2025 (5) TMI 595 - AT - Income Tax

Ex-parte order passed by CIT(A) - Addition as unexplained money u/s 69A and Disallowance of deduction claimed u/s 80C - as alleged nature and source of cash deposit unexplained - HELD THAT - We find that the CIT(A) has not passed an order as per the mandate of section 250(6) of the Act and dismissed the appeal of assessee only on the ground of non-compliance. The order passed by the CIT(A) is clearly violative of the express provisions of section 250(6) of the Act which provides that the appellate orders of the CIT(A) are to state the points arising in the appeal the decision of the authority thereon and the reasons for such decisions. Appeal of the assessee is allowed for statistical purposes. The underlying rationale of the provision is that such orders are subject to further appeal to the appellate Tribunal. Speaking order would obviously enable a party to know precise points decided in his favour or against him. Assessment order was confirmed by CIT(A) in ex parte order we are of the considered view that the assessee deserves one more opportunity to contest his case on merit.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

• Whether the dismissal of the appeal by the Commissioner of Income-tax (Appeals) (CIT(A)) as ex parte, without hearing the appellant, was legally valid and in accordance with principles of natural justice and the statutory mandate under section 250(6) of the Income-tax Act, 1961 (the Act).
• Whether the addition of Rs. 3,91,000/- as unexplained cash deposit under section 69A of the Act by the Assessing Officer (AO) and its confirmation by CIT(A) was justified in the absence of evidence from the assessee.
• Whether the disallowance of deduction claimed under section 80C of the Act amounting to Rs. 1,13,520/- was legally sustainable given the assessee's failure to substantiate the claim before AO and CIT(A).
• Whether the Tribunal should admit additional evidence filed before it, which was not produced before the AO or CIT(A), and whether such admission affects the merits of the appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Ex Parte Dismissal of Appeal by CIT(A) and Compliance with Section 250(6)

Relevant legal framework and precedents: Section 250(6) of the Income-tax Act mandates that the appellate order passed by the CIT(A) must state the points arising in the appeal, the decision thereon, and the reasons for such decisions. This requirement ensures that the order is a speaking order, enabling the appellant to understand the basis of the decision and to exercise the right of further appeal effectively. The principle of natural justice requires that an opportunity of hearing be provided before passing an adverse order.

The CIT(A) relied on the Supreme Court decision in CIT vs. S. N. Banerjee & Ors, which interpreted the phrase "to prefer an appeal" as meaning "effectively prosecuting an appeal." Additionally, the Madhya Pradesh High Court decision in Estate of Late Tukojirao Holkar vs. CWT was cited to uphold the principle that in the absence of reasonable and cogent arguments, additions made by the AO can be sustained.

Court's interpretation and reasoning: The Tribunal observed that the CIT(A) passed the order dismissing the appeal ex parte without hearing the assessee, despite issuing notices fixing hearing dates. The Tribunal held that such dismissal was violative of the principles of natural justice and the express provisions of section 250(6) of the Act, which require a speaking order. The CIT(A) failed to state the points arising in the appeal, the decision thereon, and reasons, thus rendering the order non-compliant with statutory requirements.

Key evidence and findings: The assessee did not comply with notices from AO and CIT(A) and did not appear for hearings. However, the assessee's representative before the Tribunal submitted that non-compliance was due to unavoidable circumstances and not deliberate neglect. The Tribunal admitted the additional evidence filed before it, citing Rule 29 which permits admission of additional evidence for substantial cause.

Application of law to facts: The Tribunal applied the legal requirement of a speaking order under section 250(6) and the principles of natural justice. It found the CIT(A) order deficient and concluded that the assessee was entitled to an opportunity to be heard. The Tribunal emphasized the importance of enabling the appellant to know the precise points decided and the reasons, which was absent in the ex parte order.

Treatment of competing arguments: The Revenue argued that the assessee was negligent in pursuing the appeal, justifying the ex parte dismissal. The Tribunal, however, found that the non-compliance was not deliberate and that the assessee should be given a fair opportunity to present the case on merit.

Conclusions: The Tribunal set aside the CIT(A) order and remitted the matter to the AO for fresh adjudication after granting the assessee adequate opportunity of hearing, thereby upholding the principles of natural justice and statutory compliance.

Issue 2: Justification of Addition of Rs. 3,91,000/- as Unexplained Cash Deposit under Section 69A

Relevant legal framework and precedents: Section 69A of the Act deals with unexplained cash credits or deposits and allows the AO to add such amounts to the income of the assessee if the source is not satisfactorily explained.

