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Facts
The assessee's income tax return for AY 2018-19 was selected for scrutiny, leading to additions u/s 68 for unsecured loans and disallowance u/s 36(1)(iv) for excess contributions, along with a reduction in TDS. The CIT(A) dismissed the assessee's appeal due to non-compliance and failure to provide sufficient proof for claims. The assessee then appealed to the ITAT, with a 68-day delay in filing which was condoned by the Jurisdictional High Court.
Held
The tribunal noted that the CIT(A)'s dismissal was ex-parte due to the assessee's non-compliance. Citing principles of natural justice and various Supreme Court and High Court judgments, the ITAT decided to grant the assessee one final opportunity to present their case on merits. The matter was therefore remanded back to the CIT(A) for de novo adjudication within three months, with directions for the assessee to cooperate proactively.
Key Issues
Whether the CIT(A) was justified in dismissing the assessee's appeal ex-parte due to non-compliance, and whether the matter should be remanded to the CIT(A) for a fresh hearing on merits to ensure adherence to principles of natural justice.
Sections Cited
Income Tax Act, 1961: Section 250(4), Income Tax Act, 1961: Section 250(6), Income Tax Act, 1961: Section 143(3), Income Tax Act, 1961: Section 144B, Income Tax Act, 1961: Section 139, Income Tax Act, 1961: Section 68, Income Tax Act, 1961: Section 36(1)(iv), Constitution of India: Article 14
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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI ARUN KHODPIA, AM
आदेश / O R D E R
Per Arun Khodpia, AM:
The captioned appeal is filed by the assessee against the order of learned Commissioner of Income Tax, (Appeals) (in short, ld. CIT(A)), National Faceless Appeal Centre (NFAC), Delhi, passed u/s 250 of the Income Tax Act, 1961 (in short, ‘the IT Act’) for the AY 2018-19, dated 27.07.2023, which in turn arises from the order of the Assessing Officer, NFAC, (in short, ld. AO) passed u/s 143(3) r.w.s 144B of the IT Act, dated 29.04.2021.
Vinay Kumar Jaiswal vs. Income Tax Officer-1, Ambikapur 2. The grounds of appeal raised by the assessee in the present appeal are culled out as under: “1. On the facts and circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs.29,00,000 on the count of explained credit u/s 68. On the facts and circumstances of the case and in law, ld CIT(A) has erred in sustaining disallowance of Rs.16,03,090/- u/s 36(1)(iv) being in excess of 27% Limit prescribed u/s 87.
2. The appellant craves leave, to add, urge, alter, modify or withdraw any ground/s before or at the time of hearing.”
Concisely stated, the assessee, who is an individual had filed his return of income u/s 139 on 09.11.2018 along with the audit report in Form 3CB and Form 3CD. The case of the assessee thereafter was selected for complete scrutiny assessment under the E-assessment Scheme, 2019 on account of following issues:
(i) Unsecured Loans. (ii) Excess contribution to Provident Fund, Superannuation Fund or Gratuity Fund.
Accordingly, notice u/s 143(2) of the IT Act was issued on 28.09.2019 and subsequent notices were sent in due course. The assessee furnished replies. After considering and carefully examine the replies of the assessee, the Ld. AO completed the assessment u/s 143(3) with the following additions:
(i) Addition u/s 68 of Rs.29,00,000/- (ii) Disallowance u/s 36(1)(iv) of Rs.16,03,090/-.
Vinay Kumar Jaiswal vs. Income Tax Officer-1, Ambikapur 5. Apart from said disallowances, it is also observed by Ld. AO that there was a claim of wrong tax deduction by the assessee for Rs.71,619/-, therefore, the TDS claim by the assessee has been reduced by the same amount.
Aggrieved with the aforesaid observations and finding by the Ld. AO in the assessment order, the assessee preferred an appeal before the Ld. CIT(A), wherein the appeal of the assessee has been dismissed on account of insufficient compliance made before the first appellate authority. The Ld. CIT(A) also observed that the appellant was unable to produce any proof to establish the Bonafide of his claim with respect to re-working the figures, therefore, the finding of Ld. AO affirmed by the first appellate authority.
7. Aggrieved with the order of Ld. CIT(A), the assessee preferred an appeal before us, which is under consideration in the present matter.
8. At the outset, it is brought to the notice that the appeal filed by the assessee is barred by the limitation by 68 days. In this respect, the Ld. AR representing the assessee submitted the delay is already condoned in terms of judgment passed by the Hon’ble Jurisdictional High Court in TAXC No. 146 of 2024, dated 10.06.2025 (copy placed on record) in the case of assessee and the matter is remitted back to ITAT to dispose of in accordance with law. Respectfully following the directions of Hon’ble Jurisdictional High Court, the matter is taken up for adjudication.
