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Facts
The assessee filed an ITR declaring income, but the case was picked for scrutiny due to large balances in foreign bank accounts. The Assessing Officer made an ex-parte addition of Rs. 1,20,94,342/- under section 69A, treating it as unexplained foreign investments, because the assessee failed to provide explanations or English translations of Japanese bank statements. The CIT(A) subsequently dismissed the appeal for non-prosecution without addressing its merits.
Held
The ITAT held that the CIT(A) is statutorily obligated under section 250(6) of the Income Tax Act to dispose of an appeal on merits through a speaking order, even if the assessee failed to appear, and cannot dismiss it solely for non-prosecution. Citing precedent, the ITAT set aside the CIT(A)'s order and remitted the matter back for fresh adjudication on merits, ensuring the assessee a proper opportunity of hearing.
Key Issues
Whether the CIT(A) has the power to dismiss an appeal for non-prosecution without deciding it on merits, and whether such dismissal violates statutory provisions of the Income Tax Act.
Sections Cited
69A, 250(6), 250(4), 250(5), 251(1)(a), 251(1)(b), 251(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI AVDHESH KUMAR MISHRA
Appellant by Sh.Ved Jain, Advocate Respondent by Sh. Amit Katoch, Sr. DR Date of Hearing 23/09/2024 Date of Pronouncement 23/09/2024 ORDER
PER AVDHESH KUMAR MISHRA, AM
This appeal for the Assessment Year (hereinafter, the ‘AY’) 2017-18 filed by the assessee is directed against the order dated 29.04.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [hereinafter, the ‘CIT(A)’].
Following grounds are raised in this appeal: -
“1. That on the facts and circumstances of the case and in the Law, the National Faceless Appeal Centre (NFAC) has grossly erred in confirming the order of assessment assessing the 1 income at Rs. 1,93,34,172/- as against the returned income of Rs. 72,39,830/-.
2. That on the facts and circumstances of the case and in the Law the National Faceless Appeal Centre (NFAC) had grossly erred in confirming addition of Rs. 1,20,94,342/ on account of peak credit u/s 69A.
3. That on the facts and circumstances of the case and in the Law the National Faceless Appeal Centre (NFAC) had failed to appreciate that the addition of Rs. 1,20,94,342/- has been made in a wrongful manner by treating the peak balance in foreign bank account as alleged unexplained foreign investments and without appreciating that every entry in foreign bank account is duly explainable and is attributable to genuine sources of income which were duly subject to taxation as per the laws of the respective state in accordance with the provisions of relevant Double Taxation Avoidance Agreement ('DTAA').
That on the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred on facts and in law by denying adequate opportunity of being heard to the appellant during the course of appellate proceedings.
That on the facts and circumstances of the case and in law the NFAC had grossly erred in dismissing appeal at the outset. That the appellant craves leave to add to and / or amend, modify or withdraw the grounds outlined above before or at the time of hearing of the appeal.”
The relevant facts of the case giving rise to this appeal are that the appellant/assessee, filed its Income Tax Return (hereinafter, the ‘ITR’) on 30.07.2017 declaring income of Rs.72,39,830/-. The case was picked up for scrutiny, under CASS, on the reasoning that there was “large balance in foreign bank accounts”. The Assessing Officer (hereinafter, the ‘AO’) as detailed in the assessment order issued various notices calling explanation for the credits appearing in three Foreign Bank Accounts of the appellant/ assessee, which were never complied with. Therefore, the AO had no alternative except to complete the assessment ex-parte treating the aggregate peak credit of Rs.1,20,94,342/- of these foreign bank accounts as unexplained and taxed the same under section 69A of the Income Tax Act, 1961 (hereinafter, the ‘Act’). Aggrieved, the assessee filed appeal before the CIT(A), who dismissed it due to non-prosecution.
4. Before us, the Ld. Authorized Representative (hereinafter, the ‘AR’) requested for remitting the matter back to the Ld. CIT(A) for denovo consideration as none of the authorities below had examined the case. It was submitted that the copies of foreign bank accounts, which were in Japanese, provided to the AO/CIT(A). But the appellant/assessee failed to provide the English translation of the same. To which, the Sr. Departmental Representative (hereinafter the ‘Sr. DR’) did not object to.
We have heard both the parties and have perused the material 5. available on the record. We find that the Ld. CIT(A) has dismissed the appeal ex parte due to non-prosecution. The Ld. CIT(A) has not adjudicated the case on merits. Moreover, he has not decided each ground of appeal after discussing the issues in detail and his reasons for agreeing with the assessment order. As per provisions of section 250(6) of the Act, the CIT (A) is obliged to dispose of the appeal in writing after stating the points for determination and to then pass an order on each of the points which has arisen for his consideration. The CIT(A) is further obliged to state the reason for his/her decision on each such points for determination. The CIT(A) is duty-bound to dispose of the appeal through a speaking order on merits, on all the points for determination including each ground of appeal. Moreover, it is evident from the perusal of section 251(1)(a), 251(1)(b) and Explanation of section 251(2) of the Act that the CIT(A) is required to apply his/her mind to all the issues which arise from the impugned order before him/her, whether or not these issues have been raised by the assessee before him/her.
6. Section 251(1)(a) of the Act provides that while disposing of an appeal against assessment order, the CIT(A) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1) (b) of the Act provides that in disposing of an appeal against an order imposing a penalty, the CIT(A) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty. On cumulative consideration of the provisions of section 250(6) of the Act read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) of the Act and Explanation of section 251(2) of the Act, it is concluded that the CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merits. In this regard, it is worth mentioning the finding of the Coordinate Bench in the case of MARC Laboratories Ltd. in 4 , 2732, 2733, 2730, 2734 & 2735/DEL/ 2022 wherein it has been held as under:
“5. We straightway refer to Section 250(6) of the Act which enjoins that the CIT(A) shall state the points for determination before it and the decision shall be rendered on such points along with reasons for the decision. Thus, it is incumbent upon the CIT(A) to deal with the grounds on merits even in ex parte order. In view of Section 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non-prosecution. This view is also taken by the Hon'ble Bombay High Court in case of CIT vs. Premkumar Arjundas Luthra HUF, (2017) 291 CTR 614 (Bom.). A bare glance of the order of the CIT(A) shows that CIT(A) has not addressed itself on various points placed for its determination at all and dismissed the appeal of assessee for default in non- appearance. Needless to say, the CIT(A) plays role of both adjudicating authority as well as appellate authority. Thus, the CIT(A) could not have shunned the appeal for non- compliance without addressing the issue on merits.
In the totality of the circumstances, we consider it just and expedient to restore the matter back to the CIT(A) in the larger interest of justice with a view to enable the assessee to avail proper opportunity for disposal of appeal by the CIT(A) on various points. The assessee is cautioned to extend full co- operation to the CIT(A) without any demur, failing which, the CIT(A) shall be at liberty to conclude the appellate proceedings in accordance with law. Hence, the order of the CIT(A) appealed against, is set aside and all the issues raised in the impugned appeal are restored back to the file of the CIT(A) for fresh adjudication in accordance with law after giving reasonable opportunity of hearing to the assessee.”
In view thereof and considering the facts of the case in entirety, without offering any comment on merit of the case we deem it fit to set aside the impugned order and remit the matter back to the file of the AO for denovo consideration as the AO has also passed the ex parte order. The appellant/assessee, no doubt, shall cooperate in the fresh assessment proceedings before the AO.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in open Court on 23rd September, 2024