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Facts
The assessee filed an appeal against the order of the CIT(A) which had dismissed the appeal for non-prosecution. The assessee had made cash deposits of Rs. 1,16,37,225/- in his bank account and initially did not file a return of income, prompting proceedings u/s 147. The assessee later filed a return declaring income, and the AO made additions. The CIT(A) dismissed the appeal for non-appearance.
Held
The Tribunal held that the CIT(A) erred in summarily dismissing the appeal for non-prosecution without adjudicating on the merits. The CIT(A) has a statutory obligation to dispose of appeals on merit, considering all issues, and not dismiss them solely due to the appellant's absence.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal for non-prosecution without deciding the merits of the case, and whether an appeal can be summarily dismissed on grounds of non-prosecution.
Sections Cited
147, 148, 144, 250, 251(1)(a), 251(1)(h), 251(2), 246A
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Income Tax Appellate Tribunal, Hyderabad ‘ SM-B ‘ Bench, Hyderabad
करदाता का प्रतततितित्व/ Assessee : None Represented by राजस्व का प्रतततितित्व/ Department : Shri Ranjan Agarwala, Sr.DR Represented by सुिवाई समाप्त होिे की ततति/ Date of : 17.04.2025 Conclusion of Hearing घोर्णध की तधरीख/Date of Pronouncement : 23.04.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 10.01.2025, which in turn arises from the order passed by the Assessing 2 Officer (for short “A.O.”) u/s 147 r.w.s. 144 of the Income Tax Act, 1961 (for short, “the Act”) dated 26.09.2021 for A.Y. 2016-17. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. In the facts and circumstances of the case, the order of the CIT(A) is not sustainable in law or in facts 2. The respected CIT(A) ought to have considered that the assessee has produced the evidences explaining the sources for cash deposits.
In the facts and circumstances of the case the respected CIT(A) ought to have considered that the AO erred in rejecting the evidences submitted.
4. The assessee may be permitted to add, delete, amend or modify any ground of appeal at the time of hearing.”
Succinctly stated, the A.O., based on information that though the assessee had during the subject year made cash deposits of Rs. 1,16,37,225/- in his bank account No.7036047867 with Telangana Grameen Bank, Branch: Kundaram, but had not filed his return of income, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act dated 24.05.2019 was issued to the assessee. In compliance, the assessee filed his return of income for the AY 2016-17 on 05-09-2019, declaring an income of Rs. 3,03,560/-.
3 3. During the course of assessment proceedings, the A.O. queried the assessee about the cash deposits of Rs. 1.16 crore (supra) made in his bank account. In reply, the assessee submitted that the subject cash deposits were made in tranches during the period April, 2015 to November, 2015. It was claimed by him that the cash withdrawn by him from his bank account was thereafter redeposited within a short span i.e., within 2 or 3 days. The assessee further submitted that as per his cash ledger the cash deposits that was not sourced from the cash withdrawn from his bank account amounted to Rs. 17,58,525/-.
Apropos the cash deposits of Rs. 1,758,525/-, the assessee submitted that the same was sourced from two streams viz., (a) Cash loans received from three agriculturists, i.e. (i). Shri Pidugu Nagaraju: Rs.3,00,000/-; (ii). Shri Lalithamma Dande: Rs.5,00,000/-; and (iii). Shri. Ravikanti Ashok: Rs.4,00,000/- AND (b) amounts received from debtors: Rs.5,58,525/-. However, the A.O. did not find favor with the aforesaid explanation of the assessee. Although the assessee had placed on record the copies of the “Aadhar Cards” of the aforementioned lenders along with 4 their respective confirmations, but the A.O. was of the view that as the assessee had failed to place on record any evidence to substantiate the creditworthiness of the aforementioned agriculturists, therefore, his claim of having received cash loans from the said persons did not merit acceptance. As regards the claim of the assessee that the amount of Rs.5,58,525/- was received by him from his debtors during the year under consideration, the A.O., in the absence of any documentary evidence that would substantiate the aforesaid claim, rejected the same. Accordingly, the A.O., backed by his aforesaid observations, vide his order passed u/s 147 r.w.s. 144B dated 26.09.2021 after making the aforesaid additions assessed the income of the assessee at Rs.20,62,085/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A), but without success. Ostensibly, as the assessee, despite having been put to notice about the fixation of the hearing of appeal had failed to participate in the proceedings before the CIT(A), therefore the latter holding a conviction that the assessee was not aggrieved with the impugned assessment order dismissed 5 the appeal on that ground itself. For the sake of clarity, the observations of the CIT(A) are called out as under:
6 6. As the assessee appellant despite having been intimated about the hearing of appeal had neither put up an appearance nor filed any application for adjournment, therefore, we are constrained to proceed as per Rule 24 of the Appellate Tribunal Rules, 1963 and dispose off the appeal after hearing the respondent revenue and perusing the orders of the lower authorities.
7 7. Shri Ranjan Agarwala, learned Senior Departmental Representative (for short the “Ld. DR”) relied upon the orders of the lower authorities.
We have thoughtfully considered the orders of the lower authorities. On perusal of the order of CIT(A), it is clear that the assessee, despite having put to notice about the fixation of hearing of the appeal on three occasions, i.e., vide notices dated 29.05.2024, 05.07.2024 and 12.12.2024 had neither sought for an adjournment nor participated in the proceedings before the first appellate authority. Although, we do not approve the conduct of the assessee, who had remained a non-compliant in the course of the proceedings before the CIT(A), but at the same time, are unable to persuade ourselves to concur with the manner in which the latter, without adverting to the specific grounds of appeal based on which the assessee has assailed the impugned order before him, summarily dismissed the appeal for want of prosecution.
As observed by us hereinabove, the CIT(Appeals) had 9. disposed off the appeal for non-prosecution and had failed to apply his mind to the issues which did arise from the impugned order 8 and were 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 off 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 off 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. Rather, 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 which arise 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 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 9 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 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.
We, thus, not being able to persuade ourselves to subscribe to the summary dismissal of the appeal by the CIT(Appeals) for want of prosecution, set-aside his order to his file with a direction to dispose off the same on merits. Needless to say, the CIT(A) shall in the course of set aside proceedings afford a reasonable opportunity of being heard to the assessee. Thus, the grounds of 10 appeal raised by the assessee are allowed for statistical purposes in terms of our aforesaid observations.
Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.