ITAT Restores Appeal to CIT(A) for Fresh Adjudication After Ex-Parte Dismissal

ITAT Restores Appeal to CIT(A) for Fresh Adjudication After Ex-Parte Dismissal

For the financial year 2011-12, the assessee declared income returns of Rs. 3,90,510. Based on investigation reports about the challenged accommodation entries through other companies linked to another person, reassessment proceedings were initiated against the assessee. An examination of the assessee’s proprietary bank account revealed credits totaling Rs. 72.71 lakh that were not shown in the return. The AO considered 8% of these credits as commission income and added Rs. 3,66,977 as interest income from Form 26AS data, where TDS under Section 194A had been deducted.

CIT (A) Held: The commission rate was lowered by the CIT(A) to 5% still the appeal was dismissed ex-parte due to non-compliance.

The assessee filed an appeal against an order under Section 250 of the Income Tax Act, 1961, challenging additions made in reassessment proceedings. Although the appeal before the Tribunal was delayed by 347 days, the assessee gave an affidavit that the impugned order was handed over to the assessee’s advocate for necessary action, but due to acute viral fever and medical advice for complete rest, the advocate could neither file the appeal in time nor inform the assessee. The Tribunal, being satisfied with the explanation, condoned the delay.

Main Issue: Whether the ex-parte dismissal by the CIT(A) without considering the merits of the additions warranted restoration of the appeal for fresh adjudication.

ITAT’s Decision: The Tribunal held that the assessee had not filed any submissions contesting the additions on commission income or interest income either before the AO or before the CIT(A). The CIT(A)’s order reducing the commission percentage to 5% was passed without any appearance or supporting evidence from the assessee. The Tribunal found that the additions were sustained primarily on account of non-compliance rather than on a detailed examination of the merits of the case.

Relying on the principles of natural justice, the Hon’ble appellant tribunal deemed it appropriate to restore the matter to the file of the CIT(A) for de novo consideration on merits. The ITAT also Directed the lower authorities to provide the assessee a reasonable and adequate opportunity of hearing, with directions to CIT(A) to seek a remand report from the AO if required. The assessee was specifically directed to appear on all hearing dates without default. As the matter was being remanded, other grounds were kept open for adjudication at a later stage.

The appeal was thus allowed for statistical purposes.

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