2025 (5) TMI 92 - AT - Income Tax

CIT(A) order set aside for failing to provide reasoned decision under section 250(6) requirements

AVR Storage Tank Terminals Private Limited Versus Deputy Commissioner of Income Tax, Circle 11 (1), Kolkata

AVR Storage Tank Terminals Private Limited Versus Deputy Commissioner of Income Tax, Circle 11 (1), Kolkata - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in this appeal are:Whether the Commissioner of Income-tax (Appeals) (CIT(A)) complied with the mandatory requirement under section 250(6) of the Income Tax Act, 1961, to pass a reasoned and speaking order disposing of all grounds of appeal raised by the assessee.Whether the CIT(A) erred in failing to adjudicate upon multiple grounds of appeal raised by the assessee despite allowing the appeal in general terms.Whether the CIT(A) has the power and obligation to dispose of the appeal on merits, including making inquiries or directing further inquiries under section 250(4), and whether the CIT(A) can dismiss or not decide the appeal on grounds such as non-prosecution.Whether the assessment order passed by the Assessing Officer (AO) was properly considered and whether the CIT(A) applied his mind to the facts and issues raised in the appeal.Whether the appeal before the Tribunal should be allowed for statistical purposes due to the procedural defect in the CIT(A)'s order.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Compliance with Section 250(6) - Requirement of a Reasoned and Speaking Order by CIT(A)Relevant Legal Framework and Precedents: Section 250(6) mandates that the order disposing of an appeal by the CIT(A) must be in writing and must state the points for determination, the decision thereon, and the reasons for the decision. The principle of a speaking order is well established in judicial precedents, including the Madras High Court's decision in Ajji Basha v. CIT, which requires the appellate authority to explicitly exhibit application of mind and provide reasons and findings on each ground of appeal.Court's Interpretation and Reasoning: The Tribunal noted that although the CIT(A) allowed the appeal, the order failed to address or decide upon the multiple grounds of appeal raised by the assessee. The CIT(A) reproduced the AO's order and the submissions but did not provide any reasoned analysis or findings on the merits of the grounds raised. This amounted to non-compliance with the mandatory statutory requirement under section 250(6).Key Evidence and Findings: The CIT(A)'s order spanned multiple pages but lacked any adjudication on the grounds raised by the assessee. The order merely concluded with a general allowance of the appeal and deletion of additions without discussing the specific grounds.Application of Law to Facts: The Tribunal held that the CIT(A)'s order did not meet the statutory mandate of section 250(6) and judicial standards for a speaking order, which requires reasons and findings on each issue raised. The absence of such reasoning rendered the order legally defective.Treatment of Competing Arguments: The assessee's representative contended that this was a grave error warranting setting aside the order. The Revenue did not oppose this contention. The Tribunal relied on the authority in Ajji Basha to underscore the necessity of a reasoned order.Conclusion: The CIT(A) failed to pass a reasoned order as required under section 250(6), which is a fundamental procedural defect.Issue 2: Obligation and Powers of CIT(A) to Dispose of Appeal on Merits and Not Dismiss or Ignore GroundsRelevant Legal Framework and Precedents: Sections 250 and 251 of the Act govern the procedure and powers of the CIT(A). Section 250(4) empowers the CIT(A) to make or direct further inquiries before disposing of an appeal. Section 251(1)(a) and (b) empower the CIT(A) to confirm, reduce, enhance, or annul the assessment or penalty. The Explanation to section 251(2) clarifies that the CIT(A) may consider and decide any matter arising from the proceedings, even if not raised by the appellant. The Bombay High Court in Commissioner of Income-tax (Central) Nagpur v. Premkumar Arjundas Luthra (HUF) held that the CIT(A) cannot dismiss an appeal for non-prosecution and must dispose of it on merits.Court's Interpretation and Reasoning: The Tribunal emphasized that once an appeal is filed, the CIT(A) is obliged to dispose of it on merits and cannot dismiss or ignore grounds due to non-prosecution