Facts of the Case

The assessee filed a return declaring business income of ₹4,27,350. Based on AIR information, the Assessing Officer found that the assessee had deposited cash of ₹46,18,300 in multiple bank accounts and had also invested ₹10,00,000 in mutual funds.

Reassessment proceedings under Sections 147/148 were initiated after obtaining approval. The assessee did not file a return in response to notice under Section 148 and provided only a limited explanation stating that a similar notice had been issued in her husband’s case.

Due to non-submission of details and explanations, the Assessing Officer completed assessment to the best of judgment under Section 144. Additions were made as follows:

  • ₹38,68,300 — unexplained cash deposits in bank accounts
  • ₹65,908 — bank interest
  • ₹10,00,000 — unexplained investment in mutual funds

The assessee filed an appeal before the CIT(A). Despite multiple notices of hearing, there was no response from the assessee. The CIT(A) dismissed the appeal ex-parte and confirmed the additions made by the Assessing Officer.

Issues Involved

  1. Whether the CIT(A) can confirm additions ex-parte without examining the merits.
  2. Whether an appellate order must comply with Section 250(6) by providing reasoned findings.
  3. Whether principles of natural justice were violated by absence of effective hearing.

Petitioner’s Arguments (Assessee)

  • The assessment order and appellate order were passed ex-parte without reasonable opportunity.
  • Notices of hearing were allegedly not received.
  • Additions for cash deposits ignored the debit side and sources of funds.
  • Additions for mutual fund investment were arbitrary and unsupported.
  • Both authorities acted mechanically without proper verification.

Respondent’s Arguments (Revenue)

  • The assessee failed to comply with notices and did not furnish evidence.
  • The CIT(A) provided multiple opportunities of hearing.
  • The appellate order was passed due to non-appearance of the assessee.
  • However, it was acknowledged that the CIT(A) did not independently adjudicate the issues on merits.

Court Order / Findings

The ITAT observed that the CIT(A) dismissed the appeal ex-parte and merely confirmed the reassessment order without independent application of mind or examination of the issues on merits.

The Tribunal held that such an order is not in compliance with Section 250(6), which requires the appellate authority to pass a reasoned and speaking order addressing the points for determination.

At the same time, the Tribunal noted that the assessee also contributed to the situation by failing to appear or submit evidence despite opportunities.

In the interest of justice and fair play, the Tribunal set aside the order of the CIT(A) and restored the matter for fresh adjudication on merits after granting adequate opportunity to both parties. The assessee was directed to submit all relevant evidence and explanations during the de novo proceedings.

Important Clarification

The Tribunal emphasized that while non-cooperation by the assessee is relevant, the appellate authority cannot abdicate its statutory duty to decide the case on merits. Confirmation of additions without independent reasoning violates Section 250(6) and principles of natural justice. Fresh adjudication with proper opportunity is mandatory.

Link to download the order -

https://itat.gov.in/public/files/upload/1694771204-ITA%20No.%2097%20Alld%202023%20Swatantra%20Mishra.pdf

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