ITAT Bars CIT(A) from Dismissing Appeal for Non-Prosecution, Orders Merits Adjudication

Hanumant Construction Private Limited Vs ACIT (ITAT Raipur)

Silence of the Assessee Is Not “Implicit Acceptance” of Additions: CIT(A) Must Decide Every Appeal on Merits & Cannot Dismiss It for Non-Prosecution

The Raipur ITAT has held that the CIT(A) is not empowered to dismiss an income-tax appeal merely for non-prosecution. Even where the assessee fails to respond to hearing notices, the CIT(A) remains statutorily obliged u/s 250(6) to determine the issues arising from the assessment order and pass a reasoned order on merits.

The Tribunal further found that the assessee had expressly opted against service of appellate notices through email in Form 35. Since the CIT(A) issued notices only electronically and made no attempt to serve them physically or through post, the assessee’s explanation that it remained unaware of the hearings was accepted as genuine. The ex parte appellate order confirming additions aggregating to ₹17.83 crore was set aside and the entire appeal was restored to the CIT(A) for de novo adjudication.

Hanumant Construction Pvt. Ltd. was engaged in the construction business. It had obtained financial assistance from Union Bank of India, but its loan account was subsequently classified as a non-performing asset. The bank recalled the outstanding loan together with interest and initiated recovery proceedings under Section 13(4) of the SARFAESI Act against properties mortgaged by the company and its directors.

The company claimed that it had fallen into an acute financial crisis and had become financially and operationally inactive. It had not carried on substantial business activities for nearly five or six years following the search proceedings. Its active work orders were either terminated or in the process of termination.

For AY 2020-21, the assessee did not file its return of income despite substantial financial transactions appearing against its PAN in the Income-tax system. The information included contract receipts of approximately ₹20.27 crore from the Irrigation Division, Bhabhua, ₹18.41 crore and ₹50.85 lakh from Durgawati Dam Division-2, and ₹2.09 crore from BCCL. Purchases or supplies of approximately ₹8.84 crore appeared in the GST data. The information also reflected cash deposits or withdrawals of ₹69.15 lakh and interest receipts.

Based on these transactions, the AO reopened the assessment u/s 148. Even after receiving the reassessment notice, the assessee did not file a return and failed to participate in the assessment proceedings. The AO consequently completed the assessment u/s 147 read with Section 144 and determined the total income at ₹17,83,36,015.

The assessee filed an appeal before the CIT(A), but no response was received to notices u/s 250 issued on 08.12.2025, 17.12.2025 & 29.12.2025. The CIT(A) observed that mere filing of an appeal was insufficient and that the appellant was required to arrange effective representation.

According to the CIT(A), the assessee’s continued silence indicated that it had nothing substantive to offer against the assessment. The failure to respond was treated as an implicit acceptance of the AO’s factual and legal conclusions, and the assessment order was upheld in its entirety.

The assessee approached the Tribunal with a delay of 62 days. It explained that its serious financial and operational difficulties had affected the ability of its management and key personnel to meet statutory and appellate deadlines. The delay was stated to be neither deliberate nor wilful.

More importantly, the assessee produced Form 35 to show that it had answered “No” to the question whether appellate notices and communications could be sent through email. Despite that specific choice, the CIT(A) did not send notices through post, by hand or in any other physical mode.

The assessee contended that because no physical notice had been received, it genuinely believed that the appeal was still pending. It sought condonation of delay and requested that the appeal be restored for a decision on merits.

The Department did not object to condonation. On a specific query from the Bench, the Department also conceded, though reluctantly, that the CIT(A)’s order did not contain proper reasoning on the merits of the additions and that the matter could be restored.

The Tribunal accepted that the assessee’s belief was genuine. Since it had specifically opted out of receiving communications through email, disposal of the appeal without attempting service through the selected physical mode resulted in denial of an effective opportunity of hearing.

Relying upon Collector, Land Acquisition v. Mst. Katiji [1987] 2 SCC 107, the Tribunal observed that the expression “sufficient cause” must receive a liberal construction to advance substantial justice. Refusing to condone delay may throw out a meritorious matter at the threshold, whereas condonation merely results in the controversy being decided after hearing both parties.

The ITAT found no culpable negligence, mala fides or advantage accruing to the assessee from the delayed appeal. It accordingly condoned the delay of 62 days.

On the legality of the CIT(A)’s order, the Tribunal held that Section 250(6) requires the appellate order to be in writing and to state the points for determination, the decision thereon & the reasons for the decision. Sections 250(4), 250(5), 251(1)(a), 251(1)(b) and the Explanation to Section 251(2) collectively require the CIT(A) to apply his mind to the issues emerging from the assessment order, whether or not every issue is specifically raised by the assessee.

