2025 (9) TMI 609 - AT - Income Tax

Ex parte dismissal set aside; taxpayer allowed opportunity to submit documents and case remanded for fresh decision

Eknath Genaba Shinde Versus ITO, Ward 12 (1), Pune

ITAT PUNE - AT set aside the ex parte dismissal by CIT(A)/NFAC of the appeal and restored the matter to the file of the AO, noting the dismissal arose ... Exparte order passed by CIT(A)/NFAC - Reopening of assessment u/s 147 - due to non-compliance to the statutory notices issued by AO he completed the assessment u/s 144 of the Act determining the total income of the assessee HELD THAT:- We find due to non-compliance to the various notices issued by the office of the Ld. CIT(A) / NFAC, the Ld. CIT(A) / NFAC was constrained to pass the ex-parte order dismissing the appeal filed by the assessee for want of prosecution and non-submission of any details. It is the submission of assessee that given an opportunity the assessee is in a position to substantiate his case by filing the requisite details since he is only a power of attorney holder of Pate group of companies who are engaged in the business of real estate and his income is below the taxable limit. We deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant an opportunity to the assessee to substantiate his case by filing the requisite details and decide the issue as per fact and law. Appeal filed by the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether reopening of assessment under section 147 (read with section 148) and completion of assessment under section 144 by the Assessing Officer was valid in circumstances of undisclosed sale consideration where the assessee did not respond to statutory notices. 2. Whether dismissal of the appeal by the first appellate authority by an ex-parte order for want of prosecution (non-compliance with appellate notices) was appropriate where the assessee asserts he was a power-of-attorney holder and had bona fide belief of non-liability. 3. Whether the appellate or adjudicating authorities are obliged in the interest of justice to grant an opportunity to an appellant/assessee to substantiate facts (including production of documents and oral submissions) before confirming additions made by best judgment assessment under section 144. 4. The legal significance of non-receipt/ignorance of statutory notices (e.g., due to unfamiliarity with technology) and the effect of such non-receipt on the conduct of proceedings and entitlement to an opportunity to be heard. 5. Appropriate remedy when both assessment under section 144 and ex-parte appellate dismissal have been passed in consequence of the assessee's non-appearance: restoration to the file of the Assessing Officer for de novo consideration or otherwise. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reopening under section 147/148 and assessment under section 144 Legal framework: The Assessing Officer may reopen assessment under section 147 upon recording reasons and issue notice under section 148; where an assessee fails to comply with notices and to produce details, the AO may complete assessment under section 144 by making best judgment assessment. Precedent Treatment: No reliance on or departure from judicial precedent is recorded in the text; the Tribunal proceeds on statutory principles governing reopening and best-judgment assessments. Interpretation and reasoning: The Tribunal accepted facts that information indicated sale of immovable property for substantial consideration and that the assessee did not file returns or respond to notices; on those facts the AO's reopening and subsequent best-judgment assessment under section 144 were factually and procedurally in line with statutory powers when an assessee willfully or persistently fails to co-operate. Ratio vs. Obiter: Ratio - the AO is empowered to complete assessment under section 144 where the assessee fails to comply with statutory notices following valid reopening under section 147/148; this forms part of the Tribunal's reasoning for affirming the AO's ability to determine income by best judgment absent co-operation. Conclusions: The Tribunal recognised the validity of the AO's actions in reopening and making a section 144 assessment given the non-response, but the validity of such an assessment does not preclude subsequent directions to afford opportunity where justice demands. Issue 2 - Appropriateness of ex-parte dismissal by the appellate authority for want of prosecution where the assessee claims lack of liability and power-of-attorney status Legal framework: Appellate authority may dismiss appeals for non-prosecution after providing opportunities; however, the duty to accord reasonable opportunity to present case and to consider a genuine explanation is a constitutional/statutory procedural fairness requirement. Precedent Treatment: The judgment does not cite or distinguish earlier case law but treats the question as one of balancing procedural rules against interests of justice. Interpretation and reasoning: The Tribunal noted that the assessee consistently failed to respond to multiple notices at both AO and appellate levels. Nonetheless, the assessee contended he acted only as a power-of-attorney for builders who disclosed the sales and that he believed himself not taxable; he also asserted non-receipt or lack of awareness of notices. Weighing these facts and the asserted bona fides, the Tribunal found