2025 (7) TMI 1807 - AT - Income Tax

Ex-Parte Order Set Aside for Non-Prosecution; AO's Section 147 Assessment Upheld with Hearing Opportunity

Nagankesy Venkata Reddy Versus The Income Tax Officer, Ward-1, Telangana.

The ITAT Hyderabad set aside the ex-parte order of the CIT(A) dismissing the appeal for non-prosecution and restored the matter to the AO for de novo ... CIT(A) passed ex-parte appellate order for non-prosecution - Best judgement assessment - Reopening of assessment u/s 147 - HELD THAT:- Admittedly, the assessee did not file relevant evidences in support of his case before the AO, except filing return of income, in response to notice issued u/sec.148 of the Act, which is evident from the subsequent notice issued u/sec.142(1) of the Act on various dates, for which, no compliance from the assessee. Therefore, we cannot find fault with the best judgment assessment order passed by the AO. Although, the assessee has filed appeal before the learned CIT(A), once again, there is no compliance, which is evident from the ex-parte order passed by CIT(A), where the case was listed for hearing on many occasions, but, no compliance from the assessee. Fact remains that, CIT(A) dismissed the appeal filed by the assessee for non-prosecution without considering the issues on merits on the basis of material available on record. It is well established principle of law by the decisions of various Courts/ Tribunals that, even in case of non-appearance of the appellant, the appeal should be decided on merits on the basis of material available on record. Thus, we set-aside the order of the CIT(A) and restore the issue back to the file of AO with a direction to consider the case of the assessee de novo, after providing reasonable opportunity of hearing to the assessee to explain his case. Appeal of the Assessee is allowed for statistical purposes. ISSUES: Whether reopening of assessment under section 147 of the Income Tax Act, 1961 is justified on the basis of undisclosed cash deposits and unexplained income.Whether the Assessing Officer's addition under section 69A for unexplained cash deposits is sustainable in absence of documentary evidence from the assessee.Whether the appellate authority can dismiss an appeal for non-prosecution without adjudicating on merits based on the material available on record.Whether the matter should be remanded for fresh consideration after providing reasonable opportunity of hearing to the assessee.Whether imposition of costs on the assessee for non-compliance and lethargic approach before lower authorities is appropriate. RULINGS / HOLDINGS: The reopening of assessment under section 147 was valid as the Assessing Officer had a 'reason to believe' that income chargeable to tax had escaped assessment due to undisclosed cash deposits and income.The addition made under section 69A for unexplained cash deposits amounting to Rs. 1,92,93,721/- is upheld due to the assessee's failure to furnish any documentary evidence or explanation.The appellate authority erred in dismissing the appeal for non-prosecution without considering the issues on merits based on the material available on record, as it is a 'well established principle of law' that appeals should be decided on merits even in absence of appellant's appearance.The matter is set aside to the file of the Assessing Officer for de novo consideration after providing reasonable opportunity of hearing to the assessee, ensuring the assessee can furnish relevant details to substantiate the case.A nominal cost of Rs. 10,000/- is imposed on the assessee for showing 'lethargic approach' before the lower authorities, to be paid to the Prime Minister's National Relief Fund. RATIONALE: The Court applied the provisions of the Income Tax Act, 1961, specifically sections 147 (reassessment), 148 (notice for reassessment), 142(1) (information and evidence), 143(2) (notice for scrutiny), 144 (best judgment assessment), and 69A (unexplained cash credits).The reopening of assessment was grounded on the Assessing Officer's 'reason to believe' that income had escaped assessment due to undisclosed cash deposits and income not reflected in the return of income.The best judgment assessment was justified due to the assessee's failure to respond to multiple notices and furnish evidence, leading to an ex-parte order.The appellate authority's dismissal for non-prosecution without merit consideration was found contrary to the principle that appeals should be decided on merits based on available material, even if the appellant does not appear.The Tribunal emphasized the need for procedural fairness by remanding the matter for fresh consideration with an opportunity to be heard, reflecting a doctrinal insistence on hearing before adverse orders.The imposition of costs serves as a deterrent against non-compliance and encourages diligent prosecution of appeals, with the cost directed to a public welfare fund.