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Facts
For AY 2013-14, the assessee's income was assessed U/S 143(3) by the AO based on an 8% estimated profit and various disallowances due to lack of documentary evidence. The Ld. CIT(A) subsequently dismissed the assessee's appeals on technical grounds of non-prosecution without adjudicating the issues on merits.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeals on technical grounds without addressing the merits, which violated natural justice. Consequently, the Tribunal set aside the CIT(A)'s orders and remanded the case back to the Assessing Officer for fresh adjudication, allowing the assessee an opportunity to substantiate claims with evidence.
Key Issues
Validity of estimated income (8% net profit) and various disallowances/additions by AO; dismissal of appeal by CIT(A) on technical grounds without adjudication on merits.
Sections Cited
143(3), 24(b), 80C
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(A)/NFAC Delhi dt. 29/01/2025 pertaining to Assessment Year 2013-14. 2. In the present appeal Assessee has raised the following grounds:
1. 1. 1. 1. 1. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) NFAC is not justified in upholding the order of the Ld. Assessing Officer without considering the submissions uploaded by the assessee/ appellant.
2. That in the facts and circumstances of the of the case, Ld. Commissioner of Income Tax (Appeals) NFAC is not justified in upholding the estimation of profit of business @ 8% of the total receipts at Rs.1,53,60,659/-
3. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) NFAC is not justified in upholding the addition of Rs.3,027/- made on account of short term capital gain.
4. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) NFAC is not justified in upholding the disallowance of deduction of Rs.1,00,000/- claimed under section 80C of the Income Tax Act,1961.
5. That the order of the Ld. Commissioner of Income Tax (Appeals) NFAC and Ld. Assessing Officer is bad in law.
3. Briefly, the facts of the case are that the assessee is an individual engaged in business activities. For the Assessment Year 2013-14, the assessee filed the return of income on 30.09.2013 declaring a total income of Rs.80,69,500/-. The case was selected for scrutiny, and the assessment was completed u/s 143(3) of the Income-tax Act, 1961 vide order dated 29.01.2016 by the Assessing Officer, wherein the income of the assessee was assessed at Rs.1,76,36,350/-. 3.1 During the assessment proceedings, the Assessing Officer noticed that although books of account were stated to be maintained, supporting documentary evidence could not be produced. The Assessing Officer, therefore, estimated the income of the assessee by applying a net profit rate of 8% on the gross receipts, without allowing deduction on account of material supplied by the contractor, depreciation, interest and royalty. Certain other additions were also made, including interest income on FDRs, disallowance u/s 24(b) and short-term capital gains.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). It is noted that two appeals were filed—one in physical form and another electronically. The learned CIT(A) dismissed the first appeal on the ground of non-prosecution and subsequently dismissed the electronically filed appeal treating the same as infructuous, without adjudicating the issues on merits.
Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.
During the course of hearing, the learned counsel for the assessee submitted that the Ld. CIT(A) passed two appellate orders on the same date i.e. 29.01.2025. It was submitted that the earlier order dismissing the appeal on the ground of alleged non-prosecution, despite the assessee having filed written submissions during the appellate proceedings. It was contended that such submissions were not considered at all.
6.1 It was further submitted that the second appeal filed electronically was dismissed merely on the premise that the earlier appeal had already been dismissed, without examining the merits of the issues involved. It was argued that it is the statutory duty of the learned CIT(A) to adjudicate the appeal on merits and dismissal without adjudication violates principles of natural justice. It was therefore prayed that the matter be restored for fresh consideration.
Per contra, the Ld. DR relied upon the orders of the lower authorities and submitted that the assessee failed to participate effectively in the appellate proceedings. According to the Ld. DR, the dismissal of the appeal was on account of the casual and careless approach of the assessee and therefore no relief should be granted.
We have heard the rival contentions and perused the material available on the record, and examined the orders passed by the lower authorities. We find that the assessment in the present case has been completed on an estimated basis. The assessee has raised substantial grounds relating to estimation of income, calculation of turnover, allowability of deductions and taxability of interest income, which require proper examination. 8.1 We further observe that the Ld. CIT(A) has dismissed the appeal on technical grounds without adjudicating the issues on merits. It is a settled position of law that the first appellate authority is duty-bound to adjudicate the appeal on merits after considering the material available on record. Dismissal of an appeal without dealing with the substantive grounds raised by the assessee defeats the purpose of appellate proceedings and is not in consonance with the principles of natural justice. 8.2 Considering the totality of facts and circumstances of the case, we are of the view that the issues involved require fresh examination at the level of the Assessing Officer. In the interest of justice, one more opportunity deserves to be granted to the assessee to substantiate its claims with supporting evidence.
8.3 Accordingly, we set aside the impugned orders passed by the Ld. CIT(A) and restore the entire matter to the file of the Assessing Officer for fresh adjudication in accordance with law. The Assessing Officer shall examine all the issues afresh after affording an adequate opportunity of being heard to the assessee and shall pass a reasoned and speaking order. The assessee is directed to cooperate fully and furnish all necessary details and evidence as may be called for.
In the result, the appeals of the assessee are allowed for statistical purposes.