M/S INLAND MERCHANDISE PVT. LTD.,KOLKATA vs. ITO, WARD-9(3),KOLKATA, KOLKATA

MA No.36/Kol/2018 & A.Y. 2009-10 Inland Merchandise Pvt. Ltd. Vs. ITO Wd-9(3) Kol. Page 2 First we take up MA No. 36/Kol/2018 By way of this Miscellaneous Application (MA) the assessee is seeking to recall of the Tribunal order dated 01-03-2018 passed ex parte dismissing the appeal of assessee being ITA No. 139/Kol/2017 for non-prosecution.

The facts of the case are that the case was fixed for hearing on 28.02.2018 in “D” bench which was to begin upon the completion of “C” Bench. But the ld. DR sought adjournment at the beginning of hearing of “C” bench for the case on hand and at that relevant time the AR was absent. However, the council for the assessee arrived to the office of Tribunal late as he was under the impression that the “D” bench shall function upon the completion of “C” bench. Thus, the absence of the council for the assessee resulted the dismissal of the appeal ex-parte on account on non prosecution of appeal. However, the Bench in its order provided liberty to the assessee to move application for recalling the order after explaining the reasons for non- compliance.

Now the Ld. AR before us submitted that assessee failed to appear on the date of hearing at the appropriate time under the impression that the ld. DR has sought the adjournment in the instant case. As such, it was prayed that the Council for the assessee failed to appear inadvertently and thus it was prayed to recall the order. On the other hand, Ld. DR did not oppose for the same.

Keeping in view of the submission made above, we are satisfied that there was a sufficient cause for non appearance on behalf of assessee at the time of hearing fixed on 28.02.2018. We therefore recall ex parte order dated 01.03.2018 passed by this Tribunal, keeping in view the proviso to Rule 24 of the Appellate Tribunal Rules, 1963 and restore the appeal of the assessee at its original Number.

In the result, MA of assessee stands allowed. Now coming to the ITA 139/Kol/2017 6. At the outset, the Ld AR further requested the Bench to hear the recalled order on merit. It was also brought to our notice that the Assessing MA No.36/Kol/2018 & A.Y. 2009-10 Inland Merchandise Pvt. Ltd. Vs. ITO Wd-9(3) Kol. Page 3 Officer as well as Ld. CIT(A) has passed the ex-parte order in the case on hand. The learned DR raised no objection if the recalled order is heard on merit. Therefore we decided to proceed to hear the case on merit.

The relevant grounds of appeal raised by assessee are as under:- “1) That, the orders passed by the Ld. lower authorities to the extent they are prejudicial to the interests of the appellant are arbitrary, erroneous, without any proper reasons, invalid and bad in law. 2) That, the Ld. CIT(A) erred in not dealing with ground No.3 in the Memorandum of Appeal specifically raising a legal issue regarding mandatory requirement in terms of sec. 143(2) of the Act and instead considered the same as a ground against addition u/s 68. 3) That, the Ld. CIT(A) ought to have considered that the impugned assessment order is a reassessment order passed de novo in pursuance of order u/s.263 of the Act and failure of the AO to issue notice u/s. 143(2) to the appellant is fatal to the reassessment order and hence passing of the impugned appellate order on other issues without adjudicating the said legal objection raised by the appellant is simultaneously not sustainable in law. 4) That the Ld. CIT(A) further erred in not considering that the requirement to issue notice u/s. 143(2) is mandatory and cannot be dispensed with and that being so, failure of the assessing authority on that account being not a procedural irregularity is not curable and hence the addition made in such an invalid order is liable to be deleted. 5) That, on the facts and in the circumstances of the case, the Ld. CIT(A) erred in upholding the addition of Rs.4,01,50,000/- on account of share application money received by the appellant as unexplained income u/s. 68 of the Act in spite of the fact that conditions precedent to invoke the said section have not been satisfied in the instant case. 6) That, on the facts and circumstances of the case, the order of the Ld. CIT(A) suffers from illegality and perversity inasmuch as he has failed to appreciate that the touchstone points on the basic issue of addition u/s 68 of the Act are identity, creditworthiness and genuineness of the transactions which are totally established and hence the addition sustained in the garb of sec. 68 on generalized background of some cases is not only arbitrary, whimsical but also bad in law. 7) That, the Ld. CIT(A) erred in upholding the addition of Rs.4,01,50,000/- made by the AO by invoking provisions of sec. 68 of the Act as unexplained income in the hands of the appellant in spite of the fact that source of source of share application money received from the share applicants was also established with evidence and the addition was on the basis of suspicion and misnomer only. 8) That the Ld. CIT(A) erred and acted in defiance of law in having based his decision on the order of Hon'ble Tribunal in the case of M/s Subhalakshmi Vanijya P Lt. v. CIT (ITA No.1104/Kol/2014) when admittedly, the crux of the issue there was on the validity of assumption of jurisdiction u/s. 263 of the Act bay the Ld. CIT qua introduction of share capital and not on the basic issue of application of sec. 68 of the Act, as in the present case.

At the outset, it was seen that order of AO and Ld. CIT(A) is ex parte without hearing the assessee. The issue arises whether Ld. CIT(A) can pass ex parte order. We are of the view that Section 250(2) of the Income Tax Act, 1961 grants the assessee as well as the Assessing Officer concerned a right of being heard by the First Appellate Authority. The Appellate Authority has legal duty to dispose of the appeal after hearing. Even no dismissal of appeal for default of assessee can be made. Thus the appeal is to be decided on merits. Where an appeal is disposed of, even though on merits after taking relevant facts into consideration but without giving sufficient opportunity of being heard to the assessee, an application of setting aside of ex parte order is maintainable. It was also observed that the AO has also decided ex parte by passing the order u/s 144 of the Act. Accordingly, we are of the considered view that this order needs to be set aside and remanded back to the file of AO for fresh adjudication after providing reasonable opportunity of being heard to the assessee. On specific query from the Bench for restoring the matter to the file AO for fresh adjudication as per the provisions of the law, the ld. DR raised no