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Facts
The assessee, engaged in civil contracts, filed its return for AY 2021-22. The Assessing Officer (AO) selected the case for scrutiny and issued notices, but received no response from the assessee. The AO estimated profit at 8% based on industry average and made an addition.
Held
The Tribunal held that the CIT(A) dismissed the appeal for non-prosecution without considering the merits of the case. The Tribunal set aside the order of the CIT(A) and restored the issue for reconsideration.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal for non-prosecution without deciding on merits, and if the reasons for non-appearance were bonafide.
Sections Cited
143(2), 142(1), 143(3), 250
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Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “A” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.910/Hyd./2025 Assessment Year 2021-2022 Shilpa Electrical The ACIT, Engineers (India) Private Central Circle-3(2), Limited, Hyderabad. vs. Hyderabad. PIN – 500072. Telangana. PIN - 500 004. PAN AALCS7808Q Telangana. (Appellant) (Respondent) For Assessee : MS K. Prabhavati, Advocate For Revenue : Sri Siva Prasad SV, Sr. AR Date of Hearing : 11.08.2025 Date of Pronouncement : 13.08.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the assessee against the order dated 24.02.2025 of the learned Commissioner of Income Tax-(Appeals), Hyderabad-11, Hyderabad, relating to the assessment year 2021-2022.
Briefly stated facts of the case are that, the assessee-company is engaged in the business of civil contracts, filed its return of income for the assessment year 2 ITA.No.910/Hyd./2025 under consideration on 14.03.2022 declaring it’s total income at Rs.2,92,20,020/-. The appellant's case was selected for scrutiny under CASS for the impugned assessment year. Accordingly, the Assessing Officer issued notices u/s 143(2) of the Income Tax Act, 1961 on 27.06.2022. During the course of assessment proceedings, the Assessing Officer issued notices u/sec.142(1) of the Income Tax Act, 1961 on 17.08.2022, 12.10.2022, 02.12.2022 and 08.12.2022 calling for information to substantiate the income admitted in the return of income. However, there was no response from the assessee. Further, the Assessing Officer also issued show cause notice dated 14.12.2022 to the assessee calling the assessee to show cause as to why the income shall not be estimated on the basis of percentage in line with earlier assessment years in the case of assessee for the assessment years 2018-2019 and 2020-2021, in absence of furnishing of any details. In response to the show cause notice, the assessee has filed it’s written submissions through ITBA on 23.12.2022, contending, inter alia, that, the purchases/sub-contract 3 ITA.No.910/Hyd./2025 expenses were slated to be at Rs.51,45,55,794/-, whereas as per financial statements and schedules, the purchases/other expenses/sub-contract expenses, in aggregate, were shown at Rs.42,14,72,175/. The Assessing Officer after considering the written submissions of the assessee noted that, the assessee did not submit any reconciliation statement between schedules of P & L A/c figure of Rs.42,14,72,175/- and details of purchases provided of Rs.51,45,55,704/-. Further, out of total 105 parties from whom purchases were made, the assessee had furnished copies of sample invoices only in respect of 2/3 of the parties and the assessee was admitted a net profit of Rs.2,82,68,739/-, which was 5.3% of the turnover of Rs.53,04,87,210/-. Therefore, the Assessing Officer opined that, in the similar line of business activity of civil contracts, the profit margins are higher and ranges between 8% to 12%. Since the assessee did not furnish any reason with corroborate evidences for admitting lower profit as compared to the industry average, the Assessing Officer relying upon the decision of Hon'ble jurisdictional ITAT in 4 ITA.No.910/Hyd./2025 the case of ACIT Vs. Mis Teja Constructions (ITA No. 1191/Hyd/2011 dated 17.02.2012) estimated 8% of gross turnover of Rs.53,04,87,210/- at Rs.4,24,38,876/-, then added a sum of Rs.17,33,886/ of Other income and then reduced therefrom the total income returned by the appellant at Rs.2,92,20,020/-, i.e., [Rs.4,41,72,662 (-) 2,02,02,020] and made the differential amount of Rs.1,49,52,842/- towards addition on account of estimation of income. Thus, the Assessing Officer determined the total income of the assessee at Rs.4,41,72,862/- vide order dated 27.12.2022 u/sec.143(3) of the Income Tax Act, 1961 .
Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), despite various notices issued u/sec.250 of the Act, the assessee has not furnished any information substantiating with supporting evidence. Therefore, the learned CIT(A) observed that, “the appellant is not interested in pursuing it’s appeal. With due respect to the principles of natural justice, several opportunities for presenting its case were provided to the appellant, but in 5 ITA.No.910/Hyd./2025 vain. In view of these facts and circumstances, the appeal is dismissed for non-prosecution”.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
MS. K. Prabhavati, Advocate-Learned Counsel for the Assessee submitted that, the assessee had furnished written submissions before the Assessing Officer admitting net profit of 5.3% of the turnover. However, the Assessing Officer without considering the submissions of the assessee, estimated the net profit @ 8% which cannot be accepted. Further, during the course of appellate proceedings, the learned CIT(A) has dismissed the appeal for non-prosecution without deciding the appeal on merits, which is not in accordance with law. The Learned Counsel for the Assessee, therefore, submitted that, another opportunity may please be given to the assessee to substantiate it’s case before the learned CIT(A) by remitting the issue back to the file of learned CIT(A) in the interest of substantial justice.
Sri Siva Prasad SV, learned Sr. AR for the Revenue, on the other hand, relied on the orders of the 6 ITA.No.910/Hyd./2025 lower authorities. He submitted that, the Assessing Officer has issued several notices u/sec.142(1) of the Act to furnish relevant documentary evidences. However, the assessee has filed written submissions in response to show cause notice dated 14.12.2022 without supporting documentary evidences. Therefore, the Assessing Officer has estimated the net profit @ 8% which is common in line of civil contract works. Even during the course of appellate proceedings, the learned CIT(A) had issued several notices u/sec.250 of the Act. However, the assessee did not respond to any of the notices to substantiate it’s case. Therefore, the learned CIT(A) has rightly sustained the addition made by the Assessing Officer. He, therefore, pleaded that the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. Learned Counsel for the Assessee submitted that, the learned CIT(A) has passed ex-parte order without considering the issues involved on merits, contrary to settled principle of law that, even in the case of 7 ITA.No.910/Hyd./2025 non-prosecution by the assessee, the appeal should be disposed of on merits on the basis of available material on record. We find that, the learned CIT(A) dismissed the appeal filed by the assessee for non-prosecution by following certain judicial precedents i.e., decision of Hon’ble Madhya Pradesh High Court in the case of Estate of Late Tukojirao Holkar vs., Commissioner of Wealth Tax [1997] 223 ITR 480 (MP) and the decision of ITAT, Delhi in the case of CIT vs., Multiplan India Ltd., [1991] 38 ITD 320 (Del.). However, not considered the issue on merits. No doubt, the assessee did not appear and filed relevant details when the case was posted for hearing. Learned Counsel for the Assessee explained the reasons for not appearing. According to the Learned Counsel for the Assessee, the Director of the appellant-company was fell sick and due to his ill-health, the appellant company could not respond to various notices issued by the learned CIT(A). However, non-appearance before the learned CIT(A) is neither wilful nor for any undue benefit. In our considered view, the reasons given by assessee appears to be bonafide and acceptable. Since, the 8 ITA.No.910/Hyd./2025 learned CIT(A) has dismissed the appeal for non- prosecution, without considering the issues on merits, in our considered view, the matter needs to go back to the file of learned CIT(A). Thus, we set-aside the order of the learned CIT(A) and restore the issue back to the file of learned CIT(A) for reconsideration. The learned CIT(A) is directed to reconsider the issue, after providing one more opportunity of hearing to the assessee. Needless to say, the assessee shall appear before the learned CIT(A) and file relevant details as and when the case is posted for hearing.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 13.08.2025.