TaxTMI 
TaxTMI 
2026 (8) TMI 569
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....s primary obligation is to set aside the flawed order and remit the matter for a clean-slate trial. However, when that remedial restoration is shackled by an arbitrary monetary precondition, coupled with a penal guillotine of "automatic confirmation" upon default, the judicial process is subverted into an instrument of oppression. An assessee already grappling with severe liquidity crunches and a multi-crore tax demand cannot be shown the exit doors of justice merely because a procedural cost could not be cleared within a compressed timeline. 2. The subject-matter of challenge in this appeal under Section 260A of the Act is the order dated 23rd June, 2025, passed by the Income Tax Appellate Tribunal, 'A' Bench, Kolkata, in ITA No. 334/Kol/2025 for the Assessment Year (AY) 2018-19 (the certified copy whereof was received by the appellants on 3rd December, 2025). By the said impugned order, while the learned Tribunal recorded a categorical finding of fact that the Commissioner of Income Tax (Appeals) [CIT(A)] had passed an ex-parte order denying the assessee an adequate opportunity of being heard in violation of the principles of natural justice, it nevertheless made the order of ....
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....redence to the primary books of accounts, the assessing authority locked its sights on an unsecured loan of Rs.1,23,50,000/- received from M/s Excellent Infrabuild Private Limited. Invoking Section 68 of the Act, an ex-parte assessment order was finalized on 30th November, 2023, creating an aggregate tax demand of Rs.1,81,74,868/-. 6. Carrying a sense of deep grievance against this high-pitched assessment, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), via Form No. 35 on 12th January, 2024. Regrettably, due to systemic communication gaps and the digital complexities of the faceless regime, the first appellate authority dismissed the appeal ex-parte on 19th December, 2024, through a cryptic, unreasoned order that completely bypassed the mandatory safeguards enshrined under Section 250(6) of the Act, thereby rubber-stamping the addition without issuing a speaking order. 7. Unfazed, the assessee knocked on the doors of the Income Tax Appellate Tribunal ('A' Bench, Kolkata) in ITA No. 334/Kol/2025. By the impugned order dated 23rd June, 2025, the Tribunal correctly diagnosed the fatal breach of na....
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....r unconditionally instead of imposing punitive and coercive conditions? iv. Whether the authorities below erred in law in sustaining the addition of Rs.1,23,50,000/- under Section 68 of the Income Tax Act, 1961, despite the Appellant having discharged its initial onus regarding the identity, creditworthiness, and genuineness of the lender? IV. SUBMISSIONS OF THE PARTIES 10. Mr. Amit Agarwal, learned counsel appearing on behalf of the appellants, forcefully opened his submissions by contending that the Income Tax Appellate Tribunal committed a fundamental error of law. He argued that once the Tribunal recorded a categorical finding that the assessee was condemned unheard by the first appellate authority, it was bound in law to set aside the order and restore the matter unconditionally. By imposing a punitive pre-condition of Rs.1,00,000/- and stipulating an "automatic confirmation" upon default, the Tribunal acted completely without jurisdiction. 11. He further submitted that no provision under the Income Tax Act, 1961 empowers the Tribunal to impose coercive costs or to erect financial barriers that defeat a vested statutory right of appeal. He further urged that ....
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....d that the delay was neither deliberate nor contumacious. Accordingly, GA No. 1 of 2026 is allowed, and the delay of 154 days stands condoned. 16. Turning to substantial questions of law (i), (ii), and (iii) concerning the competency of the Tribunal to impose conditional default clauses, it is well established that the Income Tax Appellate Tribunal is a statutory tribunal deriving its authority strictly from Section 254 of the Act. While Section 254(1) empowers the Tribunal to pass such orders thereon "as it thinks fit," and Rule 32 of the Income-tax (Appellate Tribunal) Rules, 1963 confers procedural powers to regulate its proceedings and grant adjournments on terms including costs, such powers cannot be stretched to defeat substantive statutory rights. The expression "as it thinks fit" implies a judicial discretion to be exercised within the parameters of law, equity, and reason, and not an unbridled power to erect coercive financial barriers. 17. It is a cardinal principle of administrative and tax jurisprudence, firmly anchored in the constitutional mandate of Article 265 and Article 300A, that a right of appeal is a valuable statutory right. As held by the Hon'ble Suprem....
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.... reflects that the appellant had submitted contemporaneous banking records and corporate details regarding the loan of Rs.1,23,50,000/- from M/s Excellent Infrabuild Private Limited. The revenue authorities failed to conduct independent inquiries or dismantle the documentary evidence, relying instead on generalized third-party reports. Such an approach suffers from perversity, requiring proper factual evaluation by the CIT(A) upon full opportunity to the assessee. 21. Balancing the procedural default of the assessee with the imperative of dispensing substantive justice, we hold that while the Tribunal possesses inherent power to impose costs for procedural delays, such costs cannot be made a condition precedent resulting in automatic dismissal or confirmation. Consequently, substantial questions of law (i), (ii), and (iii) are answered in the affirmative, in favor of the assessee and against the Revenue; and substantial question of law (iv) is answered by holding that the merits of the addition under Section 68 require fresh, unhindered adjudication by the First Appellate Authority. The cost of Rs.1,00,000/- is reduced to Rs.25,000/-, and the automatic default confirmation claus....