OM PRAKASH RATHI,RAJGARH vs. DCIT/ACIT 2 (1), UJJAIN
Facts
The assessee's re-assessment for AY 2012-13 resulted in an interest expenditure disallowance of Rs. 3,69,272/- by the AO, as borrowed funds were utilized for non-business purposes. Subsequently, the CIT(A) dismissed the assessee's first appeal *in limine* for non-prosecution without adjudicating on the merits of the case.
Held
The Tribunal found that the CIT(A)'s *in limine* dismissal violated Section 250(6) by not providing a reasoned order, and the assessee was denied reasonable opportunities for hearing. It was also noted that the AO's disallowance was made without further opportunity after rejecting the assessee's reply. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the entire matter back to the AO for fresh adjudication, directing both parties to ensure proper hearings and avoid unnecessary adjournments.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal *in limine* for non-prosecution without complying with Section 250(6), and whether the AO's disallowance of interest expenditure was procedurally correct.
Sections Cited
139, 142(1), 143(3), 147, 148, 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first-appeal dated 25.03.2025 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A), Prayagraj [“CIT(A)”] which in turn arises out of assessment-order dated 14.12.2019 passed by learned ACIT-2(1), Ujjain [“AO”] u/s 147/143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2012-13, the assessee has filed this appeal on the grounds mentioned in Appeal Memo (Form No. 36).
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Om Prakash Rathi ITA No. 457/Ind/2025 - AY 2012-13
The background facts leading to present appeal are such that the
assessee is engaged in the business of trading of tractor spare parts,
accessories, pesticides, oil, generators, etc. For AY 2012-13, the assessee
filed return u/s 139 declaring a total income of Rs. 12,15,660/- which was
assessed by way of scrutiny assessment at Rs. 12,80,370/-. Subsequently,
on the basis of information available with him, the AO issued notice dated
28.03.2019 u/s 148 and re-opened assessee’s case. In response to such
notice, the assessee re-filed return. Thereafter, the AO issued notices u/s
142(1) to assessee which were duly complied by assessee. Finally, the AO
passed order of re-assessment after making a disallowance of Rs. 3,69,272/-
out of interest expenditure claimed by assessee. The basis of disallowance
adopted by AO is that the assessee utilized borrowed funds for purchasing
land, flat, plot, etc. for non-business use. Aggrieved, the assessee carried
matter in first-appeal whereupon the CIT(A) dismissed assessee’s appeal in
limine for non-prosecution without adjudicating merit.
Ld. AR for assessee at first submitted that the section 250(6) of the
Income-tax Act, 1961 provides “The order of the Commissioner (Appeals)
disposing of the appeal shall be in writing and shall state the points for
determination, the decision thereon and the reason for the decision.”. He
submitted that in present case, the Ld. CIT(A) has dismissed assessee’s first
appeal although due to non-prosecution by assessee on the dates of hearing
but still without complying with the mandate of section 250(6). Therefore,
the impugned first appeal-order passed by Ld. CIT(A) deserves to be set
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Om Prakash Rathi ITA No. 457/Ind/2025 - AY 2012-13
aside and the matter is fit for restoring to him for a proper adjudication. In
so far as the reason of non-prosecution by assessee is concerned, Ld. AR
carried us to Para 8.1 of impugned order and demonstrated that the CIT(A)
has given only three hearings on 18.02.2021, 28.02.2025 and 11.03.2025, out of which 1st hearing was during Covid-19 pandemic. Further, the 2nd and 3rd hearings were given after a gap of about 4 years and moreover the
intervening time-period between them was a short-period of just 1 month.
Hence, the assessee was not given necessary and reasonable opportunities
due to which the assessee could not prosecute first-appeal before CIT(A).
Ld. AR next submitted that the AO’s order is also an ex-parte order in
the sense the AO issued a show-cause notice dated to assessee to which the
assessee filed adequate reply which is re-produced by AO on Pages 3-4 of
assessment-order. Thereafter, the AO straightaway rejected assessee’s reply
and made impugned disallowance without giving any further opportunity to
assessee. Therefore, the present matter ought to be remanded to the file of
AO for a fresh adjudication after giving opportunity to assessee and after
considering assessee’s submission.
Ld. DR for revenue agreed with the prayer of Ld. AR but made a
request to direct the assessee to represent his case before AO and do not
seek unnecessary adjournments.
In view of above submissions of parties; having regard to the principle
of natural justice and also bearing in mind that no prejudice would be
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Om Prakash Rathi ITA No. 457/Ind/2025 - AY 2012-13
caused to revenue if the present matter is restored at the level of AO, we
remand this matter back to the file of AO for adjudication afresh, at the risk
and responsibility of assessee. The AO shall give necessary opportunity of
hearing to assessee and pass an appropriate order uninfluenced by his
earlier order. The assessee is also directed to remain vigilant and ensure
participation in the hearings as may be fixed by AO and do not seek
unnecessary adjournments failing which the AO shall be at liberty to pass
appropriate order in accordance with law. Ordered accordingly.
Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 27/02/2026
Sd/- Sd/-
(PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore िदनांक/Dated : 27/02/2026 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYSr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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