2025 (6) TMI 644 - AT - Income Tax

Condonation of the delay of 374 days in filing the appeal - CIT(A) dismissed the appeal on the ground of maintainability u/s 249(3) of the Act by refusing to condone the delay in the filing of the appeal - HELD THAT - Once the appeal is held to be non-maintainable there remains no jurisdiction to adjudicate the matter on merits. However in the second part CIT(A) proceeded to consider the factual aspects of the case and recorded findings by relying upon the remand report dated 09/08/2019 submitted by the AO through the Joint CIT Range-4 Thane. We observe that the CIT(A) cannot simultaneously take mutually inconsistent stands in the same order as such conduct is contrary to the settled principles of law. The appellate order thus suffers from legal infirmity as it reflects two contradictory conclusions within a single proceeding thereby rendering the order untenable in law and devoid of judicial propriety. In view of the above we find no alternative but to set aside the impugned order and remand the matter back to the file of the Ld. CIT(A). We direct the Ld. CIT(A) to condone the delay of 374 days in filing the appeal and to adjudicate the matter afresh by passing a reasoned and speaking order on merits.The remand report already on record and accepted by the Ld. CIT(A) shall be duly considered.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal (AT) in this appeal include:

• Whether the appeal filed by the assessee before the Learned Commissioner of Income Tax (Appeals) (Ld. CIT(A)) was maintainable in view of the delay of 374 days in filing the appeal and whether such delay ought to be condoned under section 249(3) of the Income Tax Act, 1961 (the Act).
• Whether the Ld. CIT(A) was legally justified in dismissing the appeal on the ground of limitation while simultaneously adjudicating the matter on merits in the same order.
• Whether the addition of Rs. 24,73,73,000/- as unexplained cash deposits in the bank account of the assessee was justified, and if so, to what extent such addition should be confirmed or deleted.
• The procedural propriety and judicial propriety of the impugned order passed by the Ld. CIT(A), particularly regarding the contradictory conclusions reached within the same order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of the Appeal before Ld. CIT(A) and Condonation of Delay under Section 249(3) of the Act

Relevant Legal Framework and Precedents: Section 249(3) of the Income Tax Act mandates that appeals before the CIT(A) must be filed within the prescribed period. Delay beyond this period can lead to dismissal unless the delay is condoned. The Tribunal relied on judicial precedents including the Hon'ble Bombay High Court's decision in M/s Chemipol vs. Union of India & Ors, which referred to the Supreme Court rulings in CIT vs S. Chaniappa Mudaliar and Sunderalal Mannalal vs. Nandramdas Dwarakadas. These authorities establish that courts and tribunals possess inherent power to dismiss proceedings for non-prosecution unless statute requires adjudication on merits. Additionally, the Delhi Bench of ITAT in CIT vs M/s Multiplan India Pvt Ltd held that appeals may be dismissed as un-admitted where the appellant fails to pursue the appeal. The Apex Court in CIT vs B.N. Bhattachargee & Anr clarified that 'preferred an appeal' implies more than formal filing; it requires effective prosecution.

Court's Interpretation and Reasoning: The Ld. CIT(A) dismissed the appeal on the ground of inordinate delay of 374 days in filing the appeal and refusal to condone such delay, relying on the above precedents. The Tribunal observed that the assessee did not pursue the appeal effectively, as evidenced by absence of representation and failure to file adjournment petitions. Therefore, the Ld. CIT(A) concluded that the appeal was not maintainable.

Key Evidence and Findings: The delay of 374 days was undisputed. The assessee's non-appearance and non-cooperation during the appeal proceedings before the Ld. CIT(A) further supported the conclusion of non-pursuance.

Application of Law to Facts: Applying the legal principles, the Ld. CIT(A) rightly dismissed the appeal on limitation grounds. However, the Tribunal noted that the Ld. CIT(A) erred in proceeding to decide the appeal on merits after holding it non-maintainable, which is legally impermissible.

Treatment of Competing Arguments: The Tribunal did not find any justification for condoning the delay given the assessee's failure to prosecute the appeal. However, it criticized the Ld. CIT(A) for contradictory treatment of the appeal.

Conclusion: The appeal before the Ld. CIT(A) was rightly dismissed on limitation grounds, but the subsequent merits adjudication in the same order was legally untenable.

