Mukesh Mishra Vs ACIT (ITAT Mumbai)
Repeated Defaults Do Not Replace Merits Adjudication: ITAT Restores Ex Parte Appeal
An Appeal Requires a Decision on Its Merits
The Mumbai Tribunal restored an appeal dismissed ex parte by the Commissioner of Income Tax (Appeals), despite the assessee’s repeated failure to participate in proceedings. The significant feature was that the appellate authority had expressly declined to decide the grounds on merits. While acknowledging the assessee’s defaults, the Tribunal considered another opportunity necessary in the interest of substantive justice.
The ruling grants a fresh appellate hearing. It does not delete the additions, approve the deductions claimed, or accept the assessee’s explanations regarding the sources of investments.
Non-Compliance During Reassessment
The assessee, an individual deriving income from salary and capital gains, had not filed his original return under section 139. Following information available through the Department’s risk management system, the Assessing Officer initiated reassessment proceedings.
In response to the notice under section 148, the assessee filed a return on 12 July 2024, declaring total income of ₹23,38,410. However, most subsequent notices under section 142(1) remained unanswered. A limited response dated 7 January 2025 contained only the statement of total income and return particulars.
The assessee also failed to respond to the show-cause notice. Consequently, the Assessing Officer completed the assessment under sections 143(3) read with 147, relying on the material available.
Additions and Disallowances in Dispute
The appeal challenged several adjustments. These included ₹11,71,078 as short-term capital gains, computed by deducting current-year securities purchases of ₹3,67,369 from sale consideration of ₹15,38,447. The assessee disputed this approach, contending that the actual acquisition cost and holding particulars required examination under sections 45 to 48.
Another disputed addition was ₹63,40,996 under section 69, relating to securities purchases settled otherwise than through actual delivery. The assessee argued that the nature and source of these transactions required examination and that the resulting profit or loss should be properly determined.
Separate additions under section 69 concerned ₹3,67,369 for securities purchases and ₹17,84,600 for investment in immovable property. The assessee claimed that these investments originated from regular banking channels and explained income sources.
The remaining disputes concerned disallowance of ₹2 lakh housing-loan interest, ₹2.25 lakh under Chapter VI-A, and an alleged salary short-disclosure of ₹1,161. The Chapter VI-A claims comprised ₹1.50 lakh under section 80C, ₹25,000 under section 80D and ₹50,000 under section 80CCD(1B).
These were the assessee’s challenges; the Tribunal did not determine their factual correctness or tax treatment.
First Appeal Dismissed Without Merits Examination
The pattern of non-compliance continued before the first appellate authority. The assessee did not furnish supporting evidence, explanations, written submissions or an adjournment request.
Notices were sent to the email address available in the Department’s system and furnished in Form 35. By order dated 10 March 2026, the Commissioner (Appeals) dismissed the appeal ex parte, expressly recording that no decision was being rendered on merits.
Before the Tribunal, the assessee’s representative explained that the email account receiving the notices was not regularly accessed. She submitted that the failure was not deliberate and sought restoration of the appeal for proper adjudication.
The assessee also invoked section 250(6) and the principles of natural justice. That provision requires an appellate order to state the points for determination, the decision thereon and the reasons supporting it.
Tribunal Balances Defaults Against Substantive Justice
The Revenue strongly opposed another opportunity, pointing to habitual non-compliance throughout the proceedings. The Tribunal acknowledged the failure to file the original return, the inadequate participation during reassessment and the absence of supporting material before the Commissioner (Appeals).
Nevertheless, the decisive consideration was the absence of an appellate determination on merits. The Tribunal restored the matter to the Commissioner (Appeals) for fresh adjudication after providing an opportunity of hearing.
It directed that fresh notice be issued to the email address to be communicated by the assessee. The assessee was instructed to take the proceedings more seriously and furnish written submissions and supporting evidence addressing the grounds in Form 35.
The appeal was therefore allowed for statistical purposes. The remand was to the first appellate authority, not the Assessing Officer.
Author’s Comments
The decision underscores that an appellate authority’s responsibility to adjudicate disputed issues remains significant even where the taxpayer has repeatedly defaulted. An order expressly avoiding merits adjudication leaves the substantive controversy unresolved.
