2025 (9) TMI 705 - AT - Income Tax

Ex parte dismissal set aside; appeal remitted for fresh hearing after assessee's missed notice and undertaking to appear

M/s. Vinpack (India) Pvt. Ltd., Bangalore Versus The Income Tax Officer, Ward – 7 (1) (1), Bangalore.

ITAT (Bangalore) set aside the CIT(A)'s ex parte dismissal and remitted the matter for fresh adjudication after hearing the assessee. The ITAT accepted ... CIT (Appeals) dismissing the appeal on Ex party - Assessment u/s. 143(3) - Difference between Turnover as per books and gross receipts appearing in 26AS - HELD THAT:- We are satisfied with the submission made by the Assessee that the appeal was filed during the year 2020 and therefore the notices sent to the accounts department were not viewed by them properly and therefore the assessee was not able to respond to the said notices. We have also considered the undertaking given by the Ld.AR that if the Ld CIT has posted the appeal for hearing during the first week of March, 2025, the assessee will appear on the said date of hearing and dispose the appeal. Recording the said submission made by the Ld.AR, we are setting aside the order of Ld.CIT(A) and direct the Ld.CIT(A) to decide the issue afresh on merits and in accordance with law after hearing the assessee. Appeal filed by the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether the learned first appellate authority erred in dismissing the appeal ex parte for non-appearance without deciding the appeal on merits. 2. Whether lack of notice or failure to bring electronic notices to the attention of responsible officers (owing to the passage of time) can justify setting aside an ex parte appellate order and directing fresh adjudication on merits. 3. Whether, on the facts presented (undertaking to appear and explanation for non-appearance), the appropriate remedy is to remit the matter to the appellate authority for fresh hearing and decision in accordance with law. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of ex parte dismissal and requirement to decide appeal on merits Legal framework: Appellate authorities are required to afford a reasonable opportunity of hearing and normally to decide appeals on merits; dismissal of appeals for non-appearance is permissible only where procedural requirements are met and where absence is unexplained or inordinate. Precedent Treatment: No precedent was cited or applied in the judgment under review; the Court did not rely upon or distinguish prior authorities. Interpretation and reasoning: The Tribunal examined the appellate file and found that the assessee had instituted the appeal and had engaged with the assessment proceedings before the AO. The first appellate authority dismissed the appeal because the assessee did not respond to three notices. The Tribunal accepted the assessee's explanation that the appeal had been filed several years earlier (2020), that notices were transmitted electronically, and that because of the long intervening period the emailed notices were not brought to the attention of the director/accounts department. The Tribunal treated those facts as a plausible explanation for non-attendance and concluded that the dismissal prevented adjudication on the substantive contentions raised by the assessee (e.g., additions regarding turnover mismatch, payments to struck-off companies, interest attributable to CWIP, provision for gratuity). Ratio vs. Obiter: Ratio - where a party gives an acceptable explanation for non-appearance (including failure to receive/notice electronic communications due to passage of time) and undertakes to appear if granted another opportunity, an ex parte dismissal that precludes a merits decision should be set aside and the matter remitted for fresh hearing. Obiter - broader principles concerning electronic notice regimes and their sufficiency were not fully explored or decided. Conclusions: The Tribunal held that the ex parte dismissal was inappropriate on the facts and set aside the appellate order, directing the appellate authority to decide the appeal afresh on merits after hearing the assessee. Issue 2 - Sufficiency of explanation for non-appearance where notices were sent electronically and delay intervened Legal framework: Administrative and procedural fairness requires that parties be given a fair opportunity to be heard; electronic service of notices may be valid, but the adequacy of opportunity depends onwhether the recipient actually became aware within a reasonable period. Precedent Treatment: No judicial precedents or statutory interpretations regarding electronic notice sufficiency were invoked by the Tribunal. Interpretation and reasoning: The Tribunal accepted the factual explanation that notices were routed to the accounts department and, given the four-year gap since filing the appeal, were not brought to the attention of the responsible director. The Tribunal treated the lapse as a reasonable explanation for non-appearance, not as wilful or negligent conduct warranting final dismissal. The assessee's undertaking to attend if the appeal were listed in the first week of March 2025 further reinforced the Tribunal's view that a fresh hearing would secure an opportunity for the appeal to be adjudicated on its merits. Ratio vs. Obiter: Ratio - factual inability to notice electronic communications due to institutional lapse and long passage of time can, in appropriate circumstances, justify setting aside an ex parte appellate dismissal and remitting the matter for fresh hearing. Obiter - the judgment does not establish a general rule on required safeguards for electronic notice or the period after which electronic notices are presumed ineffective. Conclusions: The explanation for non-appearance was accepted as sufficient to vitiate the ex parte dismissal; the Tribunal directed the appellate authority to hear the parties on merits. Issue 3 - Appropriate remedy where ex parte dismissal is set aside (remand and directions) Legal framework: When an appellate order is set aside for procedural unfairness or lack of opportunity, the usual remedy is remand for de novo consideration on merits after affording the parties an opportunity to be heard; appellate tribunals may frame directions as necessary to ensure expeditious disposal. Precedent Treatment: The Court did not cite or distinguish authorities but followed established remedial practice of remand for fresh hearing. Interpretation and reasoning: The Tribunal recorded the assessee's undertaking to appear if the matter were listed in early March 2025 and, relying on that undertaking and the accepted explanation for non-appearance, ordered that the lower appellate authority decide the appeal afresh on merits and in accordance with law after hearing the assessee. The Tribunal thus limited its intervention to procedural correction and did not adjudicate the substantive questions (the various additions) which were thereby left open for the appellate authority to decide. Ratio vs. Obiter: Ratio - appropriate remedy for an improperly dismissed appeal is remand for fresh hearing to ensure adjudication on merits; Tribunal may impose a timeline or related procedural direction (as here, implicit by reference to a proposed posting). Obiter - the judgment does not determine the merits of the underlying additions and therefore provides no precedent on substantive tax issues raised before the lower authorities. Conclusions: The Tribunal set aside the ex parte appellate order and remitted the matter to the appellate authority with a direction to decide afresh after hearing the assessee; the appeal was allowed for statistical purposes only. Cross-References and Final Observations 1. Issues concerning the substantive additions (turnover vs. 26AS, payments to companies struck off, interest on capital WIP, provision for gratuity, and related party transactions) were noted in the appeal but were not decided; they remain open for adjudication by the appellate authority on remand. 2. The Tribunal's decision rests on factual findings about notice reception and the assessee's undertaking and is therefore fact-sensitive; it does not establish general propositions about electronic notice efficacy beyond the specific circumstances recited. 3. The order provides procedural relief (setting aside ex parte dismissal and remanding for fresh hearing) rather than any substantive ruling on the tax assessments or additions under challenge.