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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI ANADEE NATH MISSHRA
For the sake of convenience, these three appeals are hereby disposed of through this consolidated order. The grounds of appeal are as under: ITA No.271/LKW/2024:
1.1. BECAUSE the Id. "CIT(A)" was not justified in dismissing the appeal in limine by passing the impugned order ex-parte without affording sufficient and effective opportunity of being heard to the "appellant" and consequently the impugned order deserves to be set-aside and matter restored to "CIT(A)" for passing the order afresh after affording reasonable opportunity of being heard to the assessee. 1.2 BECAUSE non-compliance of notices of hearing issued by Id. "CIT(A)" was caused due to prolonged illness of partner of the "appellant" firm owing to which the "appellant" could not get the submission filed before the Id. "CIT(A)" and on a due consideration of this fact itself, the matter deserves to be restored to the ld. "CIT(A)" for deciding the appeal afresh after affording a reasonable opportunity of being heard to the "appellant".
2. BECAUSE even in the ex-parte order, irrespective of non- appearance of the assessee before the "CIT(A)", the Id. "CIT(A)" ought to have dealt with the issues raised by the assessee in the grounds of appeal
on merits by way of passing a speaking order after taking into consideration the material and information available on record.
3. BECAUSE the re-assessment proceedings u/s 147 of the Act were neither initiated nor concluded in accordance with the provisions of law owing to which entire proceedings commencing from recording of reasons and concluding with passing of re- assessment order got wholly vitiated and consequently the Id. "CIT(A)" should have quashed the re-assessment order by holding the same as illegal, bad in law and without jurisdiction.
4. BECAUSE reasons recorded for formation of belief of escapement of income were wholly deficient in meeting the requirement of law owing to lack of necessary ingredients, as required under section 147 r.w.s.148 of the Act, consequently the Id. "CIT(A)" should have held the re-assessment proceedings as void-abinitio and accordingly should have held the re-assessment order as illegal, bad in law and without jurisdiction.
5. BECAUSE the reassessment order u/s 147 of the Act had been passed by the Assessing Officer without issuing the mandatory notice under section 143(2) of the Act, the ld. "CIT(A)" should have held the re-assessment order as illegal, bad in law and without jurisdiction.
6. BECAUSE in the reason to believe the Id. AO had not substantiated as to how the "appellant" failed to disclose fully and truly all material facts, necessary for the assessment, during assessment proceedings u/s 143(3) of the Act, the Id. CIT(A)" should have held the initiation of re-assessment proceedings as void-abinitio.
7. BECAUSE on a due consideration of material and information on record, particularly that the assessment was reopened on the basis of change of opinion which is not permissible as per the law well settled consequently the Id. "CIT(A)" should have held the re- assessment order as illegal, bad in law and without jurisdiction.
8. BECAUSE the sanction for initiation of proceedings u/s 147 of the Act was not accorded as per provisions of section 151 of the Act and consequently the Id "CIT(A)" ought to have held the re- assessment order as illegal, bad in law and without jurisdiction.
9. BECAUSE on a due consideration of the fact that the re- assessment was made by relying on the documents found during the course of search in the case of a third party which had no evidentiary value in relation to the "appellant" so as to make presumption u/s 292C of the Act., the Id. "CIT(A)" ought to have held the re-assessment order as illegal, bad in law and without jurisdiction.
