2025 (6) TMI 937 - AT - Income Tax

Assessee gets fresh opportunity after ex-parte assessment under section 144 due to circumstances beyond control

Govindji Budhaji Thakor Versus The ITO Ward-3 (3) (2), Ahmedabad

Govindji Budhaji Thakor Versus The ITO Ward-3 (3) (2), Ahmedabad - TMI Issues presented and considered:1. Whether the dismissal of the appeal by the Commissioner of Income Tax (Appeals) for non-prosecution was justified, and whether the additions made by the Assessing Officer under Section 69A read with Section 115BBE of the Income Tax Act, 1961, were properly confirmed.2. Whether the additions of Rs. 21,69,000/- as unexplained cash deposits during the demonetization period, Rs. 85,08,876/- as unexplained credit entries in bank accounts, and Rs. 50,00,000/- as undisclosed sale consideration from immovable property were rightly made and sustained.3. Whether the delay of 258 days in filing the appeal before the Tribunal was justifiable and liable to be condoned.4. Whether the matter should be restored to the file of the Assessing Officer for fresh adjudication in light of the assessee's inability to participate in earlier proceedings due to ill health and reliance on others.Issue-wise detailed analysis:1. Dismissal of appeal for non-prosecution and confirmation of additions:The legal framework governing the dismissal of appeals for non-prosecution is well-established. Courts and tribunals have held that an appeal must be effectively prosecuted; mere filing without participation amounts to non-filing. The CIT(A) relied on such precedents to dismiss the appeal due to the assessee's failure to appear or respond to notices under Section 250 of the Act.However, the Tribunal examined the factual matrix, noting the assessee's ill health and complete dependence on his son for tax matters, compounded by conflicting legal advice and personal disputes, which hindered timely and effective participation. The Tribunal emphasized the principle of natural justice, which mandates a fair opportunity to present one's case.Balancing the legal principle with the specific facts, the Tribunal found that the dismissal for non-prosecution was harsh and that a further opportunity was warranted. The Tribunal also acknowledged the Departmental Representative's concern about unnecessary litigation caused by non-cooperation but considered that a nominal cost would suffice as a deterrent.The Tribunal thus set aside the CIT(A)'s order and restored the matter to the Assessing Officer for de novo adjudication, directing full cooperation from the assessee.2. Validity of additions under Section 69A and undisclosed sale consideration:The Assessing Officer made additions under Section 69A of the Act, which deals with unexplained cash credits, cash deposits, and investments, read with Section 115BBE, which imposes a higher tax rate on such unexplained income. The additions comprised:Rs. 21,69,000/- as unexplained cash deposits during the demonetization period;Rs. 85,08,876/- as unexplained credit entries in bank accounts;Rs. 50,00,000/- as undisclosed sale consideration from immovable property not declared in the return of income.The AO issued multiple notices under Sections 143(2) and 142(1), seeking explanations and documents, but the assessee did not respond, compelling the AO to complete the assessment ex-parte under Section 144. The CIT(A) confirmed these additions due to the assessee's non-cooperation.While the Tribunal did not delve into the merits of these additions at this stage, it recognized that the assessee had not been given a fair opportunity to present evidence or explanations. The restoration of the matter to the AO was intended to allow the assessee to substantiate his claims and contest the additions on merits.3. Condonation of delay in filing appeal:The appeal before the Tribunal was filed with a delay of 258 days. The assessee submitted an affidavit explaining the delay, citing ill health, reliance on his son who sought conflicting advice, personal disputes, and eventual realization that no appeal had been filed within the prescribed period.The Departmental Representative did not oppose the condonation of delay. The Tribunal found the reasons to be bona fide, without mala fide intent, and accordingly condoned the delay, admitting the appeal for adjudication.4. Restoration of the matter for fresh adjudication:The Tribunal considered the principle of natural justice and the assessee's inability to effectively participate in the earlier proceedings due to health and personal circumstances. It noted that the ex-parte assessment and dismissal of appeal were consequences of non-cooperation, but the underlying reasons were beyond the assessee's control.Recognizing the need to balance procedural compliance with fairness, the Tribunal restored the matter to the AO for de novo adjudication, directing the assessee to cooperate fully and submit all necessary documents. The Tribunal also imposed a nominal cost of Rs. 5,000/- payable to the Income Tax Department to deter future non-compliance.Significant holdings:'The principle of natural justice demands that the assessee be given a fair opportunity to present his case.''An appeal means an effective appeal, and merely filing an appeal without actively prosecuting it is equivalent to not filing an appeal at all. However, given the specific circumstances of the case, one more opportunity should be granted to the assessee.''Considering the genuine hardship faced by the assessee, we find that the reasons for the delay are bona fide and do not reflect any mala fide intent. Accordingly, the delay of 258 days is condoned.''We set aside the order of the CIT(A) and restore the matter back to the file of the AO for de novo adjudication, with the direction that the assessee shall fully cooperate and submit necessary documents in support of his claims. Further, we impose a cost of Rs. 5,000/- on the assessee, payable to the Income Tax Department within 30 days.'The core principles established include the necessity of effective prosecution of appeals, the application of natural justice to provide a fair hearing, the discretion to condone delay when bona fide reasons exist, and the imposition of costs as a deterrent against non-cooperation.Final determinations:The delay in filing the appeal before the Tribunal is condoned.The appeal is admitted for adjudication.The order of the CIT(A) dismissing the appeal for non-prosecution is set aside.The matter is restored to the Assessing Officer for fresh adjudication on merits.The assessee is directed to cooperate fully with the Assessing Officer and submit all relevant documents.A cost of Rs. 5,000/- is imposed on the assessee payable to the Income Tax Department.