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2024 (10) TMI 582 - AT - Income TaxDismissal of appeal of assesee ex-parte in the absence of the assessee for non-prosecution - Assessee raised this issue of breach of principles of natural justice, improper service of notice as well not deciding the issues arising in the appeal on merits - Compliance with procedural requirements under Sections 176(3) and 189 of the Income Tax Act, 1961 or not? HELD THAT - It is observed that the ld. CIT(A) dismissed the appeal of the assessee vide appellate orders dated 30.01.2018 ex-parte in limine without deciding the issues on merits, which is not in consonance with mandate of Section 250(6). The ld. CIT(A) is required to adjudicate the issues on merit in accordance with law, as is provided u/s. 250(6), by stating point for determination, his decision thereon and reason for the decision. CIT(A) has power to make such inquiries as he thinks fit and may also direct AO to make such enquiries and report the result of the same to ld. CIT(A), as is provided u/s 250(4). Thus, ld. CIT(A) has to adjudicate issues arising in the appeal on merits in accordance with law. CIT(A) has issued only one notice of hearing fixing the date of hearing on 30.01.2018. The said notice was not served on the assessee and returned unserved. The assessee is contending that the notice was sent to wrong address and was not sent to the address mentioned in Form No. 35. The return of notice of hearing is also confirmed by ld.CIT(A), and further in communication dated 18.06.2018, the ld. CIT(A) stated that notice will be issued only to the address mentioned in PAN database. First of all there is a clear breach of principles of natural justice as by issuing solitary notice, the ld. CIT(A) dismissed the appeal of the assessee ex-parte in limine without deciding the issues arising in the appeal on merits. Secondly, procedure as contemplated u/s 282 read with Rule 127 was not followed by ld. CIT(A). Once the address for serving of notice of hearing is mentioned in Form No. 35, it was obligatory on the part of ld. CIT(A) to send notice of hearing to said address as is envisaged in first proviso to sub-rule (2) to Rule 127 of the 1962 Rules. Thus, the appellate order passed by ld. CIT(A) is also liable to be set aside on these grounds. As stated by the assessee that the business of the assessee was closed since 2018, but there is no evidence brought on record that the assessee intimated revenue about the closure of its business as is required u/s 176(3). It is for the first time in affidavit dated 04.09.2024 filed before ITAT, this factum of closure of business is brought on record by the assessee. It is stated that PAN number was kept alive as litigation with Income-tax department is continuing, and Nil Returns of income were filed with department. The copies of return of income for assessment year 2019-20 to 2024-25 declaring Nil Income are placed on record. The assessee is a partnership firm. The assessee has to make true, complete and correct disclosure of its status and current state of affairs. Further reference is also drawn to provisions of Section 189(4), which stipulates that where such discontinuance or dissolution takes place after any proceedings in respect of an assessment year have commenced, the proceedings may be continued against the person referred to in sub-section (3)(i.e partners of the firm, and the legal representative of any such person who is deceased) from the stage at which the proceedings stood at the time of such discontinuance or dissolution, and all the provisions of this Act shall, so far as may be, apply accordingly These are especial facts which are within the knowledge of the assessee and the same were to be brought on record by the assessee whether the business stood discontinued or there was dissolution of the firm. It was the duty of the assessee to have brought complete, true and correct facts on record before the authorities, as to whether the assessee firm stood dissolved or the business stood discontinued. The assessee has filed appeal in its own name as well ITR s are filed in its own name, which indicate that the assessee firm did not stood dissolved although business might have been discontinued, but it required inquiry so that true, correct and complete facts are brought on record. Under these facts and circumstances, we are of the considered view, that complete inquiry is required in this regard thereto keeping in view provisions of Section 176(3), 189(3) and 189(4), and the assessee is directed to furnish complete, true and correct facts in connection thereto before ld. CIT(A) to enable ld. CIT(A) to conduct aforesaid inquiry, the powers of ld. CIT(A) being co-terminus with the powers of the AO. Thus, keeping in view entire facts and circumstances of the case, we are inclined to set aside the appellate order dated 30.01.2018 passed by ld. CIT(A), and restore the matter back to the file of ld. CIT(A) for denovo adjudication of the appeal of the assessee. CIT(A) is directed to pass orders in compliance with the provisions of section 250(6) of the Act. Needless to say that ld. CIT(A) shall give proper opportunity of being heard to both the assessee as well AO. The assessee is directed to comply with the directions / notices of hearing issued by the Ld. CIT(A) in the appellate proceedings, otherwise Ld. CIT(A) will be within its right to pass an ex parte order on merits, in accordance with law. The appeal of the assessee is allowed for statistical purposes.
Issues Involved:
1. Non-appearance and non-prosecution of the appeal by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)]. 2. Improper service of notice for hearing by CIT(A). 3. Dismissal of appeal by CIT(A) ex-parte and in limine without deciding on merits. 4. Directions by CIT(A) to file a fresh appeal and the subsequent procedural errors. 5. Delay in filing the appeal with the Income Tax Appellate Tribunal (ITAT) and the request for condonation of delay. 6. Compliance with procedural requirements under Sections 176(3) and 189 of the Income Tax Act, 1961. Detailed Analysis: 1. Non-appearance and Non-prosecution of Appeal: The appeal was dismissed by CIT(A) due to non-appearance by the assessee on the scheduled hearing date. The assessee contended that the notice for hearing was not received as it was sent to an incorrect address. The CIT(A) concluded that the assessee was not interested in pursuing the appeal, citing the legal principle that the law aids those who are vigilant. 2. Improper Service of Notice: The assessee argued that the notice for hearing was sent to the wrong address and not to the address mentioned in Form No. 35. The CIT(A) acknowledged that the notice was returned unserved, but did not follow the procedure for serving notice as per Section 282 of the Income Tax Act read with Rule 127 of the Income Tax Rules, 1962. This constituted a breach of natural justice principles. 3. Dismissal of Appeal by CIT(A) Ex-parte and In Limine: The CIT(A) dismissed the appeal without deciding on the merits, which is contrary to Section 250(6) of the Income Tax Act. The CIT(A) is required to adjudicate issues on merit, stating the points for determination, the decision, and reasons for the decision. The failure to do so rendered the order unsustainable in law. 4. Directions by CIT(A) to File Fresh Appeal: The CIT(A) incorrectly advised the assessee to file a fresh appeal with a request for condonation of delay, despite the first appeal being dismissed. This advice was contrary to the scheme of the Act, as the correct forum for appeal against the appellate order was the ITAT. The assessee, acting on this advice, filed a fresh appeal, which was dismissed as infructuous. 5. Delay in Filing the Appeal with ITAT: The assessee filed the appeal with ITAT beyond the stipulated time, citing the pursuit of alternate legal remedies based on CIT(A)'s directions. The ITAT acknowledged the delay was partly due to incorrect directions by CIT(A) and partly due to the assessee's carelessness. However, in the interest of justice and absence of malafide intent, the delay was condoned. 6. Compliance with Procedural Requirements: The assessee claimed business closure since 2018, but failed to provide evidence of notifying the Assessing Officer as required under Section 176(3). The ITAT highlighted the need for complete disclosure of the firm's status, whether dissolved or merely discontinued, and directed the CIT(A) to conduct a thorough inquiry into these aspects. Conclusion: The ITAT set aside the appellate order dated 30.01.2018 passed by CIT(A) and remanded the matter for de novo adjudication, directing compliance with Section 250(6) of the Act. The CIT(A) was instructed to provide a proper hearing to both parties, and the assessee was admonished for its lack of diligence. The appeal was allowed for statistical purposes, without commenting on the merits of the case.
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