However, this relief should not be understood as judicial approval of non-compliance. The Tribunal recognised the defaults and placed responsibility on the assessee to participate meaningfully in the restored proceedings.
The practical lesson is twofold: maintain an actively monitored email address in departmental records, and support each appellate ground with relevant evidence. Another opportunity provides a hearing; it does not establish the claim
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
This appeal has been field by the assessee, against an order dated 10-03-2026, under section 250 of the Act, passed by the National Faceless Appeal Centre, Delhi [“NFAC”], for the Assessment year 2020-2021, arising out of the assessment order under section 143(3)/147 of the Act.
2. The assessee raised following grounds of appeal:
1. Opportunity of being heard be given:
On the facts and in the circumstances of the case, the Appellant submits that the Hon’ble National Faceless Appeal Centre, Delhi passed the Appellate Order u/s 250 of the Income-tax Act, 1961 dated 10.03.2026 ex-parte dismissing the appeal as the Appellant has not made submissions in response to the notices issued for hearing.
The Appellant submits that the hearing notices were sent exclusively to an email address which the Appellant does not regularly access, and no effective communication was made through alternate channels. The non-participation of the Appellant was not willful and was beyond his control.
The Appellant submits that an opportunity of being heard be given to the Appellant.
2. Order passed u/s 250 passed without adjudicating the grounds of appeal on merits:
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in dismissing the appeal of the Appellant without adjudicating any of the grounds of appeal on merits merely on the ground that no submissions/evidences were available on record and expressly holding that “no decision is being rendered on merit”, which is contrary to the provisions of section 250(6) of the Income-tax Act, 1961 and in violation of the principles of natural justice.
The Appellant submits the Hon’ble National Faceless Appeal Centre, Delhi erred in dismissing the appeal without adjudicating any of the grounds of appeal.
3. Addition of Short Term Capital Gain on account of sale of securities of Rs. 11,71,078:
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in upholding the addition of Rs.11,71,078/- made by the Assessing towards alleged Short-Term Capital Gain on sale of securities of Rs. 15,38,447/- by mechanically adopting the purchase value of securities of Rs. 3,67,369/- during the year as the cost of acquisition without considering the actual cost of acquisition and the period of holding as required under Sections 45 to 48 of the Income-tax Act, 1961.
The Appellant submits that the addition be deleted and the capital gain to be computed as per the provisions of section 45 to 48 on the basis of the actual cost of acquisition and period of holding of the shares.
4. Addition of Rs.63,40,996 u/s 69 towards purchase of securities otherwise than by actual delivery:
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in upholding the addition of Rs.63,40,996/- made u/s 69 as Unexplained Investments by the Assessing Officer in respect of purchase of securities settled otherwise than by actual delivery without appreciating the nature and source of the transactions.
The Appellant submits that the addition of Rs.63,40,996 made u/s 69 be deleted and the profit / loss made on the sale of securities be assessed to tax.
5. Addition of Rs. 3,67,369/- made u/s 69 towards purchase of securities:
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in upholding the addition of Rs. 3,67,369/- u/s 69 as Unexplained Investments towards purchase of securities in absence of supporting documentary evidences. The Appellant submits that the said purchases of securities made from regular bank account maintained and out of the income earned by him, the source of which is fully explainable.
The Appellant submits that the addition of Rs. 3,67,369 made u/s 69 be deleted.
6. Addition of Rs. 17,84,600/- u/s 69 towards immovable property:
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in upholding the addition of Rs. 17,84,600/- u/s 69 as Unexplained Investments towards purchase of immovable property in absence of supporting documentary evidences. The Appellant submits that the amount is paid from his regular bank account and the source of investment is fully explainable.
The Appellant submits that the addition of Rs. 17,84,600 made u/s 69 deleted.
7. Disallowance of deduction of Rs. 2,00,000/- claimed in respect of interest of paid of Housing Loan:
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in upholding the disallowance of deduction of Rs.2,00,000/- claimed in respect of interest on housing loan without granting adequate opportunity to furnish documentary evidences.
