2024 (7) TMI 1425 - AT - Income Tax

CIT(Appeals) disposed off the appeal for non-prosecution - assessee despite having been afforded four opportunities had failed to participate in the proceedings before him, therefore, he was constrained to dismiss the appeal for want of prosecution - HELD THAT - No infirmity in the view taken by the CIT(Appeals) in dismissing the appeal of the assessee who had adopted an evasive and lackadaisical approach in the course of the proceedings before him, but at the same time, unable to persuade to subscribe to the manner in which he had disposed off the appeal without dealing with the issue which was specifically raised before him. CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issue which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade myself to accept the manner in which the appeal of the assessee has been disposed off by the CIT(Appeals). Once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec.251(2) of the Act 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. As per mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. The aforesaid view is fortified by the judgment of Premkumar Arjundas Luthra (HUF) 2016 (5) TMI 290 - BOMBAY HIGH COURT Thus, not being able to persuade to subscribe to the dismissal of the appeal by the CIT(Appeals) for non-prosecution, therefore, set-aside his order with a direction to dispose off the same on merits. CIT(Appeals) shall in the course of the de-novo appellate proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at liberty to substantiate his claim on the basis of documentary evidence, if any. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Legality of the order passed by CIT(A) NFAC.
2. Correctness of the addition of Rs. 4,79,694/- under Section 44AD.
3. Procedural propriety of dismissing the appeal for non-prosecution.

Issue-wise Detailed Analysis:

1. Legality of the Order Passed by CIT(A) NFAC:
The assessee contended that the order of the CIT(A) NFAC was "bad in law as well as on facts" and that the aggregate additions of Rs. 4,79,053/- were contrary to law and should be deleted. The CIT(A) dismissed the appeal for non-prosecution, citing the assessee's failure to participate despite being given four opportunities. The CIT(A) referenced several judicial precedents to justify the dismissal for non-prosecution, emphasizing that the burden of proof lies on the appellant to disprove or rebut the findings of the Assessing Officer (A.O).

2. Correctness of the Addition of Rs. 4,79,694/- under Section 44AD:
The A.O observed that the gross profit of the assessee was substantially higher than the deemed income under Section 44AD of the Income-tax Act, 1961. Consequently, the A.O adopted the gross profit as the income of the assessee, leading to an addition of Rs. 4,79,694/-. The assessee argued that the A.O erred by adopting the "gross profit" instead of the "net profit" while making the addition. The assessee's representative highlighted that under Section 44AD, either the income @8% of the gross receipts or the income disclosed by the assessee per its books of account, whichever is higher, should be brought to tax. This contention was not addressed by the CIT(A) due to the dismissal for non-prosecution.

3. Procedural Propriety of Dismissing the Appeal for Non-Prosecution:
The Tribunal found that the CIT(A) erred in summarily dismissing the appeal for non-prosecution without addressing the merits of the case. The Tribunal referenced the judgment of the Hon'ble High Court of Bombay in CIT Vs. Premkumar Arjundas Luthra (HUF), which mandates that the CIT(A) must dispose of the appeal on merit and is not empowered to dismiss it summarily for non-prosecution. The Tribunal emphasized that the CIT(A) is statutorily obligated to apply his mind to all issues arising from the impugned order, irrespective of the appellant's participation.

Conclusion:
The Tribunal set aside the order of the CIT(A) and directed a de-novo appellate proceeding, instructing the CIT(A) to dispose of the appeal on its merits. The CIT(A) was also directed to afford a reasonable opportunity of being heard to the assessee, allowing the assessee to substantiate his claims with documentary evidence. The appeal filed by the assessee was allowed for statistical purposes, and the order was pronounced in open court on the 25th of July, 2024.