MUKTESWAR RAO PASUMARTHI,KHAMMAM vs. ITO., WARD-1, KHAMMAM

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ITA 745/HYD/2025Status: DisposedITAT Hyderabad10 September 2025AY 2017-18Bench: us: 1. On the facts and in the circumstances of the case, the order passed by the learned CIT (A), NFAC, Delhi u/s.250 of the Act for the A.Y. 2017-18 is erroneous and bad in law.1 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) cannot dismiss an appeal for non-prosecution without applying his mind to the merits of the case. Such dismissal is against the principles of natural justice and statutory obligations. The appeal was set aside and remanded for fresh adjudication on merits.

What were the facts?

The assessee's appeal was dismissed by the CIT(A) for non-prosecution. The assessee had initially not filed a return of income but later did so in compliance with a notice. The AO had initiated proceedings under Section 147 and made additions, which were upheld by the CIT(A).

What were the issues?

Whether the CIT(A) can dismiss an appeal for non-prosecution without deciding the appeal on merits, and whether the reassessment proceedings under Section 147 were validly initiated.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 148,Section 250,Section 69A,Section 44AB,Section 234A,Section 234C,Section 115BBE,Section 246A,Section 251

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Income Tax Appellate Tribunal, Hyderabad ‘SMC-B’ Bench, Hyderabad

Mukteswar Rao Pasumarthi O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income Tax (Appeals) [“CIT(A)”] National Faceless Appeal Centre (“NFAC”), Delhi dated 07.02.2025, which in turn arises from the order passed by the AO u/s 147 r.w.s. 144 of the Income Tax Act, 1961 (“the Act”) dated 30.03.2022 for the A.Y.2017-18. 2. The assessee has assailed the impugned order on the following grounds before us:

Mukteswar Rao Pasumarthi 3. Succinctly stated, the AO based on information that though the assessee had during the subject year carried out multiple transactions, viz., (i) cash deposits in current account: Rs.1,18,21,492/-; (ii) cash deposits (in an account other than a current account): Rs.11,87,000/-; (iii) purchase of time deposits: Rs.20,07,000/-; and (iv) receipt of interest income: Rs.1,84,025/-, but had not filed his return of income for the said year, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act was issued Mukteswar Rao Pasumarthi to the assessee. In compliance, the assessee filed his return of income for the A.Y. 2017-18 on 14.04.2021.

4.

The AO vide his order passed u/s 147 r.w.s. 144 r.w.s.144B of the Act dated 30.03.2022 assessed the income of the assessee at Rs.36,76,061/-, after making certain additions to the returned income, viz.(i) estimation of business income after rejection of the books of accounts u/s 145(3) of the Act i.e @4% of the gross turnover of Rs.3,44,56,128/-: Rs.13,78,245/-; (ii) addition of unexplained time deposits purchased by the assessee: Rs.20,07,000/-; (iii) interest income (as disclosed in the return of income): Rs.1,90,816/-; and (iv) recharacterizing of the agriculture income as the income of the assessee from other sources: Rs.1,00,000/-.

5.

Aggrieved, the assessee carried the matter in appeal before the CIT(A), who dismissed the same for want of prosecution. For the sake of clarity, the observations of the CIT(A) are culled out as under:

Mukteswar Rao Pasumarthi 6. The assessee, being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us.

7.

As the assessee, despite having been put to notice about the fixation of the appeal, has neither put up an appearance nor sought for adjournment, therefore, we are constrained to proceed with and dispose of the appeal as per Rule 24 of the Income-Tax (Appellate Tribunal) Rules, 1963., i.e., after hearing the respondent Revenue.

Mukteswar Rao Pasumarthi 8. Ms. Aditi Goyal, learned Departmental Representative (for short “the Ld. DR”) supported the orders of the lower authorities.

9.

We have thoughtfully considered the order passed by the CIT(A) and find that he had disposed of the appeal for non- prosecution without applying his mind to the issues which did arise from the impugned order and were specifically assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed of by the CIT(Appeals). In our considered view, once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose of the same on merit and it is not open for him to summarily dismiss the appeal on account of non- prosecution of the same by the assessee. In fact, a perusal of Sec. 251(1)(a) and (b), as well as the “Explanation” to Sec. 251(2) of the Act, reveals that the CIT(Appeals) remains under a statutory obligation to apply his mind to all the issues arising from the impugned order before him. As per the mandate of law, the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. The aforesaid view is fortified by Mukteswar Rao Pasumarthi the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Premkumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom). In the aforementioned case the Hon’ble High Court had observed as under:

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 AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. Further, Sec. 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. Sec. 251(1)(a) and (h) 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-s. (2) of s. 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 s. 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 w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO 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 s. 251(1)(a) and (b) and Explanation to Mukteswar Rao Pasumarthi Sec. 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.

10.

We, thus, not being able to persuade ourselves to subscribe to the dismissal of the appeal by the CIT(Appeals) for non- prosecution, therefore, set-aside his order with a direction to dispose of the same on merits. Needless to say, the CIT(Appeals) shall, during the course of the de-novo appellate proceedings, afford a reasonable opportunity of being heard to the assessee, who shall remain at liberty to substantiate his claim on the basis of documentary evidence, if any. Thus, the grounds of appeal raised by the assessee are allowed for statistical purposes in terms of our aforesaid observations.

Mukteswar Rao Pasumarthi 11. In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.

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