Vinay Kumar Jaiswal vs. Income Tax Officer-1, Ambikapur 9. From the order of Ld. CIT(A), it is emanating that there was some failure on the part of the assessee to submit necessary evidence/proof/submission to establish the Bonafide of his claim. It is also observed by the Ld. CIT(A) that multiples opportunities were granted to the assessee, but the assessee was failed to rebut in justified manner. Further, the dismissal of the appeal of the assessee was only on account of assessee’s conduct before the CIT(A) that he was failed substantiating the facts with necessary evidence and to prove the Bonafied in his claims, therefore, we find it appropriate that one last & final opportunity should be accorded to the assessee so as to make necessary submissions to prove substance in his claims. Consequently, the matter is restored to the file Ld CIT(A) for fresh adjudication in terms of provisions of section 250(4) & (6) of the Act.
Our aforesaid decision is supported with the order of this tribunal in the case of Brajesh Singh Bhadoria Vs. Dy./ Asstt. Commissioner of Income Tax, Central Circle-2, in IT(SS) No. 1 to 6, 8 & 9/RPR/2025 dated 20.03.2025, wherein, the relevant findings are as under:
We have considered the submissions of the parties herein and analyzed the facts and circumstances involved in all the captioned appeals. After careful perusal of the documents on record, we find that the assessee had assailed the legal ground as aforestated, however, the fact of the matter is that on perusal of the respective orders of the Ld. CIT(Appeals) for all the years before us, it is also Vinay Kumar Jaiswal vs. Income Tax Officer-1, Ambikapur evident from Para 3 that there has been no compliance by the assessee before the said authority and as such, an ex-parte order was passed for the concerned years in appeal. Admittedly, as per record, sufficient opportunities had been provided to the assesse, however, there was no compliance by the assessee. In effect, rights and liabilities of the parties herein are yet to be adjudicated substantially at the level of the first appellate authority. Though in the impugned orders, discussion has been done as per material available on record by the Ld. CIT(Appeals) but they are only Form 35, statement of facts, grounds of appeal and the assessment order. However, due to non-compliance by the assessee, there are no submissions, evidence and documents submitted for adjudication by the assessee before the Ld. CIT(Appeals). That as per Para 3 of the Ld. CIT(Appeals) order, there has been no compliance on the part of the assessee for submitting detailed explanations regarding the grounds of appeal for the years under consideration which clearly shows that the grounds of appeal raised before the first appellate authority has not been substantiated on merits through corroborative evidence /submissions.
That in such scenario we are of the considered view that the Income tax Act is within the ambit of welfare legislation which are completely different from that of the penal legislation, therefore, benefit of doubt whenever arises, it has to be interpreted in favour of the assessee tax payer within the parameters of law and facts. There may be circumstances beyond control of the assessee because of which, the assessee may not have been able to represent his case on the given dates of hearing before the Ld. CIT(Appeals). Though it is correct that there was no compliance from the side of the assessee, however, nothing is there on record which suggests any deliberate non-compliance or malafide conduct of the assessee. That further, if one final opportunity is provided to the assessee to represent his case before the first appellate authority, the position of the revenue will also not be jeopardized.
Recently, the Hon’ble High Court of Bombay in the case of Vijay Shrinivasrao Kulkarni Vs. Income-tax Appellate Tribunal (2025) 171 taxmann.com 696 (Bom.), dated 04.02.2025 observed that in the case the Assessing Officer had passed an ex-parte order and when the matter went on appeal before the Ld. CIT(Appeals)/NFAC, it had also dismissed the matter ex- parte due to non-compliance by the assessee’s authorized representative, when the matter came up before the ITAT, it had failed to address the infirmity regarding Vinay Kumar Jaiswal vs. Income Tax Officer-1, Ambikapur the fact that the assessee was not afforded proper opportunity of being heard and the matter was dismissed ex-parte by the Ld. CIT(Appeals)/NFAC which amounted to violation of principles of natural justice, and instead ITAT decided the case on merits, in such circumstances, the Hon’ble High Court of Bombay held that passing of an order on merits by the ITAT even when the impugned order was passed ex-parte amounts to violation of principles of natural justice and accordingly, the said matter was remanded to ITAT for passing a fresh order in accordance with law after hearing the parties. The legal principle as enshrined in the present judgment is crystal clear that the principles of natural justice i.e. the right to be heard is to be provided and accordingly, the matter had to be substantially adjudicated by the appellate authority. Therefore, if the impugned order of the Ld. CIT(Appeals)/NFAC is an ex-parte order, the only recourse in conformity with the aforesaid judicial pronouncement is to remand the matter back to the file of the Ld. CIT(Appeals)/NFAC for fresh adjudication in terms with the principles of natural justice providing one final opportunity to the assessee.
