2018 (10) TMI 1178 - AT - Income Tax

Validity of order of CIT(A) in dismissing the appeal - Absence of proof of service of notice of hearing on the assessee - Denial of natural justice - Disallowance of the 2% of Total expenses - dismissing the appeal of the Assessee in limine for non-prosecution of appeal - Held that - There is nothing in the subsequent conduct of the assessee, after the assessee received the impugned order dated 29.12.2017 of Ld. CIT(A), to validate the presumption of Ld. CIT(A) that the assessee did not wish to pursue the appeal. The order of Ld. CIT(A) does not make any mention of actual service of notices of hearing on the assessee; and that the DR failed to bring any evidence for our consideration to prove actual service of notices of hearing on the assessee. In the absence of proof of service of notice of hearing on the assessee, requirements U/s 250(1) and (2) in procedure in appeal prescribed U/s 250 of I.T. Act cannot be said to have been fulfilled. Unless the hearing notice is served on the assessee, the assessee s right to be heard at the hearing cannot be exercised by the Assessee. Commissioner (Appeals) is duty bound to provide reasonable opportunity of being heard to the assessee. Valid service of notice of hearing is part of that duty. On cumulative consideration of these facts and circumstances, and the legal position, the presumption of Ld. CIT(A), that the assessee did not wish to pursue the appeal, stands demolished and the impugned order of Ld. CIT(A) based on this presumption has no legs to stand. In any case, when the requirement U/s 250(1) and (2) of I.T. Act are not complied with at the end of Ld. CIT(A), the appellate order passed U/s 250(6) of I.T. Act by Ld. CIT(A) suffers from infirmity and cannot be upheld. CIT(A) erred in dismissing the appeal of the Assessee in limine for non-prosecution of appeal by assessee. We set aside the impugned order of the Ld. CIT(A) and we direct the Ld. CIT(A) to pass denovo order as per law, in accordance with Sections 250 and 251 - Appeal of the Assessee is treated as partly allowed for statistical purposes.

Summary

Issues Involved:
1. Whether the dismissal of the appeal by the Ld. CIT(A) for non-prosecution was justified.
2. Whether the Ld. CIT(A) complied with the procedural requirements under Sections 250 and 251 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Justification of Dismissal for Non-Prosecution:
The appeal by the Assessee was dismissed by the Ld. CIT(A) on the grounds of non-prosecution, as the Assessee did not comply with the notices of hearings. The Ld. CIT(A) presumed that the Assessee did not wish to pursue the appeal and dismissed it in limine. The ITAT noted that the order of Ld. CIT(A) did not reference the actual service of these notices. The Ld. Departmental Representative (DR) also failed to provide evidence of the notices being served on the Assessee. The ITAT concluded that the dismissal of the appeal in limine was not justified as there was no proof of service of hearing notices on the Assessee, which is a prerequisite for the Assessee to exercise the right to be heard.

2. Compliance with Procedural Requirements under Sections 250 and 251 of the Income Tax Act, 1961:
The ITAT emphasized that under Section 250(6) of the Income Tax Act, the Ld. CIT(A) is required to dispose of the appeal in writing, stating the points for determination and the reasons for the decision. The Ld. CIT(A) is also mandated to apply his mind to all issues arising from the impugned order, whether or not these issues were raised by the Assessee. The ITAT referred to the powers of the Commissioner (Appeals) under Section 251, which include confirming, reducing, enhancing, or annulling the assessment. The ITAT concluded that the Ld. CIT(A) is not empowered to dismiss an appeal in limine for non-prosecution and must dispose of the appeal on merits. The ITAT drew support from the Bombay High Court ruling in CIT vs. Premkumar Arjundas Luthra (HUF), which held that the CIT(A) must apply his mind to all issues and dispose of the appeal on merits.

The ITAT observed that the Assessee had promptly filed the appeal and vigorously prosecuted it in the ITAT. The Assessee's Counsel expressed the desire to pursue the appeal against the Assessment Order. The ITAT found that the Ld. CIT(A)'s presumption that the Assessee did not wish to pursue the appeal was invalid, particularly in the absence of proof of service of hearing notices. The ITAT held that the Ld. CIT(A) erred in dismissing the appeal for non-prosecution and directed the Ld. CIT(A) to pass a denovo order in accordance with Sections 250 and 251 of the Income Tax Act.

Conclusion:
The ITAT set aside the impugned order of the Ld. CIT(A) and directed a fresh disposal of the appeal on merits. The appeal of the Assessee was treated as partly allowed for statistical purposes. The order was pronounced in the open court on 16/10/2018.