ITAT sets aside ex-parte dismissal for improper notice service and procedural violations under Sections 250(6), 282

ITAT Bangalore set aside CIT(A)'s ex-parte dismissal of assessee's appeal for breach of natural justice and procedural violations. CIT(A) dismissed appeal without deciding merits, violating Section 250(6) mandate. Notice was improperly served to wrong address instead of Form 35 address, breaching Section 282 and Rule 127 requirements. ITAT directed complete inquiry regarding assessee's business discontinuance under Sections 176(3) and 189, requiring assessee to furnish true facts. Matter restored to CIT(A) for fresh adjudication with proper hearing opportunity, directing compliance with Section 250(6) for merit-based decision.

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Issues Involved:

1. Non-appearance and non-prosecution of the appeal by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)].
2. Improper service of notice for hearing by CIT(A).
3. Dismissal of appeal by CIT(A) ex-parte and in limine without deciding on merits.
4. Directions by CIT(A) to file a fresh appeal and the subsequent procedural errors.
5. Delay in filing the appeal with the Income Tax Appellate Tribunal (ITAT) and the request for condonation of delay.
6. Compliance with procedural requirements under Sections 176(3) and 189 of the Income Tax Act, 1961.

Detailed Analysis:

1. Non-appearance and Non-prosecution of Appeal:
The appeal was dismissed by CIT(A) due to non-appearance by the assessee on the scheduled hearing date. The assessee contended that the notice for hearing was not received as it was sent to an incorrect address. The CIT(A) concluded that the assessee was not interested in pursuing the appeal, citing the legal principle that the law aids those who are vigilant.

2. Improper Service of Notice:
The assessee argued that the notice for hearing was sent to the wrong address and not to the address mentioned in Form No. 35. The CIT(A) acknowledged that the notice was returned unserved, but did not follow the procedure for serving notice as per Section 282 of the Income Tax Act read with Rule 127 of the Income Tax Rules, 1962. This constituted a breach of natural justice principles.

3. Dismissal of Appeal by CIT(A) Ex-parte and In Limine:
The CIT(A) dismissed the appeal without deciding on the merits, which is contrary to Section 250(6) of the Income Tax Act. The CIT(A) is required to adjudicate issues on merit, stating the points for determination, the decision, and reasons for the decision. The failure to do so rendered the order unsustainable in law.

4. Directions by CIT(A) to File Fresh Appeal:
The CIT(A) incorrectly advised the assessee to file a fresh appeal with a request for condonation of delay, despite the first appeal being dismissed. This advice was contrary to the scheme of the Act, as the correct forum for appeal against the appellate order was the ITAT. The assessee, acting on this advice, filed a fresh appeal, which was dismissed as infructuous.

5. Delay in Filing the Appeal with ITAT:
The assessee filed the appeal with ITAT beyond the stipulated time, citing the pursuit of alternate legal remedies based on CIT(A)'s directions. The ITAT acknowledged the delay was partly due to incorrect directions by CIT(A) and partly due to the assessee's carelessness. However, in the interest of justice and absence of malafide intent, the delay was condoned.

6. Compliance with Procedural Requirements:
The assessee claimed business closure since 2018, but failed to provide evidence of notifying the Assessing Officer as required under Section 176(3). The ITAT highlighted the need for complete disclosure of the firm's status, whether dissolved or merely discontinued, and directed the CIT(A) to conduct a thorough inquiry into these aspects.

Conclusion:

The ITAT set aside the appellate order dated 30.01.2018 passed by CIT(A) and remanded the matter for de novo adjudication, directing compliance with Section 250(6) of the Act. The CIT(A) was instructed to provide a proper hearing to both parties, and the assessee was admonished for its lack of diligence. The appeal was allowed for statistical purposes, without commenting on the merits of the case.

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