Relying upon Prem Kumar Arjun Das Luthra (HUF) [2017] 291 CTR 614 (Bombay), the Tribunal held that the CIT(A) cannot dismiss an appeal for want of prosecution in the manner of a civil appeal. The appellate authority must examine the assessment record and adjudicate the grounds on merits through a reasoned order.

The matter was accordingly restored to the CIT(A) for fresh adjudication after granting the assessee a reasonable opportunity. The assessee was directed to cooperate with the remanded proceedings. No opinion was expressed on the merits of the additions.

Author’s Comment

The order reiterates that an appeal before the CIT(A) does not automatically fail merely because the assessee remains absent. Non-appearance may permit the CIT(A) to proceed ex parte, but it does not permit him to avoid adjudication. Ex parte disposal must still be disposal on merits.

The observation that failure to respond amounts to implicit acceptance of the assessment is particularly problematic. Additions must stand on the legal and evidentiary strength of the assessment record, not on a presumed admission arising from appellate silence.

At the same time, the remand does not erase the assessee’s serious defaults. The company neither filed its return in response to notice u/s 148 nor participated before the AO. On remand, it must reconcile the substantial contract receipts, GST purchases, cash transactions & interest income and establish its actual taxable income with books and supporting documents.

The principle is clear: the CIT(A) may decide against an absent assessee, but he must decide the issues; non-prosecution is not a substitute for appellate adjudication.

Cases Discussed

• Collector, Land Acquisition v. Mst. Katiji – (1987) 2 SCC 107.
• Prem Kumar Arjun Das Luthra HUF – (2017) 291 CTR 614 (Bom.).
• Estate of Late Tukojirao Holkar v. CWT – 223 ITR 480 (M.P.).
• Kalsaria Diamonds Pvt. Ltd. v. Addl. CIT – ITA No. 1783/Mum/2012, order dated 05.09.2013.

FULL TEXT OF THE ORDER OF ITAT RAIPUR

This appeal for Assessment Year (‘AY’) 2020-21 filed by the assessee is directed against the order dated 07.01.2026 of Commissioner of Income Tax (Appeals), [CIT(A)], Raipur-3 passed under section 250 of the Income Tax Act, 1961 (‘Act’).

2. The assessee appellant has raised following grounds of appeal:

“1. In the facts and circumstances of the case and in law the Id. Commissioner of Income-tax (Appeals) has erred in deciding the appeal ex-parte without proper service of the notice as per provisions of the Act despite Appellant opting out for service of notice u/ s.250 of the Income-tax Act, 1961 through email by stating “No” in relevant column of Form 35 and without following the principles of natural justice.

2. In the facts and circumstances of the case and in law, learned Commissioner of Income Tax (Appeals), has erred in upholding order of learned Assessing Officer making total addition of Rs.17,83,36,015/- on three various counts without considering assessment records, without observing the principles of natural justice and without allowing reasonable opportunity to the appellant to explain his case.

3. The impugned order is bad in law and on facts.

4. The appellant craves leave to add, urge, alter, modify or withdraw any ground/s of appeal on or before hearing of the case.”

2.1 There is a delay of 62 days in filing the present appeal. The condonation of delay in filing this appeal is on the record stating following reasons for delay:

“i) The assessee-company was engaged in construction activities with financial assistance from Union Bank of India, Raipur.

ii) That the banker-Union Bank of India, Raipur classified the loan account of the assessee-company as Non-Performing Asset (NPA), and recalled the entire loan amount along with interest and initiated recovery proceedings.

iii) That in furtherance of the above, the authorised officers of Union Bank of India initiated legal proceedings and issued possession notices in respect of the immovable properties mortgaged as security with them, including those held by the company and its directors, by exercising powers conferred under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, read with Rule 6/8 of the Security Interest (Enforcement) Rules, 2002.

iv) That, it is evident from the above facts, that the assessee-company has become Bankrupt due to acute financial crisis.

v) That due to the acute financial crisis, the assessee-company has not been carrying on any substantial business activities for the last 5-6 years post search operation under the Act. All active work orders are in the process of being terminated, and a final show cause notice for termination of contracts is issued to the company. This has resulted in the company becoming financially and operationally inactive.

vi) That the aforementioned financial and operational hardships severely affected the functioning of the company, including the ability of its management and key personnel to comply with statutory and appellate deadlines in a timely manner.

vii) That the delay in filing the appeal was purely due to genuine and uncontrollable circumstances and was in no manner deliberate, willful, or indicative of negligence on the part of the assessee-company.”