or other procedural reasons. The CIT(A) must apply his mind to all issues arising from the impugned order, whether or not raised by the appellant.Key Evidence and Findings: The CIT(A) did not conduct any inquiry or pass a reasoned order on the grounds raised. The Tribunal noted that the CIT(A) order contained a verbatim reproduction of the AO's order and submissions but no independent reasoning or findings.Application of Law to Facts: The Tribunal found that the CIT(A) did not exercise his powers under sections 250 and 251 properly and failed in his statutory duty to dispose of the appeal on merits. The CIT(A)'s order was thus not sustainable.Treatment of Competing Arguments: The assessee's counsel argued for remand to allow proper adjudication. The Revenue did not oppose. The Tribunal relied on the statutory framework and judicial precedents to uphold the principle of disposal on merits.Conclusion: The CIT(A) erred in failing to adjudicate the appeal on merits and ignoring the grounds of appeal, contrary to statutory mandate and judicial precedents.Issue 3: Impact of Non-Adjudication of Grounds and RemedyRelevant Legal Framework and Precedents: The requirement of a reasoned order is a procedural safeguard to ensure fairness and transparency in appellate proceedings. Non-adjudication of grounds raised in appeal vitiates the order. The Tribunal relied on the principle that an appellate order must address all grounds raised and provide reasons.Court's Interpretation and Reasoning: The Tribunal held that since the CIT(A) failed to decide the grounds of appeal, the order was not in compliance with section 250(6) and was legally unsustainable. The appropriate remedy was to set aside the order and remit the matter to the CIT(A) for fresh disposal on merits.Key Evidence and Findings: The Tribunal observed that the CIT(A) order did not contain any discussion or decision on the multiple grounds raised by the assessee, despite allowing the appeal in general terms.Application of Law to Facts: The procedural defect warranted setting aside of the CIT(A) order and remand for fresh adjudication with opportunity to the assessee to make submissions.Treatment of Competing Arguments: The assessee sought remand; the Revenue did not oppose. The Tribunal granted the relief accordingly.Conclusion: The CIT(A) order was set aside and the matter remitted for fresh disposal with compliance to section 250(6).Issue 4: Miscellaneous Procedural IssuesThe Tribunal briefly noted the assessee's contention regarding the correctness of tax computations, depreciation claims, applicability of section 115BAA, and interest calculations under sections 234A, 234B, 234C, and 244A of the Act. However, since these issues were not adjudicated by the CIT(A), the Tribunal did not decide them but remitted them for fresh consideration by the CIT(A).3. SIGNIFICANT HOLDINGS'Section 250(6) casts a duty on the Ld. CIT(A) to pass an order in appeal which should state the points for determination and a decision as well as the reason for arriving at such decision.''The order passed by the Appellate Authority should explicitly exhibit his application of mind to the facts and circumstances and the objections raised in the grounds of appeal, also by expressing his reasons and findings in support of his conclusion.''The law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act and the procedure to be adopted for deciding the appeal.''Once an appeal is preferred before the CIT(A), it is not open to him to withdraw or not press the appeal. In fact, the CIT(A) is obliged to dispose of the appeal on merits.''Accordingly, as the Ld. CIT(A) has not deliberated upon nor decided the various grounds of appeal raised before him, we find it appropriate to set aside the impugned order of the Ld. CIT(A) and remit the matter back to the file of Ld. CIT(A) for disposal of all the grounds raised by the assessee on merits by passing a speaking order de novo.'Core principles established include the mandatory nature of a reasoned and speaking order by the CIT(A) under section 250(6), the obligation of the CIT(A) to dispose of appeals on merits, and the prohibition against dismissal or non-adjudication of grounds raised in appeal.Final determination was to allow the appeal for statistical purposes, set aside the CIT(A) order, and remit the matter for fresh adjudication with opportunity to the assessee to make submissions on all grounds raised.