The Appellant submits that the deduction of Rs. 2,00,000/- in respect of housing loan interest be granted.
8. Disallowance of deduction of Rs. 2,25,000/- claimed under Chapter VI-A
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in upholding the disallowance of deduction of Rs.2,25,000/- for want of supporting documentary evidences claimed under Chapter VI-A comprising:
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- Section 80C (PF, LIC, etc.): Rs. 1,50,000/-
- Section 80D (Mediclaim Premium): Rs. 25,000/-
- Section 80CCD(1B) (NPS Contribution): Rs. 50,000/-
The Appellant submits that the payments towards PF (deducted from salary), LIC premium, Mediclaim premium and NPS contribution during the year under consideration and are genuine deductions.
The Appellant submits that the deduction of Rs. 2,25,000/- claimed under Chapter VIA be granted.
9. Addition of Rs. 1,161/- made under the head salary:
On the facts and in the circumstances of the case and in law, the Hon’ble National Faceless Appeal Centre, Delhi erred in making addition of Rs.1,161/- under the head “Income from Salary” by the Assessing Officer on account of alleged short disclosure.
The Appellant submits that the addition of Rs. 1,161/- be deleted.
10. General:
The Appellant craves leave to reserve to itself the right to add, after, amend or annul any of the grounds of appeal at or before the time of hearing and to produce such further evidence, documents and papers as may be necessary.
3. The brief relevant facts of the case are that the Assessee is an individual, earned income from salary and capital gains, but, did not furnish return of income u/s 139 of the Act. The assessing officer based on the information available on portal under RMS issued notice under section 148 of the Act, in response to that assessee filed the return of income on 12/07/2024, declaring total income of ₹23,38,410/–. The assessee did not furnish response to the most of notices u/s 142(1), issued by AO, except small response on 7/01/2025, submitting statement of total income and mere information of details of income declared in the return of income filed u/s 148 of the Act. The assessee also failed to comply with show cause notice issued by the AO, therefore, the assessing officer has passed an order based on information available with him, and made additions on account of STCG on sale of securities, unexplained investment u/s 69, short disclosure of salary income, disallowed of deductions claimed in the return of income and passed an order.
4. Thereafter, assessee filed an appeal against the order under section 147, however, again he had not filed any explanation, evidence or written submission for the adjudication of appeal. The learned CIT(Appeals) found that neither any adjournment letter nor any written submission was furnished by the assessee, though, notices were issued on the email available in the ITBA module and provided in form No. 35, i.e. [email protected]. Thus, after affording sufficient opportunities, learned CIT(Appeals) disposed ex-party appeal, without decision on merits of the case.
5. Before us, the learned AR of assessee submitted that ex-party dismissal of appeal is contrary to the provisions of section 250(6) of the Income tax Act and in violation of principles of natural justice. Further, requested to send it back to the learned CIT (Appeals) and allowed an opportunity to contest appeal there.
6. Per contra learned DR, vehemently opposed the request for sending it back to Ld. CIT (Appeals), as the assessee is habitual non-compliant.
7. We have considered the rival submissions, perused the material on record and observed that Assessee failed to furnish return of income u/s 139 of the Act for the year under consideration. Even during the reassessment proceedings, after furnishing of return of income, he did not seriously participate in the proceedings, therefore, the additions were made in the assessment order. Before the learned CIT (Appeals), assessee also not furnished any response to substantiate his grounds of appeal, before ex parte dismissal of appeal. The assessee contended that the hearing notices were not properly delivered to him on the email Id, so, he could not respond. However, it is found that ld CIT(Appeals) dismissed the appeal without rendering decision on the merits of the case. Thus, in the interest of substantive justice and in the factual matrix of the case, we deem it appropriate to restore back the matter to the file of learned CIT(Appeals) and provide another opportunity through issue of notice on the email ID to be communicated by the assessee. The assessee is also directed to consider the appeal proceeding more seriously and submit written submissions along with evidence to substantiate the grounds of appeal taken in the form no. 35.
8. In the result, appeal filed by the Assessee is allowed for statistical purposes.
Order pronounced in the open court on 08.10.2026.