3. The relevant facts giving rise to this appeal are that the assessee is engaged in construction business. However, it had not filed any Income Tax Return (‘ITR’) of the relevant year though various financial transactions appearing in its PAN/name displayed on the ITBA/Income Tax System were as under:

“1. Interest of Rs.11,32,240/- from Union Bank of India u/s 194A of the Act.

2. Payment of contract receipt of Rs.20,27,32,644/- by the Irrigation Division, Bhabhua u/s 194C of the Act.

3. Payment of contract receipt of Rs.18,41,11,093/- by the Durgawati Dam Division-2 u/s 194C of the Act.

4. Payment of contract receipt of Rs.50,84,578/- by the Durgawati Dam Division-2 u/s 194C of the Act.

5. Purchases or supplies of Rs.8,83,67,812/- as per GSTR.

6. Cash deposits/cash withdrawals of Rs.69,15,000/-.

7. Interest of Rs.10,71,518/- on deposits\.

8. Contract receipt of Rs.2,09,43,911/- from BCCL.”

4. Based on the above financial transactions, the assessee’s case was reopened under section 148 of the Act. In pursuance of the notice under section 148 of the Act, the assessee did not file any ITR. Further, it also did not ensure any compliance during the course of assessment proceedings. Hence, the Ld. Assessing Officer (‘AO’), having no other alternative, completed the assessment under section 147 r.w.s. 144 of the Act determining income at Rs.17,83,36,015/-. Aggrieved, the assessee filed appeal before the Ld. CIT(A). However, it did not pursue the same as evident from order of the Ld. CIT(A) as under:

“3.1 Ground No. 1 to 6:- Through these grounds of appeal, the appellant has challenged the addition of Rs.17,83,36,015/-.

During the appeal proceedings, the appeal was fixed for hearing as under:

It is quite evident from the chronology of event that despite several opportunities being granted from time to time, there has been absolutely no compliance on part of the appellant to give detailed explanation regarding ground of appeal taken for A.Y. 2020-21, the appellant has shown that he is not interested in pursuing the appeal. The laws aid those who are vigilant, not those who sleep upon their rights. Under these circumstances, in my opinion the appellant is not interest in the appeal. In view of these facts, the appeal of the appellant deserves to be dismissed as it cannot be kept pending adjudication for indefinite period. It is the duty of the appellant to make necessary arrangements for effective representation on the appointed date. Mere filing of an appeal is not enough, rather it requires effective hearing also. Therefore, the appeal is found liable for dismissal. This view is supported by the following judicial pronouncements:-

(i) In the case of Estate of Late Tukojirao Holkar vs. CWT 223 ITR 480 (M.P.) Hon’ble MP High Court has held as under:-

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(ii) In the case of Kalsaria Diamonds Pvt Ltd vs AddI.CIT in ITA NO 1783/Mum/2012 dated 05.09.2013, Hon’ble Mumbai ITAT placing reliance on decision of Hon’ble MP High court in the case of Estate of Late Tukojirao Holkar (supra) has held as under:-

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No explanation has been furnished by the appellant at this stage on the findings and conclusion of the Ld. AO.

During the course of appeal proceedings, having meticulously examined the factual matrix and findings recorded in the assessment order, it becomes evident that the assessee has remained completely silent, failing to furnish any response or submission in support of the grounds raised. Throughout the appellate proceedings, a series of 03 notices under Section 250 were duly issued, yet the assessee did not file a single reply, nor did they seek any adjournment or clarification. This persistent non- participation signals an absence of contestable material or argument warranting judicial intervention.

The pattern of inaction compels the inference that the assessee has nothing substantive to offer in defense of its allegations. When a party fails to discharge the elementary burden of responding to statutory notices, it amounts to an implicit acceptance of the factual and legal positions taken by the Id. AO. Consequently, the observations and additions made in the impugned order remain uncontroverted and retain their legal validity.

In light of the above, the assessment order is upheld in its entirety. Grounds of appeal raised by the assessee are dismissed.”

5. At the outset, Shri B. Subramanyam, CA, Ld. Authorized Representative (‘AR’) of the assessee drawing our attention to Form No. 35 of the appeal filed before the Ld. CIT(A) submitted that the assessee had not received any notice, in this case, in physical form through Dak/post or by hand from the office of Ld. CIT(A) though it had categorically mentioned in the Form No. 35 that the assessee should not be served any notice through email. The Ld. AR prayed for condoning the delay and remitting this case back to the file of the Ld. CIT(A) for adjudication on merit as the violation of principles of natural justice got established.

