2024 (3) TMI 815 - AT - Income Tax

Assessee gets second chance after ex-parte dismissal for non-compliance with CIT(A) notices under section 56(2)(vii)

Smt. Vardhanapu Manikumari L/R of (Late) Earnest Christopher Vardhanapu Versus Income Tax Officer Ward-1 Bhimavaram

ITAT Visakhapatnam remitted matter back to CIT(A) after assessee's appeal was dismissed ex-parte due to non-compliance with notices. Despite assessee's ... Dismissal of appeal of assessee ex-parte before the Ld.CIT(A) - there was no compliance from the assessee to the notices issued and served on the assessee - AR contended that the assessee was not given sufficient opportunities to substantiate her case and therefore, pleaded for another opportunity of being heard before the CIT(A) - AO applied the section 56(2)(vii) - HELD THAT:- As in view of the foregoing facts and circumstances of the case and keeping in view the principles of natural justice, we are inclined to remit the matter back to the file of the Ld.CIT(A) and direct the Ld.CIT(A) to afford the assessee, another opportunity of being heard before the Ld.CIT(A) and to pass order on merits. The assessee is also directed to adhere to the notices issued by the Ld.CIT(A) and furnish relevant material evidences to substantiate her case. Accordingly, the grounds filed by the assessee are allowed for statistical purpose. ISSUES PRESENTED AND CONSIDERED 1. Whether delay in filing the appeal before the Tribunal (51 days) ought to be condoned on account of medical incapacity of the appellant? 2. Whether dismissal of the appeal by the Commissioner of Income Tax (Appeals) (CIT(A)) ex parte, for non-compliance with notices, amounted to violation of principles of natural justice requiring remand for fresh hearing? 3. Whether the Assessing Officer's addition of Rs. 75,00,000 under section 56(2)(vii) and the validity of the notice under section 148 were correctly subject to adjudication before the CIT(A), and whether further adjudication on merits is required in view of the ex parte disposal? ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay for filing appeal (medical incapacity) Legal framework: The Tribunal may condone delay in filing appeals where a reasonable cause is shown for the delay; medical incapacity is an accepted ground if supported by evidence. Precedent treatment: No contrary contemporaneous authority was applied by the Tribunal in this judgment; the Tribunal applied established principles permitting condonation where reasonable cause exists. Interpretation and reasoning: The order of the CIT(A) was served on 28.06.2023; the appeal was required to be filed by 26.08.2023 but was filed on 16.10.2023. The appellant produced a medical certificate evidencing an accident and medical advice of bed rest for two months, during which the requirement to sign and file the appeal was overlooked. The Tribunal found the medical evidence credible and the circumstances unforeseen and beyond the appellant's control. Ratio vs. Obiter: Ratio - medical incapacity supported by contemporaneous medical certificate constitutes a reasonable cause for condoning delay in filing an appeal. Conclusion: Delay of 51 days is condoned; appeal admitted for hearing in the interest of justice. Issue 2 - Ex-parte disposal by CIT(A) and breach of principles of natural justice; entitlement to another opportunity Legal framework: Principles of natural justice require that an assessee be given reasonable opportunity of hearing before adverse orders are passed; CIT(A) must afford adequate opportunity in appeal proceedings and should not dismiss without affording such opportunity unless non-compliance is deliberate and inexorable. Precedent treatment: The appellant relied on a reported decision of a High Court and a tribunal decision holding that in-limine dismissal by CIT(A) contrary to statutory provision is impermissible; the Tribunal considered these authorities in the context of whether the assessee was afforded opportunity. Interpretation and reasoning: The record showed notices were issued and served on the appellant before the CIT(A), but there was no compliance; the appellant's husband had died during proceedings and the appellant as legal heir/representative had not responded, leading to ex-parte dismissal. The Tribunal, after hearing parties and reviewing the file, considered the principles of natural justice and found merit in the appellant's contention that she was not given sufficient opportunity to be heard. Instead of deciding the substantive questions (validity of reopening or merits of addition), the Tribunal exercised supervisory jurisdiction to remit the matter to the CIT(A) to afford another opportunity and to decide on merits after receipt of material evidence. Ratio vs. Obiter: Ratio - where record reflects absence of sufficient opportunity to the appellant in appeal proceedings, the appropriate remedy is remand to the CIT(A) to afford opportunity and adjudicate on merits; procedural fairness requires adherence to notices and furnishing of material by the appellant. Obiter - references to particular high court/tribunal precedents were persuasive but the Tribunal did not overrule or distinguish them in extended terms. Conclusion: The matter is remitted to the CIT(A) with a direction to grant the appellant another opportunity of hearing, to consider and admit relevant material evidence, and to pass a reasoned order on merits; grounds of appeal allowed for statistical purposes. Issue 3 - Validity of section 148 notice and application of section 56(2)(vii) (merits) Legal framework: Additions under section 56(2)(vii) (receipt of property without consideration exceeding threshold, or stamp duty consideration) and validity of reopening under section 147/148 require factual and legal adjudication based on documentary evidence (date of receipt, registration, stamp duty, status of donor institution, and applicable provisos/exceptions). Precedent treatment: The appellant invoked precedents holding that appeal dismissals in limine are procedurally improper; however, the Tribunal did not make a definitive pronouncement on the substantive correctness of the AO's application of section 56(2)(vii) or on the validity of the reopening notice. Interpretation and reasoning: The Tribunal noted factual contentions: alleged gift of land to the deceased in 2009 but registered and stamped in 2013; payment of substantial stamp duty; claim that donor institution was registered under section 12A and that section 56 would not apply to transactions in 2009. Given the ex-parte disposal at CIT(A) stage and absence of full contestation on these facts, the Tribunal declined to decide the substantive issues and returned them to the CIT(A) for fresh consideration after affording opportunity to the appellant to produce relevant evidence. Ratio vs. Obiter: Ratio - substantive questions regarding applicability of section 56(2)(vii) and validity of section 148 notice where appeal was dismissed ex-parte must be adjudicated afresh by the CIT(A) after affording opportunity; the Tribunal will not decide merits where procedural infirmity (lack of opportunity) taints the appellate record. Obiter - observations summarizing factual disputes are non-decisional and intended to guide remand. Conclusion: No adjudication on the merits of the section 56(2)(vii) addition or the validity of the section 148 notice; those issues are to be considered de novo by the CIT(A) on remand after giving the appellant an opportunity to place material on record.