Facts of the Case

The Assessing Officer received specific CIB information that the assessee had deposited cash amounting to ₹82,60,000 in a business bank account with Bank of Baroda during the relevant year. The assessee furnished a copy of the income tax return showing total income of approximately ₹2.31 lakh.

On obtaining bank statements directly from the bank, the Assessing Officer found total deposits of ₹1,07,39,380, whereas the assessee had disclosed sales receipts of only ₹30,14,240. Consequently, unexplained cash deposits of ₹77,25,140 were suspected to have escaped assessment, leading to initiation of reassessment proceedings under Sections 147/148.

Notices were issued, but the assessee failed to comply adequately and did not file a return in response to notice under Section 148. The assessee also failed to produce books of account or explain the nature and source of cash deposits. Directions under Section 144A were issued by the Additional CIT to complete assessment under Section 145(3).

Subsequently, the Assessing Officer framed a best judgment assessment under Section 144 and added ₹77,25,140 as undisclosed income.

The assessee filed an appeal before the CIT(A). Despite five opportunities of hearing, the assessee did not appear, and the CIT(A) dismissed the appeal for non-prosecution without adjudicating the issues on merits.

Issues Involved

  1. Whether the CIT(A) can dismiss an appeal solely for non-prosecution without examining merits.
  2. Whether an appellate order must comply with Section 250(6) by giving reasons and findings on issues raised.
  3. Whether principles of natural justice were violated by passing a non-speaking order.

Petitioner’s Arguments (Assessee)

  • The assessment was ex-parte and arbitrary.
  • Proper opportunity was not granted due to illness.
  • Addition of the entire bank credits without considering debits was incorrect.
  • The appellate authority failed to provide an effective hearing.
  • The order violated principles of natural justice.

Respondent’s Arguments (Revenue)

  • The assessee failed to appear despite multiple opportunities before the CIT(A).
  • The appellate authority passed an ex-parte order due to non-compliance by the assessee.
  • However, it was acknowledged that the CIT(A) did not examine the issues on merits.

Court Order / Findings

The ITAT observed that the CIT(A) dismissed the appeal merely for non-prosecution without adjudicating the issues on merits. The Tribunal emphasized that Section 250(6) mandates that the appellate authority must pass a speaking order stating points for determination, decision thereon, and reasons for the decision.

Since the CIT(A) failed to discuss the merits of the case, the appellate order was held unsustainable in law. The Tribunal set aside the order and restored the matter to the file of the CIT(A) for fresh adjudication on merits after providing adequate opportunity to both parties.

The Tribunal further noted that the powers of the CIT(A) are co-terminus with those of the Assessing Officer, and therefore the appellate authority must independently evaluate the issues.

 Important Clarification

The Tribunal clarified that dismissal of an appeal for non-prosecution alone does not absolve the appellate authority from its statutory duty to decide the case on merits. Orders passed without reasons violate Section 250(6) and principles of natural justice and are liable to be set aside.

Link to download the order -

https://itat.gov.in/public/files/upload/1694771299-ITA%20No.%2020%20Alld%202023%20Syed%20Shoeb%20Ashraf.pdf

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