2024 (11) TMI 1364 - AT - Income Tax

Ex-parte order of the CIT(Appeals) - CIT(Appeals) had disposed off the appeal for non-prosecutio n - HELD THAT - Assessee despite having been afforded six opportunities had except for seeking adjournments on three occasions had failed to participate in the proceedings before the CIT(Appeals), therefore, the latter holding a firm conviction that the assessee was not interested in prosecuting the matter, disposed of the appeal vide an ex-parte order. On a careful perusal of the order of the CIT(Appeals), we find that he had summarily referred to the observation of the A.O and approved the same without deliberating upon the specific issues, based on which, the additions/disallowances were assailed by the assessee before him. As observed by us hereinabove, the CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issues which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had 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. We, thus, not being able to persuade ourselves to subscribe to the dismissal of the appeal by the CIT(Appeals) for non-prosecution, therefore, set-aside his order with a direction to re-adjudicate the same afresh. Needless to say, the CIT(Appeals) in the course of the set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee, and shall adjudicate the grounds of appeal/additional grounds of appeal as have been raised by the assessee before us. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:

1. Validity of jurisdiction assumed by the Assessing Officer (A.O) under Section 147 without issuing notice under Section 143(2).
2. Disallowance under Section 40A(3) for cash purchases amounting to Rs. 3,40,30,000.
3. Addition under Section 69 for unexplained investment of Rs. 2,00,000.
4. Addition under Section 69C for unexplained expenditure of Rs. 3,56,800.
5. Addition of Rs. 60,000 as undisclosed income from truck under Section 44AE.
6. Procedural lapse by the Commissioner of Income-Tax (Appeals) in dismissing the appeal for non-prosecution.

Detailed Analysis:

1. Validity of Jurisdiction Assumed by A.O:
- The primary contention was that the A.O failed to issue a notice under Section 143(2) after the assessee, in response to a notice under Section 148, requested that his original return be treated as filed in compliance with the notice. The Tribunal noted that the A.O was obligated to issue a notice under Section 143(2) before proceeding with the assessment. The failure to do so constituted a procedural lapse, rendering the assessment invalid. This view was supported by various judicial pronouncements, including those from the Hon'ble Supreme Court and High Courts, which emphasized the necessity of issuing a notice under Section 143(2) to validate the jurisdiction assumed under Section 147.

2. Disallowance Under Section 40A(3):
- The A.O disallowed Rs. 3,40,30,000 under Section 40A(3) due to cash purchases. The assessee claimed these were payments to farmers/brokers for purchases of Urad. However, the assessee failed to provide requisite details, leading to the disallowance. The Tribunal noted that the disallowance was based on the A.O's observations of abnormal cash transactions and lack of supporting evidence from the assessee.

3. Addition Under Section 69 for Unexplained Investment:
- An addition of Rs. 2,00,000 was made under Section 69 for the unexplained source of investment in a truck. The A.O observed that the assessee did not adequately explain the source of funds for this investment, leading to the addition.

4. Addition Under Section 69C for Unexplained Expenditure:
- The A.O added Rs. 3,56,800 under Section 69C, observing that the returned income was insufficient to cover the business expenditure of Rs. 8.24 lakhs. The Tribunal did not delve into the merits of this addition due to the procedural lapses identified.

5. Addition of Rs. 60,000 as Undisclosed Income Under Section 44AE:
- The A.O added Rs. 60,000 as deemed income from truck plying under Section 44AE. This was based on the presumption of income from the truck, which the assessee failed to disclose.

6. Procedural Lapse by CIT(A) in Dismissing the Appeal for Non-prosecution:
- The Tribunal criticized the CIT(A) for dismissing the appeal due to non-prosecution without addressing the merits of the case. It emphasized that the CIT(A) is obligated to adjudicate on the merits, irrespective of the assessee's participation. The Tribunal set aside the order of the CIT(A) and directed a fresh adjudication, ensuring that the assessee is given a reasonable opportunity to present his case.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, primarily due to procedural lapses in jurisdiction assumption and appeal dismissal. The case was remanded to the CIT(A) for fresh adjudication on merits, ensuring compliance with procedural requirements and affording the assessee an opportunity to be heard.