CIT(A) Must Decide on Merits Even in Ex Parte Cases: ITAT Remands Income Addition Dispute Matter [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) remanded the matter concerning the income addition dispute citing that the Commissioner of Income Tax (Appeals) [CIT(A)] failed to adjudicate the case on merits even if it was an Ex-parte order.

Santosh Tukaram Varade, the assessee, is a commission agent dealing in agricultural produce, primarily potatoes. He declared an income of Rs. 3,68,040, but the Income Tax Department reopened the case under Section 148 of the Income Tax Act, 1961, for the Assessment Year (AY) 2013-14 after noticing substantial cash deposits in his bank accounts that did not align with his declared gross receipts.

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The Assessing Officer (AO) computed his income at 8% of the gross receipts, resulting in an addition of Rs. 27,97,934, citing non-maintenance of books and failure to get accounts audited under Sections 44AA and 44AB. For AY 2017-18, the AO treated the entire bank deposits of Rs. 2,86,93,336 as unexplained money under Section 69A.

On appeal, the CIT(A) dismissed the case summarily for non-prosecution, without analyzing the merits of the assessee’s claims. The assessee’s counsel argued that for AYs 2014-15 to 2016-17, the assessee’s business model was accepted without such additions, and inconsistent treatment in different years was unjustified and also argued that he was denied a fair hearing before the CIT(A).

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The two-member ITAT bench, comprising Dr. Manish Borad (Accountant Member) and Shri Vinay Bhamore (Judicial Member), observed that the CIT(A) failed to discharge his duty under Section 250(6) of the Income Tax Act, which mandates that appeals be adjudicated on merits, even in ex parte scenarios.

Referring to the Bombay High Court ruling in Pr. CIT (Central) vs. Premkumar Arjundas Luthra (HUF) [2017] 297 CTR 614 (Bom.), the tribunal ruled that the CIT(A)’s order was invalid as it did not evaluate the appellant’s claims.

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The tribunal directed the CIT(A) to reconsider the matter, taking into account the reassessment orders for AYs 2014-15 to 2016-17 and ensuring a fair hearing. The matter was remanded for fresh adjudication, and the appeal was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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