2025 (6) TMI 304 - AT - Income Tax

CIT(A) justification in confirming the addition and dismissing the appeal ex-parte - HELD THAT - Assessee has always evaded the process of law and had tried to make mockery of the judicial process by repeatedly not complying with the hearing notices provided to the assessee. In the first round of appeal the Tribunal was lenient and on the ground of natural justice one opportunity was provided to the assessee and the matter was remanded to the file of the Ld. CIT(Appeals)/NFAC. Unfortunately in the second round of appeal also before the Ld. CIT(Appeals)/NFAC the assessee once again failed to comply with the hearing notices and thereby closing all doors in respect of natural justice regarding the assessee. If any further leniency is provided that would go against the order in the case of Ishwarlal Mali Rathod Vs. Gopal and Ors. 2021 (9) TMI 1301 - SUPREME COURT wherein it has been held that judicial approach must be taken in such manner that there should not be any prolonged pendency of any litigation. Any deliberate attempt to prolong litigation due to malafide conduct of the assessee should be nipped in the bud itself so that the faith in the judicial process amongst the litigants is maintained. In the present case as had been examined afore-stated the assessee has least bothered about the legal process and in spite of being granted two round of appeal the assessee has failed to provide any response regarding hearing notices issued by the first appellate authority. That further on a careful consideration of the decision on merits by the CIT(Appeals)/NFAC no reason to interfere with the findings of the CIT(Appeals)/NFAC and accordingly the same is upheld. Decided against assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal are:

(a) Whether the addition of Rs. 29,19,000/- made by the Assessing Officer (AO) under section 68 read with section 115BBE of the Income Tax Act, on account of unexplained capital gains from sale of shares, was justified and sustainable in law?

(b) Whether the assessment order passed under section 147 read with section 144 of the Act was valid or was it bad in law, void ab initio, barred by limitation, or illegal?

(c) Whether the first appellate authority (CIT(A)) was justified in confirming the addition and dismissing the appeal ex-parte without deciding on merits, and whether the appellant was denied a fair and meaningful opportunity to present her case?

(d) Whether the repeated non-compliance and non-cooperation by the appellant in responding to notices and participating in appeal proceedings justified dismissal of the appeal on merits?

(e) Whether the directions of the Tribunal to provide one more opportunity to the appellant were complied with, and if not, what consequences flow from such non-compliance?

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Justification of addition of Rs. 29,19,000/- as unexplained income under section 68 read with section 115BBE

The legal framework governing unexplained cash credits or unexplained investments is section 68 of the Income Tax Act, which requires the assessee to satisfactorily explain the nature and source of such credits. Section 115BBE prescribes a special tax rate on income from undisclosed sources. The AO reopened the assessment under section 147 based on information that the appellant had earned long-term capital gains on sale of shares amounting to Rs. 29,19,000/-, which were not disclosed or explained satisfactorily.

The AO issued multiple notices under section 142(1) and a show-cause notice, all of which were ignored by the appellant. Consequently, the AO passed the assessment order under section 147 read with section 144, making the addition as unexplained income under section 68 read with section 115BBE.

The appellant failed to file any response or evidence to explain the source or genuineness of the capital gains. The CIT(A) and subsequently the Tribunal found no merit in the appellant's claim and upheld the addition. The absence of any explanation or documentation led to the presumption that the income was unexplained and liable to be taxed accordingly.

Issue (b): Validity of assessment order under section 147/144

Section 147 authorizes reopening of assessment if income has escaped assessment, subject to prescribed time limits and procedural safeguards. Section 144 allows the AO to make best judgment assessment if the assessee fails to comply with notices or furnish evidence.

The AO reopened the assessment in 2017 for AY 2010-11, issuing notice under section 148. The appellant did not respond to notices under section 142(1) or the show-cause notice. The AO thus proceeded to pass the order under section 147 read with section 144. The appellant challenged the validity of this order, claiming it was barred by limitation and bad in law.

The CIT(A) and Tribunal found the reopening and assessment valid, as the AO followed due process and the appellant's non-compliance justified proceeding under section 144. The delay in filing the appeal and failure to cooperate further weakened the appellant's position. Thus, the order was held not to be void or barred by limitation.

Issue (c): Whether the CIT(A) was justified in confirming the addition and dismissing the appeal ex-parte without deciding on merits

The appellant contended that the CIT(A) dismissed the appeal ex-parte without providing a fair opportunity to present the case. The CIT(A) had issued multiple hearing notices, but the appellant failed to respond or appear. Initially, the CIT(A) dismissed the appeal for non-compliance.

The Tribunal intervened and set aside the order, directing the CIT(A) to provide one more opportunity to the appellant to file submissions and documents. However, in the subsequent proceedings, the appellant again failed to comply with notices and did not participate in hearings despite several opportunities over a period of nearly two years.

Given this persistent non-cooperation, the CIT(A) proceeded to decide the appeal on the basis of available records and dismissed the appeal on merits. The Court upheld this approach, emphasizing that the appellant's conduct amounted to evasion of the judicial process, and that further leniency would undermine judicial discipline and the principle of expeditious disposal of litigation.

Issue (d): Effect of persistent non-compliance and non-cooperation by the appellant

The appellant's repeated failure to respond to notices at both assessment and appellate stages was a critical factor. The AO issued multiple notices, all ignored. The CIT(A) provided five opportunities initially, then after the Tribunal's directions, four more opportunities, none of which were availed.

The Court emphasized that such persistent non-compliance frustrates the adjudicatory process and justifies dismissal of appeals. Reliance was placed on a Supreme Court ruling which held that judicial approach must prevent prolonged pendency caused by malafide or negligent conduct. The Court held that the appellant's conduct did not inspire confidence and warranted dismissal of the appeal on merits.

Issue (e): Compliance with Tribunal's directions and consequences of non-compliance

The Tribunal had condoned delay in filing the second appeal and directed the CIT(A) to provide one more opportunity to the appellant to present her case with relevant documents. Despite this clear direction, the appellant did not respond to any notices or hearings issued by the CIT(A) over a period of 21 months.

The Court found this to be a clear defiance of the Tribunal's directions and held that the CIT(A) was justified in deciding the appeal on the basis of available records. The Court refused to grant any further leniency, underscoring the need to uphold the integrity of judicial process and prevent abuse of procedure.

3. SIGNIFICANT HOLDINGS

"The assessee has always evaded the process of law and had tried to make mockery of the judicial process by repeatedly not complying with the hearing notices provided to the assessee."

"If any further leniency is provided that would go against the order of the Hon'ble Supreme Court in the case of Ishwarlal Mali Rathod Vs. Gopal and Ors., wherein it has been held that judicial approach must be taken in such manner that there should not be any prolonged pendency of any litigation."

"The persistent noncompliant & non-cooperative attitude of the appellant is evident which doesn't inspire any confidence to keep the appeal pending for long."

"In view of these facts and circumstances... the set aside appeal proceedings is decided on the basis of documents that are available as part of the appeal memo."

Core principles established include the necessity of cooperation by the assessee in tax proceedings, the legitimacy of best judgment assessments when the assessee is non-compliant, and the imperative to prevent abuse of judicial process by dilatory tactics.

Final determinations:

- The addition of Rs. 29,19,000/- as unexplained income under section 68 read with section 115BBE was upheld.

- The assessment order under section 147 read with section 144 was valid and not barred by limitation.

- The CIT(A) was justified in dismissing the appeal on merits after repeated non-compliance by the appellant, even after the Tribunal's directions to provide opportunity.

- The appeal was dismissed in entirety, and no interference was warranted with the findings of the CIT(A).