Ex-Parte Dismissal of Income Tax Appeal without Adjudication Unsustainable: ITAT Directs Reconsideration of ₹2.32 Cr Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT) has held that the Commissioner of Income Tax (Appeals) [CIT(A)] does not possess jurisdiction to dismiss an appeal for non-prosecution of appeal. The Tribunal observed that appellate authorities are under a statutory mandate to decide appeals on merit in well-reasoned speaking orders.

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The assessee VY Institute of Medical Science Private Limited, being a hospital had filed its return for AY 2016-17 declaring substantial loss. While scrutinizing the return, the Assessing Officer (AO), on observing the issue of 2,58,303 shares at a premium of ₹80 per share treated ₹2,32,49,970 as unexplained cash credit under section 68 of the Income Tax Act on the ground of unsatisfactory compliance regarding the source and genuineness of such capital.

In the appeal filed before the CIT(A), the matter was dismissed ex-parte on the ground that the appellant was not interested in failing to appear for hearings.

The reason given by the assessee’s Authorized Representative (AR) for the delay in prosecution and the consequent 397 day delay in filing the ITAT appeal was the negligence of their previous tax advisor.

Further, affidavits of directors were furnished to prove that there was no mala fide intent. The AR also stated that there is no power vested with the CIT(A) to dismiss an appeal without issuing a speaking order on merits.

The ​Revenue department had opposed this plea at first stating that the assessee had tactfully evaded investigation. But finally, the Senior Departmental Representative conceded to remand it for adjudication on merits.

The Tribunal Bench comprising Partha Sarathi Chaudhury, [Judicial Member] and Avdhesh Kumar Mishra [Accountant Member] held that under Section 250(6) of the Income Tax Act the CIT(A) has to record the points for determination and the reason for the order.

Relying on the Bombay High Court Judgment in the case of Prem Kumar Arjun Das Luthra HUF the Bench held that,“The CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is bound to dispose of the appeal on merits,”

The ITAT has condoned the 397 day delay in the interest of substantial justice and has directed the matter to be remitted back to the CIT(A) for afresh adjudication.

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