Issue 2: Contradiction in the Ld. CIT(A)'s Order - Dismissal on Limitation Grounds and Merits Adjudication

Relevant Legal Framework and Precedents: It is a settled principle of law that an appellate authority cannot take mutually inconsistent stands in the same order. If an appeal is dismissed as not maintainable, the authority loses jurisdiction to decide on merits. Judicial propriety demands consistency and clarity in orders.

Court's Interpretation and Reasoning: The Tribunal observed that the Ld. CIT(A) bifurcated the order into two inconsistent parts: first, dismissing the appeal on limitation grounds, and second, deciding the merits by confirming part of the addition. This approach violated settled legal principles and rendered the order "untenable in law and devoid of judicial propriety."

Key Evidence and Findings: The order of the Ld. CIT(A) itself reflected this contradiction. The remand report and the factual findings on merits were considered after dismissal on limitation grounds.

Application of Law to Facts: The Tribunal held that such contradictory conclusions cannot stand and necessitated setting aside the impugned order for fresh adjudication.

Treatment of Competing Arguments: The Tribunal did not accept the Ld. CIT(A)'s approach and emphasized the need for a reasoned and speaking order either on limitation or on merits, but not both simultaneously.

Conclusion: The impugned order suffers from legal infirmity due to contradictory conclusions and must be set aside.

Issue 3: Justification and Quantum of Addition of Unexplained Cash Deposits in Bank Account

Relevant Legal Framework and Precedents: Under the Income Tax Act, unexplained cash credits or deposits in bank accounts can be added to the income of the assessee if not satisfactorily explained. The burden lies on the assessee to account for such deposits. Precedents establish that additions should be made only to the extent unexplained and not arbitrarily.

Court's Interpretation and Reasoning: The Ld. AO made an addition of Rs. 24,73,73,000/- as unexplained deposits in the Oriental Bank of Commerce account. The Ld. CIT(A), after receiving the remand report, held that the assessee had executed work related to commission income at rates of 0.5% for A.Y. 2009-10 and 10% for A.Y. 2011-12 for providing accommodation entries. Therefore, the entire addition was not justified. The Ld. CIT(A) confirmed an addition of Rs. 12,36,865/- representing the commission income portion and deleted the balance amount.

Key Evidence and Findings: The bank account statements showed total credits of Rs. 24,73,73,000/- including cash deposits and debits. The remand report and evidence on record indicated the commission income earned by the assessee for arranging accommodation entries.

Application of Law to Facts: The Ld. CIT(A)'s approach to confirm only the commission income portion as addition and delete the rest was a reasoned exercise of discretion based on evidence. However, since the order was set aside on procedural grounds, the matter is to be reconsidered afresh.

Treatment of Competing Arguments: The revenue challenged the deletion of the balance amount, but the Tribunal did not express a final view on merits and remanded the matter for fresh adjudication.

Conclusion: The addition of Rs. 12,36,865/- was provisionally confirmed, but the entire issue is to be reconsidered de novo.

Issue 4: Procedural and Judicial Propriety in the Impugned Order

Relevant Legal Framework and Precedents: Principles of natural justice and judicial propriety require that an order be clear, consistent, and passed after affording a reasonable opportunity of hearing. The appellate authority must not adopt contradictory positions and must pass speaking orders.

Court's Interpretation and Reasoning: The Tribunal found that the Ld. CIT(A) failed to observe these principles by dismissing the appeal on limitation grounds and simultaneously deciding on merits without affording proper opportunity to the assessee. The assessee was also not represented before the Tribunal, but the Tribunal proceeded ex parte after hearing the revenue.

Key Evidence and Findings: The absence of representation by the assessee at the Tribunal stage and lack of adjournment request were noted. The Ld. CIT(A)'s order lacked judicial propriety due to conflicting conclusions.

Application of Law to Facts: The Tribunal set aside the order and directed the Ld. CIT(A) to condone the delay and adjudicate the appeal afresh with a reasoned and speaking order, allowing the assessee to file additional evidence and be heard.

Treatment of Competing Arguments: The Tribunal balanced the need for expeditious disposal with the assessee's right to be heard and expected due diligence from the assessee.

Conclusion: The impugned order was procedurally and legally defective and required remand for fresh adjudication.

3. SIGNIFICANT HOLDINGS

"The appellate order thus suffers from legal infirmity, as it reflects two contradictory conclusions within a single proceeding, thereby rendering the order untenable in law and devoid of judicial propriety."

"In view of the above, we find no alternative but to set aside the impugned order and remand the matter back to the file of the Ld. CIT(A). We direct the Ld. CIT(A