dismissal without an opportunity to substantiate potentially determinative factual explanations ran counter to the interest of justice. Ratio vs. Obiter: Ratio - where an appellant claims a substantive factual justification (e.g., acting only as power-of-attorney and not personally liable) and requests an opportunity to substantiate, the appellate authority (or Tribunal) should consider restoring the matter for adjudication rather than allow ex-parte disposal in all cases; this principle underpins the decision to restore. Conclusions: The Tribunal concluded that despite procedural defaults, fairness dictated granting the assessee an opportunity to substantiate his case before final confirmation of the large addition; accordingly, the ex-parte dismissal was set aside to the extent of directing fresh consideration. Issue 3 - Obligation to grant opportunity to substantiate facts before confirming best-judgment additions Legal framework: Principles of natural justice and statutory procedure require that assessments and appellate determinations which rest on absence of evidence should, where appropriate, allow the taxpayer an opportunity to produce evidence and make submissions before final adverse conclusions are reached. Precedent Treatment: No specific precedents cited; Tribunal applies principle broadly consistent with established procedural fairness doctrines. Interpretation and reasoning: Although the AO and the appellate authority acted within powers after the assessee's non-compliance, the Tribunal emphasised the 'interest of justice' as a basis to permit the assessee to present evidence (e.g., power-of-attorney documents, proof that principal disclosed income) that could materially alter the assessment. The Tribunal considered the asserted factual matrix (agency relationship, disclosure by principals, assessee's income below taxable limit) sufficient to justify restoration for fresh enquiry rather than permanently upholding the addition without ever considering such evidence. Ratio vs. Obiter: Ratio - where an assessee, even after procedural lapses, demonstrates a plausible substantive defence that could negate or reduce tax liability, tribunals may restore matters to provide opportunity to substantiate; this is a determinative holding of the decision. Conclusions: The Tribunal directed restoration to the AO with explicit directions to grant opportunity, permit the assessee to appear and produce documents, and warned that failure to appear without seeking adjournment would permit the AO to pass appropriate orders; the direction balances procedural strictness with remedial fairness. Issue 4 - Effect of claimed non-receipt/ignorance of notices due to unfamiliarity with technology Legal framework: Service/receipt of notices and the taxpayer's obligation to respond are governed by statutory notice provisions; ignorance or technological unfamiliarity does not automatically vitiate proceedings but may be relevant to whether a reasonable opportunity was effectively afforded. Precedent Treatment: Not addressed by reference to case law in the judgment. Interpretation and reasoning: The Tribunal treated the claimed non-notice/technological unfamiliarity as part of the factual background. It did not hold that such claim alone invalidated the proceedings, but it reinforced the conclusion that, given the asserted circumstances and the substantial quantum involved, a one-time restorative opportunity was warranted rather than strict finality. Ratio vs. Obiter: Obiter/Incidental - the Tribunal did not lay down a general rule excusing non-compliance due to technological unfamiliarity; it treated the claim as a factor justifying restoration on these facts. Conclusions: Non-receipt/ignorance may be a relevant factor in deciding whether to provide a fresh opportunity; on the facts, the Tribunal allowed restoration but conditioned future proceedings on the assessee's appearance and compliance. Issue 5 - Appropriate remedy: restoration to Assessing Officer and directions Legal framework: Tribunals have power to set aside orders and remit matters for fresh consideration to ensure adjudication on merits where fairness requires. Precedent Treatment: No precedents cited; remedy applied in exercise of adjudicatory powers to secure justice. Interpretation and reasoning: Considering the totality - large addition arising from alleged undisclosed sale, claim of agency/power-of-attorney, asserted bona fides and ignorance of notices - the Tribunal found restoration to the AO with directions to grant opportunity and to permit submissions was the appropriate and proportionate remedy. The Tribunal imposed a procedural safeguard: the assessee must appear on the appointed date and not seek adjournments, failing which the AO may proceed. Ratio vs. Obiter: Ratio - where ex-parte orders at multiple levels have disposed of substantive rights without the appellant having had an opportunity to present potentially dispositive evidence, the Tribunal may restore the matter to permit adjudication on facts and law; this is the operative holding and remedial direction. Conclusions: The appeal was allowed for statistical purposes and the matter restored to the AO for fresh adjudication in accordance with law, with directions for appearance and opportunity to substantiate; the AO is free to pass appropriate order if the assessee fails to comply with the restoration directions.