6. On the other hand, Shri Rituparna Namdeo, Ld. CIT-DR did not object to condonation of the delay. The Ld. CIT-DR drawing our attention to various paras of order of the CIT(A), submitted that the reasonable opportunities of being heard had been provided to the appellant assessee by the CIT(A). However, the appellant assessee did not ensure any compliance before him for the reasons best known to it. Further, on our specific query that the Ld. CIT(A) had not decided the appeal with reasoned order, the Ld. CIT-DR reluctantly admitted for remitting the case back to the Ld. CIT(A) for denovo adjudication.

7. We have heard both parties and have perused the material available on the record. We have taken note of the fact that the Ld. CIT(A) has not decided the appeal after sending any notice through post/physical mode (other than through email) even after categorical mention of ‘NO’ in response to whether notices/communication may be sent on email in Form Nos. 35 of this case. Thus, the assessee’s belief that its appeal would be pending before the Ld. CIT(A) as it had not received any notice in physical mode is found genuine. The relevant page of Form 35 is extracted below:

8. The justification of the appellant assessee (mentioned above in para 2.1) for delay condonation in this case therefore, becomes relevant to determine whether the same reflects sufficient and reasonable cause on its part in not presenting this appeal within the prescribed time. In case of Collector, Land Acquisition vs MST Katiji (1987) 2 SCC 107, the Hon’ble Supreme Court has held that the expression ‘Sufficient Cause’ used by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of justice that being the life-purpose of the existence of the institution of Courts. It is further held by the Hon’ble Supreme Court that such liberal approach is adopted on one of the principles that refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Another principle laid down by the Hon’ble Supreme Court is that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred as the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It is also held by the Hon’ble Supreme Court that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In the instant case, applying the same principles, we find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the appeal as the assessee does not stand to benefit by resorting to such delay. We find merit in the delay condonation petition also. Therefore, in the factual matrix of the present case, we find that there exists sufficient and reasonable cause for condoning the delay in filing the appeal as held by the Hon’ble Supreme Court in the case of Collector, Land Acquisition vs MST Katiji (supra). Therefore, in the interest of substantial justice, we are of the considered view that the delay in filing this appeal deserves to be condoned and the appeal should be decided on merit. Further, we do not see any prejudice which will be caused to the Revenue in deciding this appeal on merit. Thus, in view of the aforesaid discussions, in exercise of powers under section 254 of the Act, we hereby condone the delay in filing this appeal as we are satisfied that there is sufficient cause for not presenting this appeal within the prescribed time. Accordingly, the delay in filing of this appeal is hereby condoned.

9. We have taken note of the fact that the Ld. CIT(A) has not decided this appeal after hearing the assessee and discussing the issues in detail and the reasons for agreeing with the assessment order though he/she, as per provisions of section 250(6) of the Act, is obliged to dispose of the appeal in writing with well- reasoned order on each point of determination arisen for his/her consideration. It is evident from the perusal of section 251(1)(a), 251(1)(b) and Explanation of section 251(2) of the Act that the CIT(A) is required to apply his/her mind to all the issues arisen from the assessment order, whether or not such issues have been raised by the assessee before him/her. On cumulative consideration of the provisions of section 250(6) of the Act read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) of the Act and Explanation of section 251(2) of the Act, the CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merit. Reliance is placed on the decision of the Hon’ble Bombay High Court in case of Prem Kumar Arjun Das Luthra HUF, (2017) 291 CTR 614 (Bom.). The case laws relied upon by the Ld. CIT(A) are of no relevance as those appeals are beyond the purview of section 250(6) of the Act read with sections 250(4), 250(5), 251(1)(a), 251(1)(b)</a) of the Act and Explanation of section 251(2) of the Act.

10. We have taken note of the fact that the assessee has not made any compliance before the Ld. CIT(A). Even in such facts and circumstances, the Ld. CIT(A) cannot dispose the appeal ex-parte due to non-prosecution as he has no option except to decide the case on merit with detailed reasoning, which has not been done in this case. Keeping in view the facts of the case, we, without offering any comment on merit of the case, find impugned order deem fit to set aside and remand the matter back to the file of the Ld. CIT(A) for deciding the appeal afresh/denovo, in accordance with the law, after affording reasonable opportunity of being heard to the assessee. We, therefore, order accordingly. Needless to say that the appellant assessee has to cooperate in the remitted appellate proceedings. Accordingly, 1st ground is allowed.

11. In view of the above, remaining grounds become academic and therefore, the same are left open.

12. In the result, the appeal of assessee is allowed for statistical purposes as above.

Order pronounced in the open court on 10/09/2026.