2025 (6) TMI 1048 - AT - Income Tax

CIT(A)/ NFAC decided appeal ex-parte - there was a non-compliance by the assessee before the Ld. CIT(A) - HELD THAT - We observe that the Ld. CIT(A)/ NFAC has passed the order in concurrence of the order of the Ld. AO without himself going into the merits of the case. Thus in our view his order is in violation of the provisions of section 250(6) of the Act. On the facts and in the circumstances of the case set out above we deem it fit in the interest of justice and fair play to set aside the order of the Ld. CIT(A)/NFAC and restore the matter back to his file for adjudication afresh and pass speaking order on merits as per facts and law after allowing reasonable opportunity of being heard to the parties.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the delay of 464 days in filing the appeal before the Tribunal can be condoned in light of the reasons stated by the assessee.

2. Whether the additions made by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals)/NFAC (CIT(A)) regarding unexplained investment and income from other sources are justified under the provisions of the Income Tax Act, 1961.

3. Whether the reassessment proceedings initiated under section 147 of the Act are valid and in accordance with the law.

4. Whether the CIT(A) erred in dismissing the appeal for non-prosecution without adjudicating on the merits and without granting adequate opportunity to the assessee.

Issue 1: Condonation of Delay in Filing Appeal

Legal Framework and Precedents: The Tribunal considered the settled principles laid down by the Hon'ble Supreme Court in Collector, Land Acquisition vs. Mst. Katiji & Ors., which emphasizes that substantial justice must prevail over technicalities. It was held that a non-deliberate delay should not defeat the cause of justice, and condonation of delay should be granted if there is a reasonable cause. Further, the Tribunal relied on the recent Supreme Court decision in Inder Singh vs. The State of Madhya Pradesh, which reiterated that limitation should not scuttle the examination of merits if sufficient cause is shown.

Court's Reasoning: The assessee filed an affidavit explaining the delay, citing reasons beyond his control such as reliance on a tax consultant who failed to prosecute the appeal, the demise of the senior professional handling the case, and difficulties in obtaining case records. The Tribunal found these reasons to constitute a reasonable cause and a bona fide attempt to pursue the appeal.

Application of Law to Facts: Given the circumstances, including the COVID-19 pandemic period affecting communication and procedural timelines, the Tribunal held that the delay was not intentional and condoned it in the interest of justice.

Conclusion: The delay of 464 days was condoned, and the appeal was admitted for adjudication.

Issue 2: Validity of Additions Made by AO and Upheld by CIT(A)

Legal Framework: The additions were made under section 69 as unexplained investment and under income from other sources for agricultural income. The AO rejected the assessee's explanation regarding the source of funds for investment in immovable property, particularly the sale proceeds of agricultural land and commercial property, and the declaration of undisclosed income in an Income Disclosure Scheme (IDS).

Court's Interpretation and Findings: The AO disbelieved the source of Rs. 35,00,000/- from sale of agricultural land because no capital gains tax was paid, and the assessee failed to justify the classification of the asset under section 2(14). The balance sources were also rejected. The CIT(A) upheld these additions but dismissed the appeal for non-prosecution without examining the merits.

Competing Arguments: The assessee contended that the additions were unjustified and that he had valid explanations and documentary evidence to support the sources of investment and agricultural income. The Revenue supported the AO and CIT(A) orders.

Application of Law to Facts: Since the CIT(A) did not adjudicate on merits, the Tribunal refrained from deciding on the validity of additions at this stage and directed the matter to be heard afresh.

Conclusion: The Tribunal did not uphold the additions but remanded the matter for fresh adjudication after hearing the assessee.

Issue 3: Validity of Reassessment Proceedings under Section 147

Legal Framework: Section 147 permits reopening of assessment if the AO has reason to believe that income has escaped assessment. The assessee challenged the reassessment proceedings as not in accordance with law.

Court's Reasoning: The Tribunal did not specifically analyze the validity of reassessment in the present order but included it as a ground to be examined afresh by the CIT(A) upon restoration of the appeal.

Conclusion: The issue is to be decided on merits by the CIT(A) after affording opportunity to the assessee.

Issue 4: Dismissal of Appeal by CIT(A) for Non-Prosecution

Legal Framework and Precedents: The Tribunal referred to the decision of the Hon'ble Bombay High Court in CIT vs. Premkumar Arjundas Luthra (HUF), which held that the CIT(A) does not have the power to dismiss an appeal for non-prosecution under the Act. Further, section 250(6) mandates that the CIT(A) must state points for determination, decision thereon, and reasons for the decision.

Court's Interpretation and Findings: The CIT(A) dismissed the appeal for non-prosecution without hearing the assessee on merits and without giving adequate opportunity. The order was passed in concurrence with the AO's order without independent adjudication, violating section 250(6).

Application of Law to Facts: The Tribunal found that the CIT(A) failed to comply with the legislative mandate and procedural fairness. Given the affidavit explaining non-compliance and the absence of intentional default, the Tribunal deemed it fit to restore the matter to the CIT(A) for fresh adjudication.

Conclusion: The CIT(A) order dismissing the appeal was set aside, and the matter was remanded for fresh hearing and decision on merits.

Significant Holdings:

"When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay."

"Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated."

"The law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act."

"The CIT(A) has to adhere to the legislative mandate enshrined in sub-section (6) of section 250 of the Act which requires him to state the points for determination, the decision thereon and the reason for the decision."

"The CIT(A) order is in violation of the provisions of section 250(6) of the Act where it dismisses the appeal without going into merits and without granting adequate opportunity."

In conclusion, the Tribunal condoned the delay in filing the appeal, set aside the CIT(A) order dismissing the appeal for non-prosecution, and restored the matter to the CIT(A) for fresh adjudication on merits after granting adequate opportunity to the assessee. The Tribunal emphasized the importance of procedural fairness and adherence to statutory mandates, directing the assessee to maintain vigilance in receiving departmental communications and to cooperate in the proceedings.