2020 (11) TMI 930 - AT - Income Tax

Dismissal of appeal for non prosecution by CIT(A) - as argued CIT-A failed to apply his mind to the issues which arose from the impugned order - HELD THAT - We are not impressed with the dismissal of the appeal by the CIT(A) for non-prosecution, without application of mind by him to the issues which were assailed by the assessee by preferring the appeal before him. Once an appeal is preferred before the CIT(A) then it is obligatory on his part to dispose off the same on merits. We are of a strong conviction that it is not open for the CIT(A) to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. Rather, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec. 251(2) reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. In our considered view, the CIT(A) is not vested with any power to summarily dismiss the appeal for non-prosecution - See PREMKUMAR ARJUNDAS LUTHRA (HUF) 2016 (5) TMI 290 - BOMBAY HIGH COURT . Thus dismissal of the appeal by the CIT(A) for non-prosecution, thus, set aside the same to his file with a direction to dispose off the appeal on merits. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Dismissal of appeal by CIT(A) for non-appearance.
2. Addition of commission income on sales.
3. Adhoc disallowance of alleged unexplained expenditure.

Issue 1: Dismissal of appeal by CIT(A) for non-appearance
The assessee's appeal was dismissed by the CIT(A) due to non-appearance despite being afforded sufficient opportunity. The CIT(A) failed to adjudicate on the merits of the case, specifically on the grounds challenging the additions/disallowances made by the Assessing Officer (A.O). The Appellate Tribunal criticized the CIT(A) for summarily dismissing the appeal without considering the issues raised by the assessee, citing the obligation of the CIT(A) to dispose of appeals on merits as per statutory provisions. The Tribunal referred to a judgment by the Bombay High Court emphasizing that the CIT(A) must address all issues raised in the appeal, even if not raised by the appellant, and cannot dismiss appeals for non-prosecution. Consequently, the Appellate Tribunal set aside the dismissal and directed the CIT(A) to hear the appeal on its merits, ensuring the assessee's right to be heard.

Issue 2: Addition of commission income on sales
The A.O, during scrutiny assessment, raised concerns regarding the sales and purchases of the assessee company. The A.O observed discrepancies in the supporting evidence provided by parties involved in the transactions with the assessee. Despite the assessee's claims of genuine transactions, the A.O concluded that structured transactions had taken place on a commission basis. Consequently, the A.O calculated the commission income at 2% on sales, resulting in an addition to the total income. Additionally, the A.O made further adjustments related to discrepancies in supplier balances and unproved expenses, leading to an overall increase in the assessed income. The CIT(A) upheld these additions, which were challenged by the assessee in the appeal. However, due to the dismissal for non-appearance, the Appellate Tribunal remanded the matter back to the CIT(A) for a fresh consideration on the merits of the additions made by the A.O.

Issue 3: Adhoc disallowance of alleged unexplained expenditure
Apart from the commission income addition, the A.O also made an adhoc disallowance on account of alleged unexplained expenditure. This disallowance was based on the A.O's assessment of the genuineness of the expenses claimed by the assessee. The CIT(A) confirmed this disallowance along with other additions. The assessee disputed these disallowances in the appeal, which was dismissed for non-appearance. The Appellate Tribunal, while setting aside the dismissal, directed the CIT(A) to reconsider this adhoc disallowance along with other issues raised by the assessee during the assessment. The Tribunal emphasized the importance of a thorough examination of all aspects of the case before making any additions or disallowances to the assessed income.

This detailed analysis of the legal judgment addresses the issues involved in the appeal before the Appellate Tribunal, highlighting the procedural and substantive aspects of the case related to the dismissal of the appeal, addition of commission income on sales, and adhoc disallowance of alleged unexplained expenditure.