Facts of the Case

The assessee, an individual engaged in the business of a brick kiln under the name M/s R.B.S. Ent. Udyog, did not file a return of income for Assessment Year 2012-13.

During assessment proceedings, the Assessing Officer made an addition of ₹23,20,837 as unexplained investment in Fixed Deposit Receipts (FDRs) under Section 69 of the Income Tax Act, 1961.

Aggrieved by the assessment order, the assessee filed an appeal before the first appellate authority. However, the National Faceless Appeal Centre (NFAC) dismissed the appeal for non-prosecution, noting that multiple notices were issued but no compliance or written submissions were received.

Issues Involved

  1. Whether dismissal of the appeal for non-prosecution without adjudicating on merits was justified.
  2. Whether addition under Section 69 for investment in FDRs was sustainable.
  3. Whether the assessee was denied reasonable opportunity of hearing.
  4. Whether health issues cited by the assessee constituted sufficient cause for non-compliance.
  5. Whether the matter should be restored for fresh adjudication.

Petitioner’s Arguments (Assessee)

The assessee challenged the ex-parte order on multiple grounds, contending that:

  • The appellate authority erred in deciding the appeal without considering the detailed grounds raised.
  • Rejection of books of account and confirmation of additions were arbitrary.
  • Part of the addition relating to fixed deposits represented renewal of old FDRs rather than fresh investments.
  • The assessee suffered from serious medical conditions, including diabetes and heart surgery, which prevented compliance with notices.
  • Non-appearance was not deliberate, and lack of opportunity resulted in grave injustice.

Respondent’s Arguments (Revenue)

The Revenue relied on the order of the NFAC, emphasizing that:

  • Multiple notices were issued during appellate proceedings.
  • The assessee failed to comply with any of them.

Before the Tribunal, however, the Departmental Representative did not object to restoration of the appeal.

 Court Order / Findings (ITAT Allahabad)

The Tribunal observed that:

  • There was complete non-compliance by the assessee during the first appellate proceedings.
  • The NFAC had issued several notices which remained unanswered.

However, considering the overall facts and in the interest of substantial justice, the Tribunal held that the assessee deserved one more opportunity to present his case.

Accordingly, the Tribunal:

  • Set aside the ex-parte order of the NFAC
  • Restored the appeal to the NFAC for fresh adjudication
  • Directed that a reasonable opportunity of hearing be provided
  • Cautioned the assessee to comply fully in the set-aside proceedings

The Tribunal further clarified that failure to cooperate in the restored proceedings would allow the NFAC to decide the matter on the basis of available records, even ex-parte.

Important Clarification

  • Appeals should ordinarily be decided on merits rather than dismissed solely for non-prosecution.
  • Serious medical conditions may constitute sufficient cause for non-compliance.
  • Restoration of proceedings aims to ensure fairness, not to condone continued default.
  • Additions under Section 69 require proper examination of facts and evidence.
  • Assessees must actively participate in remanded proceedings to avoid adverse outcomes.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771229158_RAMBODHSINGHPRATAPGARHVS.INCOMETAXOFFICERPRATAPGARH.pdf

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