10. BECAUSE the assessment was re-opened on the basis of material seized/found during the search of a 3rd party as such the re-assessment proceedings could have been initiated u/s 153C of the Act only and not under section 147 of the Act and on a due consideration of this illegality alone, the id "CIT(A)" ought to have held the re- assessment proceedings as void-abinitio and the re- assessment order as illegal, bad in law and without jurisdiction. WITHOUT PREJUDICE TO THE AFORESAID 11. BECAUSE on the facts and in the circumstances of the case and on a due consideration of the material and information on record, the Id. "CIT(A)" ought to have deleted the following additions made in the assessment order. (i) Addition of Rs.2,24,00,000/- made u/s 68 of the Act by treating the unsecured loan of Rs. 1,94,00,000/- from M/s. Neil Industries Ltd. and unsecured loan of Rs. 30,00,000/- from M/s Sulabh Engineering and Services Ltd as unexplained cash credits by alleging the said loans to be bogus. (ii) Addition of Rs.6,72,000/- made u/s 69C of the Act on account of commission alleged to have been paid for obtaining the unsecured loans of Rs.2,24,00,000/-; and (iii) Addition of Rs.12,72,887/ made u/s 37 of the Act on account of disallowance of claim of interest on unsecured loans.
12. BECAUSE on the facts and in the circumstances of the case, the Id. "CIT(A)" should have directed the AO to drop the penalty proceedings initiated u/s 271(1)(c) of the Act. 13 BECAUSE on the facts and in the circumstances of the case, the Id. "CIT (A)" should have held that the appellant" was not liable for interest u/s 2348 of the Act and consequently the Id "CIT(A)" ought to have directed the Assessing Officer to delete the interest charged under section 234B of the Act.
BECAUSE the order appealed against is contrary to facts, law and principles of natural justice.
BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other.
The "appellant" craves leave, to add, delete or modify any of the grounds before hearing of appeal. ITA No.272/LKW/2024:
1.1. BECAUSE the ld. "CIT(A)" was not justified in dismissing the appeal in limine by passing the impugned order ex-parte without affording sufficient and effective opportunity of being heard to the "appellant" and consequently the impugned order deserves to be set-aside and matter restored to "CIT(A)" for passing the order afresh after affording reasonable opportunity of being heard to the assessee. 1.2 BECAUSE non-compliance of notices of hearing issued by ld. "CIT(A)" was caused due to prolonged illness of partner of the "appellant" firm owing to which the "appellant" could not get the submission filed before the Id. "CIT(A)" and on a due consideration of this fact itself, the matter deserves to be restored to the Id. "CIT(A)" for deciding the appeal afresh after affording a reasonable opportunity of being heard to the "appellant".
2. BECAUSE even in the ex-parte order, irrespective of non- appearance of the assessee before the "CIT(A)", the Id. "CIT(A)" ought to have dealt with the issues raised by the assessee in the grounds of appeal
on merits by way of passing a speaking order after taking into consideration the material and information available on record.
3. BECAUSE the assessment order appealed against was passwed by the Jt. Commissioner of Income-tax, Central Circle-1, Kanpur, who was not vested with the jurisdiction of the AO in the case of the "appellant", the said assessment order itself was bad in law and without jurisdiction and on a due consideration of this fact alone the ld. "CIT(A)" should have quashed the assessment order.
4. BECAUSE addition were made by the Assessing Officer on the basis of material seized/found on a search of a third party and as such the assessment proceedings could have been initiated u/s 153C of the Act only and not u/s 143(2) of the Act and on a due consideration of this illegality alone, the Id "CIT(A)" ought to have held the assessment proceedings as void-abinitio and the assessment order as illegal, bad in law and without jurisdiction.
5. BECAUSE the addition of Rs. 24,95,292/- was made by the Assessing Officer on the basis of statement of third party, without affording opportunity to the assessee to or Frose examine the person giving the statement of culpable nature, the Id."CIT(A)" Kumar hoold have deleted the said addition in view of judgement and order passed by the Apex Court in the case of Andaman Timber Industries vs CCE reported Partner in (2015) 127 DTR (SC) 241. WITHOUT PREJUDICE TO THE AFORESAID
6. BECAUSE on the facts and in the circumstances of the case and on a due consideration of the material and information on record, the Id. "CIT(A)" ought to have deleted the addition of Rs. 24,95,292/ made u/s 37 of the Act on account of disallowance of claim of interest on unsecured loans taken by the "appellant" in the earlier year from M/s. Neil Industries Ltd., and M/s. Sulabh Engineering & Services Ltd.
