2024 (12) TMI 635 - AT - Income Tax

ITAT overturns ex-parte dismissal for violating Section 250(6) requirements, orders fresh merit-based adjudication despite assessee non-compliance

Sh. Dwarika Prasad Mishra Versus Income-tax Officer, Tikamgarh.

ITAT set aside CIT(A)'s ex-parte dismissal order for violating Section 250(6) requirements by failing to state determination points, decision, and ... CIT(A) dismissed the appeal of the assessee ex-parte - rejecting the books of account addition made by applying the gross profit rates and by disallowing of expenses -HELD THAT:- As per Section 250(6), CIT(A) has to state point for determination, his decision and reasoning thereof. The appellate order of the CIT(A) is clearly in violation of section 250(6) of the Act and liable to be set aside. Merely stating the assessment order passed by AO is upheld, and that the assessee has not submitted details/documents is not sufficient. CIT(A) is not toothless as his powers are co-terminus with the powers of the AO., which even includes power of enhancement. It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A) and did not file the requisite details/documents during appellate proceedings to support his contentions. Thus, the assessee is equally responsible for its woes. As also observed that the assessee has raised various important issues, which are recorded in the grounds of appeal including additional grounds of appeal as well contentions raised before me, which raises mixed question of law and facts, which requires verification of facts These issues go to the root of the matter and require proper adjudication after considering/verifying the facts as they raises mixed question of law and facts. Under these circumstances and fairness to both the parties, in the interest of justice, the appellate order of CIT(A) is set aside and the matter can go back to the file of ld. CIT(A) for fresh adjudication of the appeal of the assessee on merit. Appeal of the assessee is allowed for statistical purposes. Issues Involved:1. Condonation of delay in filing the appeal.2. Addition to income based on low Gross Profit (GP) rate.3. Disallowance of expenses under various heads: Donation, Festival, Advertisement, and Travelling Expenses.4. Rejection of books of account and estimation of income.5. Procedural lapses by the Commissioner of Income-tax (Appeals) in dismissing the appeal.Detailed Analysis:1. Condonation of Delay:The appeal was filed 29 days late before the Income-tax Appellate Tribunal (ITAT). The assessee claimed the delay was due to the non-receipt of the appellate order by the accountant, who had left the job. The Tribunal found no malice on the part of the assessee and, considering the principle of substantial justice, condoned the delay. The Tribunal relied on the precedent set by the Supreme Court in the case of Collector Land Acquisition, Anantnag & Ors. vs Mst. Katiji & Ors.2. Addition to Income Based on Low GP Rate:The Assessing Officer (AO) added Rs. 3,83,079 to the income of the assessee due to a low GP rate of 1.93% compared to 2.17% observed in the vicinity. The AO noted the absence of a complete stock register and quantitative details, which hindered the verification of the GP rate. The assessee argued that the GP rate was higher than the preceding year and that the AO's addition was unjustified without rejecting the books of account.3. Disallowance of Expenses:- Donation Expenses: The AO disallowed Rs. 1,17,600 claimed as donation expenses, stating they were not business expenses. The assessee failed to produce supporting bills and vouchers.- Festival Expenses: Rs. 55,650 claimed as festival expenses were disallowed due to lack of supporting documentation, despite the assessee's claim that these were customary expenses for employees and customers.- Advertisement and Travelling Expenses: The AO disallowed 50% of the advertisement and travelling expenses, citing them as excessive and unsupported by bills and vouchers.4. Rejection of Books of Account and Estimation of Income:The assessee contended that the AO estimated income without formally rejecting the books of account, which were duly audited. The Tribunal noted that the AO did not pinpoint specific discrepancies but rather made arbitrary disallowances. The Tribunal emphasized that income estimation should follow the rejection of books under Section 145(3).5. Procedural Lapses by the Commissioner of Income-tax (Appeals):The CIT(A) dismissed the appeal ex parte due to non-compliance by the assessee. The Tribunal found this dismissal in violation of Section 250(6), which mandates a reasoned and speaking order. The CIT(A) failed to adjudicate the issues on merits or call for assessment records from the AO. The Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication, directing the CIT(A) to consider all grounds and additional evidence while ensuring compliance with procedural requirements.Conclusion:The Tribunal allowed the appeal for statistical purposes, remanding the case to the CIT(A) for a fresh decision on merits, emphasizing procedural fairness and the need for a detailed examination of issues raised by the assessee. The Tribunal did not comment on the merits of the case, focusing instead on ensuring a fair process.