10. In the aforesaid case, the Hon’ble High Court of Bombay had referred to a judgment of the Hon’ble Supreme Court in the case of Delhi Transport Corporation vs. DTC Mazdoor Union AIR 1999 SC 564, wherein the Supreme Court inter-alia held that Article 14 guarantees a right of hearing to a person who is adversely affected by an administrative order. The principle of audi-alteram partem is a part of Article 14 of the Constitution of India. In light of such decision, the petitioner ought to have been granted an opportunity of being heard which, partakes the characteristic of the fundamental right under Article 14 of the Constitution of India.
The Hon’ble High Court of Bombay in the aforesaid case had referred to a decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Madras v. Chenniyappa Mudiliar 1969 1 SCC 591, wherein the Supreme Court in interpreting the section 33(4) of the Income Tax Act, 1922 has held that the appellate tribunal was bound to give a proper decision on question of fact as well as law, which can only be done if the appeal is disposed off on merits and not dismissed owing to the absence of the appellant. Reverting to the facts of the present case the grounds of appeal were simply filed before the Ld.CIT(Appeals) they were not substantiated or corroborated through submissions and filing of documentary evidences since the assessee had not complied before the Vinay Kumar Jaiswal vs. Income Tax Officer-1, Ambikapur Ld.CIT(Appeals) on the dates of hearing. Therefore, as per framework of the Act there must be adjudication on merits by the first appellate authority and one final opportunity be provided to the assessee to represent his matter on merits in the interest of natural justice.
12. There may even be a situation where the Ld. Counsel for the assessee may assail a legal ground before the Tribunal following the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC) with a contention that irrespective of the order of the Ld. CIT(Appeals) being ex-parte, the Tribunal may decide the legal issue that has been raised by the Ld. Counsel. In our view, the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (supra) provides that any legal issue which goes to the root of the matter and is established through legal principles, the assessee can take up and raise such legal issue at any appellate forum irrespective of whether the assessee had raised such legal issue at the sub-ordinate level or not, however, it always depends on facts and circumstances of each case whether the Tribunal would decide the legal ground or in a case where the question is of natural justice and ex-parte order by the Ld. CIT(Appeals) the Tribunal would remand it back to Ld. CIT(Appeals) providing final opportunity to a bonafide assessee. The Tribunal as the highest fact finding authority must be certain enough that the impugned order before it has been passed on merits and is a speaking order where the assessee has also complied during the process of litigation. In case, where the order of the Ld. CIT(Appeals) itself is ex-parte and some legal ground is raised and if the Tribunal decides such legal ground where in fact principles of natural justice is left unanswered due to the fact that the impugned order before the Tribunal is ex-parte and there was no compliance by the assessee in such scenario the Tribunal would also be usurping the power of the Ld. CIT(Appeals) which is also a statutory authority as per the Act. This is due to the reason that as per framework of the Act, Ld. CIT(Appeals) is the first appellate authority where an appeal by assessee it would be substantially decided through a speaking order by the Ld. CIT(Appeals). When this part is over and either party is aggrieved second appeal lies before the ITAT. Now if for every ex-parte order passed by the Ld. CIT(Appeals), of course due to non-compliance by the assessee, if the Tribunal adjudicates a legal ground, for instance validity of assessment or reassessment order and answers it in favour of the assessee then it would create an easy route for assessee getting redressal from Tribunal even without bothering to comply with hearing notices before the Ld.
Vinay Kumar Jaiswal vs. Income Tax Officer-1, Ambikapur CIT(Appeals). This would dismantle the structure of the Act which is definitely not the intention of the legislature. Here in this situation, where the benefit of doubt is given to the assessee since he had not complied with the hearing notices before the Ld. CIT(Appeals) which resulted in passing of an ex-parte order by the Ld. CIT(Appeals), in such scenario, as per the scheme of the Act and following the principles of natural justice, the only course of action is to remand the matter back to the file of the Ld. CIT(Appeals) for adjudication on merits providing one final opportunity to the assessee.
In view thereof, we set aside the respective orders of the Ld. CIT(Appeals) for all the years and remand the same to their file for denovo adjudication on merits. At the same time, we direct the assessee that this being the final opportunity, there must be compliance on merits before the first appellate authority. Needless to say, the Ld. CIT(Appeals) shall provide reasonable opportunity of being heard to the assessee and pass an order in terms of Section 250(4) and (6) of the Act within three months from receipt of this order.
11. In view of aforesaid facts and circumstances, the matter is restored back to the file of Ld. CIT(A) for denovo adjudication, within a period of 3 months from the receipt of this order. Needless to say, the assessee shall be afforded with reasonable opportunity of being heard in the set aside appellate proceedings. The assessee is also directed to cooperate and assist proactively in the set aside proceedings, failing which the Ld. CIT (A) would be at liberty to decide the case in accordance with the mandate of law.
Order pronounced in the open court on 29/07/2025.