7. BECAUSE on the facts and in the circumstances of the case, the Id."CIT(A)" should have directed the AO to drop the penalty proceedings initiated u/s 271(1)(c) of the Act.
8. BECAUSE the order appealed against is contrary to facts, law and principles of natural justice. 9. BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other. 10. The "appellant" craves leave, to add, delete or modify any of the grounds before hearing of appeal. :
1.1. BECAUSE the Id. "CIT(A)" was not justified in dismissing the appeal in limine by passing the impugned order ex-parte without affording sufficient and effective opportunity of being heard to the "appellant" and consequently the impugned order deserves to be set aside and matter restored to "CIT(A)" for passing the order afresh after affording reasonable opportunity of being heard to the assessee. 1.2 BECAUSE non-compliance of notices of hearing issued by ld. "CIT(A)" was caused due to prolonged illness of partner of the "appellant" firm owing to which the "appellant" could not get the submission filed before the ld. "CIT(A)" and on a due consideration of this fact itself, the matter deserves to be restored to the Id. "CIT(A)" for deciding the appeal afresh after affording a reasonable opportunity of being heard to the "appellant".
2. BECAUSE even in the ex-parte order, irrespective of non- appearance of the assessee before the "CIT(A)", the Id. "CIT(A)" ought to have dealt with the issues raised by the assessee in the grounds of appeal
on merits by way of passing a speaking order after taking into consideration the material and information available on record.
3. BECAUSE additions were made by the Assessing Officer on the basis of material seized/found on a search of a third party and as such the assessment proceedings could have been initiated u/s 153C of the Act only and not u/s 143(2) of the Act and on a due consideration of this illegality alone, the ld "CIT(A)" ought to have held the assessment proceedings as void-abinitio and the assessment order as illegal, bad in law and without jurisdiction.
4. BECAUSE the additions in the assessment order were made by the Assessing Officer on the basis of statement of third party, without affording opportunity to the assessee to cross examine the person giving the statement of culpable nature, the Id."CIT(A)" should have deleted the additions in view of judgement and order passed by the Apex Court in the case of Andaman Timber Industries vs CCE reported in (2015) 127 DTR (SC) 241. WITHOUT PREJUDICE TO THE AFORESAID Kumar BECAUSE consideration Partner on the facts and in the circumstances of the case and on a due consideration of the material and information on record, the Id. "CIT(A)" ought to have deleted the following additions made by the Assessing Officer: (1) Addition of Rs.79,00,000/- made u/s 68 on account of treatment of Unsecured Loan as unexplained sum. (ii) Addition of Rs.2,37,000/- made u/s 69C on account of estimated commission on alleged unexplained sum. (iii) Disallowance of Rs.17,25,096/-made u/s 37 on account of disallowance of interest on unsecured loan.
6. BECAUSE on the facts and in the circumstances of the case, the Id."CIT(A)" should have directed the AO to drop the penalty proceedings initiated u/s 270A of the Act.
BECAUSE the order appealed against is contrary to facts, law and principles of natural justice.
8. BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other.
The "appellant" craves leave, to add, delete or modify any of the grounds before hearing of appeal.
These three appeals have been filed by the assessee beyond the time limit prescribed under section 253(3) of the Income Tax Act, 1961. The assessee has filed applications for condonation of delay in filing of these appeals as per section 253(5) of the Act. The assessee has requested for condonation of delay in the aforesaid applications on medical grounds. The ld. Sr. D.R. for Revenue expressed no objection to the condonation of delay in filing of these appeals. Accordingly, we condone the delay in filing of these appeals and admit the appeals for decision on merits.
