ITAT Rebukes CIT(A) for "Lazy" Dismissal, Orders Fresh Hearing on Demonetization Cash Deposits [rEad Order]
Nair appealed this decision to the Commissioner of Income Tax (Appeals). However, the CIT(A) dismissed the appeal outright for non-prosecution, meaning the appellant did not actively pursue the appeal.
![ITAT Rebukes CIT(A) for Lazy Dismissal, Orders Fresh Hearing on Demonetization Cash Deposits [rEad Order]](https://images.taxscan.in/h-upload/2025/08/20/2078698-cash-deposit-taxscan.webp "ITAT Rebukes CIT(A) for Lazy Dismissal, Orders Fresh Hearing on Demonetization Cash Deposits [rEad Order]")
In a sharp critique of appellate procedure, the Income Tax Appellate Tribunal (ITAT), Cochin Bench has set aside an order that dismissed a taxpayer’s appeal without examining the merits of a significant addition related to demonetization cash deposits. The tribunal strongly emphasized that a first appellate authority cannot dismiss an appeal for non-prosecution without first making...
In a sharp critique of appellate procedure, the Income Tax Appellate Tribunal (ITAT), Cochin Bench has set aside an order that dismissed a taxpayer’s appeal without examining the merits of a significant addition related to demonetization cash deposits. The tribunal strongly emphasized that a first appellate authority cannot dismiss an appeal for non-prosecution without first making a genuine attempt to decide the case on its substantive legal grounds.
The case involved an individual, Prabheesh Nair, who runs a business dealing in electrical items. For the assessment year 2017-18, Nair did not file his income tax return within the stipulated time. After he failed to comply with a notice issued under Section 142(1), the Income Tax Officer completed the assessment ex-parte under Section 144. The assessment order included a major addition of Rs. 9,22,000 under Section 69 of the Act. This amount represented deposits made in specified bank notes during the demonetization period, which the assessing officer treated as the appellant’s unexplained money.
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Nair appealed this decision to the Commissioner of Income Tax (Appeals). However, the CIT(A) dismissed the appeal outright for non-prosecution, meaning the appellant did not actively pursue the appeal. The CIT(A) relied on a ruling from the Hon’ble Supreme Court from 1979 to justify this summary dismissal without delving into the factual and legal questions at the heart of the case.
Aggrieved by this procedural dismissal, Nair appealed to the ITAT. During the hearing, his advocate argued the case against the senior departmental representative. The tribunal carefully listened to both sides and thoroughly examined the record. The core issue for the ITAT’s consideration was not the demonetization deposits themselves, but whether the CIT(A) had fulfilled a fundamental judicial duty.
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The ITAT’s order pointed to Section 250(6) of the Income Tax Act, which mandates that the CIT(A) must frame points for determination and provide a detailed discussion in the order. The bench observed that this duty to decide on merits persists even when an appeal is disposed of ex-parte. The tribunal cited a relevant decision from the Hon'ble Bombay High Court to reinforce this legal principle, noting that the first appellate authority is not permitted to take a "lazy" approach by dismissing matters for non-prosecution without a substantive review.
Consequently, the ITAT did not rule on the demonetization addition itself. Instead, it allowed the assessee’s appeal for statistical purposes and remanded the case back to the file of the CIT(A). The tribunal directed the CIT(A) to hear the matter afresh on its merits, ensuring that Prabheesh Nair is given a reasonable opportunity to be heard before a final order is passed.
The order was pronounced by Accountant Member Inturi Rama Rao, underscoring the necessity for appellate authorities to exercise their jurisdiction responsibly and in accordance with the law.
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