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Facts
The assessee, a partnership firm, filed its ITR for AY 2012-13. The case was reopened under Section 148, and the AO made an assessment under Section 143(3), determining total income by treating certain receipts as commission income and disallowing partners' salary/interest. The CIT(A) dismissed the assessee's appeal for non-compliance and want of prosecution, upholding the AO's assessment.
Held
The Tribunal held that the first appellate authority must adjudicate appeals on their merits and cannot dismiss them solely for want of prosecution. Accordingly, the Tribunal set aside the CIT(A)'s order and remanded the matter back for fresh adjudication of all grounds, directing the assessee to cooperate and the CIT(A) to provide adequate opportunity.
Key Issues
Whether the CIT(A) erred in dismissing the appeal for want of prosecution without adjudicating on the merits of the case, including jurisdictional issues related to the reopening of the assessment under Section 148 and the merits of additions made by the AO.
Sections Cited
148, 143(3), 147, 44AD, 250, 234A, 234B, 234D
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT, Appeal, Addl/JCIT(A) Gwalior dt. 09/01/2025 pertaining to Assessment Year 2012-13. 2. In the present appeal Assessee has raised the following grounds:
That the impugned order is bad both on facts and law.
That the Ld. CIT(A) has wrongly and illegally upheld the additions of Rs. 4,19,620/- made by the AO by passing an exparte order without allowing the appellant an opportunity of being h eard against the principle of natural justice. 3. That the Ld. CIT(A) erred in upholding the assessment order made by the Ld. AO ignoring the facts and circumstances of the case by passing an exparte order in a mechanical manner without ensuring proper service of hearing notices. 4. That the Ld. CIT(A) erred in upholding the addition of Rs. 4,19,620/- against the facts and circumstances of the case after ignoring that the appellant has filed the ITR under the deeming fiction of section 44AD and has declared the receipts in the ITR. 5. That the Appellant craves permission to add, amend, elucidate any ground of appeal
at the time of hearing.
3. Briefly, the facts of the case are that the assessee is a partnership firm, in response to notice under section 148 of the Income Tax Act, filed its return of income on 01.10.2019, declaring income of Rs . 7,140/- for AY 2012-13. The case was 2 reopened and assessed under section 143(3) read with section 147 on 30.12.2019 by the AO, who determined total income at Rs.4,19,615. The AO concluded that the firm had provided accommodation entries to S.P. Singla Construction group and assessed the amount as commission income, further disallowing salary and interest to partners.
3.1 The AO held that the assessee did not carry on genuine business during the year and was merely providing accommodation entries. On this basis, the AO treated Rs.4,19,615/- as commission income rather than business income, and also disallowed partners’ salary and interest due to absence of a certified copy of the partnership deed. Interest under sections 234A, 234B, and 234D was also levied.
Against the order of the Ld. AO the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) submitted that during appellate proceedings, several notices under section 250 were issued but the assessee failed to file any written submissions or attend hearings. Considering repeated non-compliance, the CIT(A) held that the assessee was not interested in prosecuting the appeal. Relying on judicial precedents, it was observed that an appeal requires active prosecution and mere filing is insufficient. As the assessee provided no evidence or arguments in support of its grounds, the CIT(A) dismissed the appeal and upheld the assessment order passed by the AO.
Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.
During the course of hearing the Ld. AR submitted that the order of the CIT(A) is vitiated in law as the appeal has been dismissed merely for want of prosecution, without adjudicating on the merits of the various grounds. It was urged that the assessee had raised serious issues relating to the jurisdiction of reopening, the validity of the notice under section 148, and also the merits of the addition; however, the Ld. CIT(A) chose not to deal with any of them and summarily dismissed the appeal.
6.1 It was contended that the assessee is a small firm engaged in sub-contract work, which had already declared income u/s 44AD and filed its return in response to notice u/s 148. The additions made by the Assessing Officer, ignoring receipts subjected to TDS and without considering the claim of partners’ salary and interest, are unsustainable.
6.2 The AR therefore pleaded that in the interest of justice, the matter may be restored to the file of the Ld. CIT(A) with direction to adjudicate the issues on merits after granting adequate opportunity to the assessee.
The Ld. DR, on the other hand, strongly relied on the order of the Ld. CIT(A). It was submitted that, despite repeated notices issued through the ITBA portal, the assessee failed to comply or submit any documents. The Ld. CIT(A) was therefore justified in concluding that the assessee was not interested in pursuing the appeal.
7.1 It was further submitted that the assessee cannot take advantage of its own defaults. Reliance was placed on the principle that an appeal must be effectively prosecuted; otherwise, it deserves to be dismissed. However, the DR fairly left the issue to the discretion of the Bench regarding granting one more opportunity, subject to the imposition of costs, if deemed fit.
We have heard the rival contention of both the parties and perused the material available on the record. It is a well-settled principle that the first appellate authority is duty-bound to adjudicate the grounds raised before it on merits and cannot dismiss an appeal for want of prosecution alone. Reference in this regard may be made to the decision of the Hon’ble Supreme Court in CIT v. Kanpur Coal Syndicate (53 ITR 225), which lays down that the powers of the CIT(A) are co- terminus with that of the Assessing Officer.
8.1 In the present case, the assessee has raised multiple grounds, including jurisdictional grounds challenging the reopening. These have not been addressed by the Ld CIT(A). Considering the principle of natural justice and the importance of the issues involved, we are of the view that one more opportunity deserves to be granted to the assessee.
8.2 Accordingly, we set aside the impugned order of the Ld. CIT(A) and restore the matter to his file for fresh adjudication of all grounds raised by the assessee in accordance with law. The assessee is directed to extend full cooperation by filing necessary evidence and written submissions. The Ld. CIT(A) shall provide an adequate opportunity to be heard and decide the appeal by passing a speaking order.
In the result, the appeal is allowed for statistical purposes.