On merits, the ld. authorized representative of the assessee submitted that the ld. CIT(A) has dismissed the assessee’s appeals for want of prosecution of the appeals by the assessee, taking adverse view of non-compliance with the notices issued by the ld. CIT(A). He drew our attention to the fact that the ld. CIT(A) failed to decide the appeals filed by the assessee on merits which is in contravention of the provisions of section 250(6) of the Act. He stated that, the ld. CIT(A) was duty bound to dispose of the appeal through a speaking order, stating the points for determination, the decision thereon and the reason for the decision, as provided under section 250(6) of the Act. He placed reliance on the decision of the Tribunal in the case of Paharti Mata Sahkari Awas Samiti Ltd. Vs. ACIT, 162 taxmann.com 320 (Lucknow – Trib.) and HV Metal ARC (.) Ltd. Vs. ACIT, 100 taxmann.com 4 (Delhi – Trib.). One of us (the Accountant Member) is author/co-author of both the aforesaid orders of ITAT, on which reliance has been placed by the ld. authorized representative of the assessee. The ld. authorized representative of the assessee submitted that the impugned appellate orders of the ld. CIT(A) should be set aside and the ld. CIT(A) should be directed to pass fresh appellate orders in accordance with law after providing reasonable opportunity to the assessee, and in accordance with the provisions of section 250(6) of the Act. The ld. Sr. D.R. for Revenue expressed no objection to the aforesaid submissions made by the ld. authorized representative of the assessee and submitted that the issues and dispute may be restored to the file of the ld. CIT(A) for passing fresh appellate orders. 4. We have heard both sides. We have perused the materials on record. We find that the ld. CIT(A) has passed the impugned appellate orders in a summary manner without deciding the issues in dispute and the points arisen for determination in the assessee’s appeals, through a speaking order. In similarly worded orders, the ld. CIT(A) dismissed the assessee’s appeals stating as under in paragraph 5 of each of the aforesaid impugned appellate orders in the three appeals before us: “5. In the light of non-compliance of the appellant, the appeal is dismissed for want of prosecution.”
The relevant provisions under I.T. Act regarding procedure in appeal, and powers of the Commissioner [Appeals] are contained in Sections 250 and 251 of 1.T. Act, which are reproduced below for ready reference: "250. (1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the Assessing Officer against whose order the appeal is preferred.
(2) The following shall have the right to be heard at the hearing of the appeal (a) the appellant either in person or by an authorized representative; (b) the Assessing Officer, either in person or by a representative. (3) The Commissioner (Appeals) shall have the power to adjourn the hearing of the appeal from time t (4) The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals). (5) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. (6) 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. [(6A) In every appeal, the Commissioner (Appeals), where it is possible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of section 246A. (7) On the disposal of the appeal, the Commissioner (Appeals) shall communicate the order passed by him to the assessee and to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- (a) In appeal against an order of assessment, may confirm, reduce, enhance or annual the assessment (aa) In appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) In an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty, (c) In any other case, he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation. - In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant."
