropriate to set aside the order of the Ld. CIT(A) and remit the matter back to the Ld. CIT(A) for disposal of the grounds of appeal taken by the assessee on merit by passing a speaking order. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments and rule 46A of the I.T. Rules, 1962 shall also be followed and an opportunity of being heard may be provided to the Ld. AO, if required. Accordingly, the grounds taken by the assessee in his appeal are allowed for statistical purposes. I.T.A. No.: 1356/KOL/2025 Assessment Year: 2021-22 Jai Matadi Enterprise.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 8th September, 2025. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 08.09.2025 Bidhan (Sr. P.S.) I.T.A. No.: 1356/KOL/2025 Assessment Year: 2021-22 Jai Matadi Enterprise. Copy of the order forwarded to:
Jai Matadi Enterprise, C/o. Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite 213, 2nd Floor, Kolkata, West Bengal, 700069. 2. ITO, Ward-42(1), Murshidabad.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order