Court's interpretation and reasoning: The AO made the addition of Rs. 3,91,000/- due to the assessee's failure to produce any evidence explaining the cash deposit in the bank account. The CIT(A) confirmed this addition based on the absence of any explanation or evidence from the assessee. The Tribunal noted that the assessee had not submitted any explanation before the AO or CIT(A), but had filed additional evidence before the Tribunal.

Key evidence and findings: The assessee deposited Rs. 3,91,000/- in a bank account but did not substantiate the source before the AO or CIT(A). The additional evidence filed before the Tribunal purportedly substantiates the nature and source of the cash deposit, but was not considered by the lower authorities.

Application of law to facts: Since the lower authorities passed ex parte orders without considering the additional evidence, the Tribunal admitted the evidence and remitted the matter for fresh adjudication to enable the assessee to substantiate the cash deposit.

Treatment of competing arguments: The Revenue maintained that the addition was justified due to the assessee's failure to comply and produce evidence. The Tribunal, however, prioritized procedural fairness and allowed the assessee an opportunity to explain the source.

Conclusions: The addition is not upheld at this stage; the matter is remitted for fresh consideration after hearing the assessee.

Issue 3: Disallowance of Deduction Claimed under Section 80C of Rs. 1,13,520/-

Relevant legal framework and precedents: Section 80C provides deductions for specified investments and expenditures, subject to proof and compliance with conditions.

Court's interpretation and reasoning: The AO disallowed the deduction due to lack of evidence. CIT(A) confirmed the disallowance for the same reason. The Tribunal found that the assessee had not presented evidence before the lower authorities but filed additional documents before the Tribunal.

Key evidence and findings: No evidence was produced before AO or CIT(A) to substantiate the deduction claim. Additional evidence was filed before the Tribunal but not considered previously.

Application of law to facts: The Tribunal admitted the additional evidence and remitted the matter for fresh adjudication to allow the assessee to establish entitlement to deduction.

Treatment of competing arguments: The Revenue argued that the claim was rightly disallowed due to non-substantiation. The Tribunal emphasized procedural fairness and the need for opportunity to present evidence.

Conclusions: The disallowance is not sustained at this stage; the matter is remitted for fresh consideration.

Issue 4: Admission of Additional Evidence before the Tribunal

Relevant legal framework and precedents: Rule 29 of the ITAT Rules permits the admission of additional evidence if substantial cause is shown.

Court's interpretation and reasoning: The Tribunal accepted the explanation that non-compliance before lower authorities was due to unavoidable circumstances and admitted the additional evidence filed before it.

Key evidence and findings: The additional evidence comprised documents substantiating the cash deposit and deduction claim, filed for the first time before the Tribunal.

Application of law to facts: The Tribunal exercised its discretion to admit evidence in the interest of justice, enabling adjudication on merits rather than procedural default.

Treatment of competing arguments: The Revenue opposed the admission, relying on procedural lapses. The Tribunal prioritized substantive justice over procedural technicalities.

Conclusions: Additional evidence admitted; matter remitted for fresh adjudication.

3. SIGNIFICANT HOLDINGS

"The order passed by the CIT(A) is clearly violative of the express provisions of section 250(6) of the Act, which provides that the appellate orders of the CIT(A) are to state the points arising in the appeal, the decision of the authority thereon and the reasons for such decisions."

"Speaking order would obviously enable a party to know precise points decided in his favour or against him."

"Considering the facts and circumstances of the case and the fact that the assessment order was confirmed by CIT(A) in ex parte order, we are of the considered view that the assessee deserves one more opportunity to contest his case on merit."

"Rule-29 permits ITAT to admit additional evidence for any substantial cause. Ld. AR submitted that non-compliance was due to unavoidable circumstances. Hence, the additional evidences are admitted."

Core principles established include the necessity of compliance with section 250(6) to ensure speaking orders by CIT(A), the requirement of adherence to natural justice principles by providing hearing opportunities before adverse orders, and the discretionary power of the Tribunal to admit additional evidence in the interest of justice.

Final determinations on each issue are that the CIT(A) order is set aside for failure to comply with statutory and natural justice requirements; the additions and disallowances made by AO and confirmed by CIT(A) are not upheld at this stage; additional evidence is admitted; and the matter is remitted to the AO for fresh adjudication after granting the assessee adequate opportunity to present the case on merits.