6. A perusal of the above provisions of law shows that U/s. 250(6) of 1.T. Act the Ld. CIT (A) was 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 arose for consideration; and the Ld. CIT (A) was further obliged to state the reasons for his decision on each such points which arose for determination. Thus, the Ld. CIT (A) was duty bound to dispose of the appeal on merits. Moreover, the perusal of Section 251(1)(a) and (b) of 1.T. Act and the further perusal of Explanation of Section 251(2) of 1.T. Act shows that the Ld. CIT (A) was required to apply his mind to all the issues which arose from the impugned order before him, whether or not these issues had been raised by the Assessee before him. Also, Section 251(1)(a) of 1.T. Act provides that while disposing of an appeal against Assessment Order, Commissioner (Appeals) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1) (b) provides that in disposing of an appeal against an order imposing a penalty, Commissioner (Appeals) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty. On cumulative consideration the provisions U/s. 250(6) read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation of Section 251(2) of I.T. Act, we come to the conclusion that the Ld. CIT (A) is not empowered to dismiss the appeal in limine for non- prosecution of appeal and is obliged to dispose of the appeal on merits. Once the Assessee files an appeal U/s. 246A of 1.T. Act, the Assessee sets in motion the machinery designed for disposal of the appeal under Sections 250 and 251 of 1.T. Act. If the appeal filed by the assessee fulfils the requirements of maintainability and admissibility prescribed under Sections 246, 246A, 248 and 249 of 1.T. Act; neither the Assessee can stop the further working of that machinery as a matter of right by withdrawing the appeal, or by not pressing the appeal, or by non- prosecution of the appeal; nor the first appellate the authority, CIT (A) in this case, can halt this machinery by ignoring either the procedure in appeal prescribed Us 250 of 1.T. Act or powers of Commissioner (Appeals) prescribed U/s. 251 of 1.T Act. CIT (A), the first appellate authority, cannot dismiss assessee's appeal in limine for non- prosecution without deciding the appeal on merits through an order in writing, stating the points of determination in the appeal, the decision thereon and the reason for the decision. It is well-settled that powers of Ld. CIT (A) are co-terminus with powers of the Assessing Officer. Useful reference may be made to order of Apex Court decision in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) in which it was held that AAC has plenary powers in disposing off an appeal, that the scope of his power is co-terminus with that of the ITO, that he can do what the ITO can do and also direct him to do what he failed to do. In this context, useful reference may also be made to Apex Court's decisions in the cases of CIT v. Rai Bahadur Hardutory Motilal Chamaria [1967] 66. ITR 443 and CIT v. B.N. Bhattachargee [1979] 118 ITR 461 (SC) for the proposition that an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing, the first appellate authority can proceed with the enquiry and if he finds that there has been an under-assessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the Assessing Officer to not complete the Assessment Proceedings by allowing the Assessee to withdraw Return of Income; it is similarly, by analogy, not open for Ld. CIT (A) to not pass order on merits by dismissing the appeal in limine whether on account of non-prosecution of appeal by the Assessee or if the Assessee seeks to withdraw the appeal or if the assessee does not press the appeal. When the Commissioner (Appeals) dismisses the appeal of assessee in limine for non-prosecution of appeal by the assessee, in effect, indirectly it leads to same results as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise, through dismissal of appeal in limine for non-prosecution of appeal before the first appellate authority; in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee. What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled. In view of the foregoing discussion; and on careful perusal of Section 250(6) r.w.s. 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation to Section 251(2) of 1.T. Act; it is amply clear that Ld. CTT (A) has no power to dismiss appeal in limine for non-prosecution of appeal by the assessee. We draw support from order of Hon'ble Bombay High Court in the case of CIT v. Premkumar Arjundas (HUF) [2016] 240 Tasman 133/69 taxmann.com 407 for the propositions that Ld. CIT (A) is required to apply his mind to all issues which arise from impugned order before him whether or not same had been raised by appellant before him; and that CIT (A) is obliged to dispose of the appeal on merits. In this case, it was held as under:
"8...... it is very clear once an appeal is preferred before the CIT (A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT (A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1) (a) and (b) of the Act provide that while disposing of appeal the CIT (A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT (A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT (A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT (A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT (A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT (A) is co- terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT (A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT (A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT (A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act."
7. In view of the foregoing, we hold that the ld. CIT(A) erred in dismissing the appeals of the assessee in limine for non- prosecution of appeals by the assessee. Also, the representatives of both sides are in agreement that the issues in dispute may be restored to the file of the ld. CIT(A) for passing fresh appellate orders. Accordingly, we set aside the impugned appellate orders of the ld. CIT(A) in the present three appeals before us and we direct the ld. CIT(A) to pass de novo appellate orders in accordance with law after providing reasonable opportunity to the assessee, diligently following the provisions of section 250(6) of the Act.
In the result, all the three appeals are partly allowed for statistical purposes. Order pronounced in the open Court on 05/08/2024.