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Facts
The assessee, a resident individual, did not file his income tax return voluntarily for AY 2018-19. The AO received information about share trading in penny stocks, totaling Rs. 92,63,502/-, and reopened the assessment. The AO treated the transaction as non-genuine and added the amount to the assessee's income.
Held
The Tribunal noted that the assessee was partly responsible for the ex-parte disposal by the first appellate authority due to non-compliance with hearing notices. However, the first appellate authority dismissed the appeal without properly deciding the grounds on merits or addressing the validity of reopening.
Key Issues
Whether the first appellate authority erred in dismissing the appeal ex-parte without adjudicating the grounds on merits, and if the reopening of assessment under section 147 was valid.
Sections Cited
139(1), 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
(Assessment Year: 2018-19) Ronak Ashok Shah ITO-41(3)(3) 1803, Raj Hans Apt., Kautilya Bhavan, Jitendra Road, Malad (E) Vs. Mumbai Mumbai-400 097 PAN/GIR No. BDJPS 9744 J (Appellant) : (Respondent) Appellant by : Shri Rajesh Kothari Respondent by : Shri Annavaram Kosuri (Sr. AR) Date of Hearing : 18.02.2026 Date of Pronouncement : 23.02.2026 O R D E R
Per Saktijit Dey, Vice President:
This is an appeal by the assessee against order dated 10.03.2025, passed by National Faceless Appeal Centre (‘NFAC’ for short), Delhi for the assessment year (A.Y. for short) 2018-19.
In ground no. 1, the assessee has raised grievance against the ex parte disposal of the appeal by ld. First appellate authority. Whereas, ground nos. 2 to 5 are on the issue of validity of reopening of assessment. Ground nos. 6 & 7 are on the authority of the Jurisdictional Assessing Officer (JAO) in completing the assessment. Whereas, ground nos. 8 to 11 are on merits.
Ronak Ashok Shah vs. ITO 3. Briefly the facts are, the assessee is a resident individual. For the assessment year under dispute, the assessee did not file his return of income voluntarily u/s. 139(1) of the Act.
Subsequently, the Assessing Officer (A.O. for short) received information that in the year under consideration, the assessee had entered into transaction of trading in shares of two companies namely Goenka Business and Finance Ltd. and Ejecta Marketing Ltd. and received sale consideration of Rs.92,63,502/-. He further found that as per the result of enquiry carried out in respect of the companies whose shares were purchased by the assessee, they were found to be penny stock companies. Since, the assessee was a non-filer of income tax return, the A.O. alleging escapement of income, reopened the assessment u/s. 147 of the Act. In response to notice issued u/s. 148 of the Act, the assessee furnished his return of income and also participated in the assessment proceedings. In course of assessment proceedings, the A.O. from time to time called for various information. As alleged by the A.O., the assessee made part compliance.
Being dissatisfied with the submissions made and details furnished by the assessee, the A.O. treated the share transaction as non-genuine, being penny stocks and added back the receipts from such transactions amounting to Rs.92,63,502/- to the income of the assessee.
Against the assessment order so passed, the assessee preferred an appeal before the first appellate authority contesting not only the addition made, but also the validity of reopening of assessment u/s. 147 of the Act. However, due to non-compliance with the notice of hearing, ld. First appellate authority proceeded to dispose of the appeal ex parte by dismissing it.
Ronak Ashok Shah vs. ITO 7. We have heard the parties and perused the materials available on record. Before us, ld. Counsel appearing for the assessee submitted that due to unavoidable circumstances, the assessee could not comply with the hearing notices issued by ld. First appellate authority, hence, failed to represent his case. He submitted, the reopening of assessment u/s. 147 of the Act is wholly without jurisdiction, as the reasons recorded do not make out a case of escapement of income. He further submitted, without providing reasonable opportunity of being heard, ld. First appellate authority decided the appeal ex parte by dismissing all the grounds without proper reasoning.
The ld. Departmental Representative (‘ld. DR’ for short) submitted, due to non- compliance by the assessee, ld. First appellate authority had no other option but to decide the appeal based on facts and materials available on record.
Having considered rival submissions, we find before ld. First appellate authority the assessee had raised grounds on merits as well as on the validity of reopening of assessment u/s. 147 of the Act. It is evident from the order of ld. First appellate authority that on three different occasions, notices of hearing were issued to the assessee. However, on each occasion the assessee did not comply.
Before us, ld. Counsel appearing for the assessee has fairly accepted the aforesaid factual position. Thus, in our view, the assessee is partly responsible for ex parte disposal of his appeal. However, on perusal of the impugned order of ld. first appellate authority, it can be seen that the assessee had raised grounds both on merits as well as challenging the validity of reopening of assessment. However, ld. First appellate authority has proceeded on the footing as if the assessee does not want to prosecute the appeal. Instead of deciding the grounds on merits, ld. First appellate authority, more or less has dismissed the appeal
Ronak Ashok Shah vs. ITO for non-prosecution. This, in our view, is against the statutory mandate. Even, in the event of non-appearance by the assessee, though ld. First appellate authority has the freedom to decide the appeal ex parte, however, he has to decide the grounds through proper reasoning and a speaking order, which is lacking in the present case. The observations of ld. First appellate authority in paragraph 5.7 which sustaining the addition do make out a case of non-speaking order. Even, we have not found any decision of ld. First appellate authority on the legal issue relating to validity of reopening of assessment. Thus, prima facie, it appears that ld. first appellate authority has not decided the appeal after considering the grounds on their own merits. Since, the issues raised in the appeal require factual verification, even on the issue of reopening of assessment, which could not be done at the first appellate stage, due to non-appearance of the assessee, we are inclined to set aside the impugned order of ld. First appellate authority and restore the issues back to his file for de novo adjudication after providing due and reasonable opportunity of being heard to the assessee. The assessee is directed to respond to the hearing notice to be issued by ld. First appellate authority and make proper compliance.
In the result, the appeal is allowed for statistical purpose. Order pronounced in the open court on 23.02.2026 Sd/- Sd/- (Makarand V. Mahadeokar) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 23.02.2026 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai