ITAT Restores Assessee’s Appeal After NFAC Dismisses it for Non-Compliance: Grants One Last Opportunity with Cost [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) restored the appeal of an assessee, Subramaniyam Kulandhaivel, which had been dismissed ex-parte by the National Faceless Appeal Centre (NFAC). The Tribunal expressed concern over the assessee’s repeated non-compliance but nevertheless chose to allow one final opportunity for him to present his case, albeit with a cost of ₹25,000.

The case concerns the Assessment Year 2018–19. Subramaniyam Kulandhaivel, a rig operator from Namakkal, Tamil Nadu, had filed an appeal before the NFAC against an adverse assessment order passed under Section 144 of the Income Tax Act, 1961. The assessment was completed on a best judgment basis, citing the assessee’s failure to respond to multiple notices or submit supporting documents. Later, the first appellate authority, NFAC also dismissed the appeal in-limine (i.e., without going into the merits) solely due to non-compliance with hearing notices.

Aggrieved by this, the assessee approached the ITAT. The counsel for the assessee, argued that since the NFAC had dismissed the appeal purely on procedural grounds without adjudicating on merit, the lower fee was justified under Section 253(6)(d) of the Act. The Tribunal, citing its earlier ruling in Aasife Biriyani Pvt. Ltd., upheld this position and admitted the appeal.

Additionally, there was a delay of 34 days in filing the appeal. The Tribunal reviewed an affidavit submitted by the assessee, which explained that he was away in North India for rig-related work and had entrusted a friend to monitor the appeal proceedings. Unfortunately, this friend failed to communicate the NFAC’s dismissal order. The Tribunal condoned the delay, accepting the explanation as reasonable.

While the Tribunal acknowledged the assessee’s lapses, it also pointed out that both the AO and the NFAC had passed orders without hearing the case on merit. The Bench asserted that even if an assessee defaults in appearance, the appellate authority cannot summarily dismiss the appeal without adjudicating the issues involved.

Quoting from the Madras High Court’s ruling in Southern Steel Industries vs AAC (CT), the Tribunal stated that “the appellate authority has no jurisdiction to dismiss the appeal for default without going into the merits.”

Despite the assessee’s nonchalant conduct, the ITAT showed leniency. The matter was remanded back to the Assessing Officer (AO) for fresh adjudication. However, the Tribunal imposed a cost of ₹25,000, to be paid by the assessee to the Tamil Nadu State Legal Services Authority (TNSLSA) at the Madras High Court.

The ITAT consisting of George George K. (Vice President) and S.R. Raghunatha (Accountant Memeber) clarified that the assessee must furnish proof of payment within one month from the date of the order. It also directed the AO to give a reasonable opportunity to the assessee but warned the latter against seeking unnecessary adjournments or failing to cooperate.

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