Facts of the Case

The assessee filed his return of income declaring taxable income of ₹10,19,230 for Assessment Year 2016-17. The case was selected for scrutiny through CASS, and the assessment was completed at a total income of ₹39,62,679 after making an addition of ₹29,43,449.

Aggrieved by the assessment order, the assessee filed an appeal before the first appellate authority. However, due to non-compliance with notices, the National Faceless Appeal Centre (NFAC) dismissed the appeal.

The assessee thereafter approached the Income Tax Appellate Tribunal challenging the dismissal of the appeal.

Issues Involved

  1. Whether the appeal could be admitted despite delay in filing before the Tribunal.
  2. Whether dismissal of the appeal by the NFAC for non-compliance without adjudicating on merits was justified.
  3. Whether the assessment proceedings suffered from jurisdictional defects due to issuance of notices by a non-jurisdictional officer.
  4. Whether application of Section 44AD was appropriate where turnover allegedly exceeded the statutory limit.
  5. Whether the assessee deserved another opportunity to present his case.

Petitioner’s Arguments (Assessee)

The assessee raised multiple grounds, including that:

  • The assessment proceedings were without jurisdiction because notice under Section 143(2) was issued by an officer who did not have jurisdiction.
  • Consequently, subsequent proceedings were void ab initio.
  • Section 44AD was wrongly applied despite turnover exceeding the statutory threshold.
  • Books of account had been audited and financial statements were furnished.
  • The assessee could not respond to notices because the Chartered Accountant handling the matter had expired, and this fact came to his knowledge only after the assessment order.
  • The demand was based on conjectures and incorrect application of law.

The assessee also filed an application for condonation of delay of 26 days in filing the appeal before the Tribunal.

Respondent’s Arguments (Revenue)

The Revenue pointed out that:

  • There had been complete non-compliance by the assessee during appellate proceedings.
  • Notices issued by the NFAC remained unanswered.

However, the Departmental Representative did not object to condonation of the short delay in filing the appeal.

Court Order / Findings (ITAT Allahabad)

Condonation of Delay

The Tribunal found the explanation for the 26-day delay to be genuine and beyond the control of the assessee. Accordingly, the delay was condoned and the appeal admitted.

Non-Compliance Before NFAC

It was noted that the assessee had not complied with notices during the first appellate proceedings, leading to dismissal of the appeal.

Restoration in the Interest of Justice

Despite the non-compliance, the Tribunal held that the assessee deserved one more opportunity to present his case.

Accordingly, the Tribunal:

  • Set aside the order of the NFAC
  • Restored the matter to the NFAC for fresh adjudication
  • Directed that the assessee be given adequate opportunity to present evidence
  • Cautioned the assessee to comply fully in the set-aside proceedings

The Tribunal clarified that if the assessee again fails to cooperate, the NFAC may pass an order on the basis of material available on record, even ex-parte.

Important Clarification

Short delays in filing appeals may be condoned where justified by bona fide reasons.

Dismissal of appeals for non-compliance without adjudicating merits may warrant restoration.

Jurisdictional objections and substantive grounds should ordinarily be examined on merits.

Restoration is intended to secure substantial justice, not to excuse continued non-cooperation.

Assessees must actively participate in remanded proceedings to avoid adverse orders.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771229101_RAKESHKUMARSINGHCHUNARVS.DCACIT3MIRZAPUR.pdf

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