No power with CIT(A) to dismiss appeal for non-prosecution

Ashish Dham Vs DCIT (ITAT Delhi)

Conclusion: 

CIT(A) erred in dismissing assessee’s appeal  and passing a non-speaking order on each of the points which arose for his consideration, therefore, CIT(A) was directed to pass denovo order as per law, in accordance with Sections 250 and 251 for fresh disposal of appeal filed by assessee.

Held:

Assessee filed appeal before CIT(A) against additions made by AO. However, assessee did not comply with hearing notices issued by CIT(A). As assessee did not appear before CIT(A), CIT(A) concluded that assessee was not interested in prosecuting his case and he dismissed assessee’s appeal. The additions made by AO were confirmed. It was held CIT(A) erred in dismissing assessee’s appeal on merits in a summary manner, without giving detailed reasons for his order, on various grounds of appeal before him. CIT(A) also erred in passing a non-speaking order on each of the points which arose for his consideration and he failed in discharging the statutory obligation to state the reasons for his decision on each such points, which arose for determination in assessee’s appeal before CIT(A). Therefore, the impugned order was set aside and CIT(A) was directed to pass denovo order as per law, in accordance with Sections 250 and 251 for fresh disposal of appeal filed by assessee.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal by Assessee is filed against the order of the Learned Commissioner of Income Tax (Appeals)-16, New Delhi, [“Ld. CIT(A)” for short], dated 15.02.2016, for Assessment Year 2011-12, on the following grounds:

“1. Ld. CIT (Appeals), without appreciating the correct facts of the case and without giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in not deciding the appeal on the merits of the case and as well as on validity /legality of assessment order passed by ld. Assessing Officer without having the jurisdiction over the case.

2. That Ld. CIT(A) without appreciating the correct facts of the case giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in confirming the addition of Rs. 12,52,000/-under section 69 of the I.T. Act on account of cash deposit in bank account made by ld. Assessing Officer.

3. That Ld. CIT(A) without appreciating the correct facts of the case and giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in confirming the addition of Rs. 17,64,241/-made by ld. Assessing Officer by disallowing the interest on housing loan from income house property.

4. That ld. CIT(A) without appreciating the correct facts of the case and giving proper opportunity of being heard and raising any query during the course of hearing is not justified in law and facts and circumstances of the confirming the addition the addition of Rs. 17,00,000/- on account of alleged difference in the receipts as per 26AS and return of income.

5. Assessee has every right to make, add, delete, modify, or alter any grounds of appeal at the time of hearing.”

(2) The Assessment Order U/s 143(3) of the Income Tax Act, 1961 (“I.T. Act” for short) was passed on 31/12/2013, in which the following additions were made by the Assessing Officer (AO):

(3) The Assessee filed appeal before the Ld. CIT(A). However, the assessee did not comply with hearing notices issued by the Ld. CIT(A). As the assessee did not appear before the Ld. CIT(A), the Ld. CIT(A) concluded that the Assessee was not interested in prosecuting his case and he dismissed the Assessee’s appeal with the following observations in his aforesaid impugned order dated 15/02/2016:

“ Findings:-

Opportunities granted to appellant:-

(i) Case was fixed for 19/10/2015 by issuing notice u/s 250. No one attended.

(ii) Another notice u/s 250 is issued on 16/11/2015 and hearing fixed on 09/12/2015.

(iii) On 9/12/2015 case was adjourned to 30/12/2015. None attended on 30/12/2015.

(iv) On 12/01/2016 another notice u/s 250 issued case fixed for hearing on 04/02/2016.

(v) On 04/02/2016 case was adjourned to 11/02/2016. No one attended on 11/02/2016 or till the passing of this order.

From the opportunities given to the assessee and his non compliant attitude, it is clear that appellant is not interested in prosecuting his case. As there is nothing on record to rebut the conclusion drawn by the Assessing Officer. The additions made by AO are confirmed.

In the result the appeal of the appellant is dismissed. ”

(3.1) The Assessee filed appeal in Income Tax Appellate Tribunal (ITAT), against the impugned order dated 15/02/2016 of the Ld. CIT(A). We find from the perusal of record, that the following grounds of appeal were raised by the Assessee before the Ld. CIT(A).

“1. That order passed by ld. Assessing Officer is without jurisdiction and bad in law and should be quashed ab-initio.

2. That without prejudice to ground of appeal no. 1, order passed by ld. assessing officer is barred by limitation and bad in law and should be annulled.

3. That without prejudice to ground of appeal no. 1 and 2 ld. Assessing Officer without appreciating the correct facts of the case and giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in making the addition of Rs. 12,52,000/- under section 69 of the I.T. Act on account of cash deposit in bank account.

4. That ld. Assessing Officer without appreciating the correct facts of the case and giving proper opportunity of being heard is not justified in law and facts ;and circumstances of the case in making the addition of Rs. 17,64,241/- by disallowing the interest on housing loan from income from house property.

5. That ld assessing officer without appreciating the correct facts of the case and giving proper opportunity of being heard and raising any query during the course of hearing is not justified in law and facts and circumstances of the case in making the addition of Rs. 17,00,000/- on account of alleged difference in the receipts as per 26AS and return o f income.

6. Assessee has every right to make, add, delete, modify or alter any grounds of appeal at the time of hearing.

(3.2) However, the Ld. CIT(A) in his aforesaid impugned order dated 15/02/2016, has not disposed off various grounds of appeal through a speaking order on merits. Instead, the Ld. CIT(A) has dismissed assessee’s appeal on merits, in a summary manner through a non-speaking order, on merits.

(4) The relevant provisions under I.T. Act regarding procedure in appeal, and powers of the Commissioner [Appeals] are contained in Sections 250 and 251 of I.T. Act, which are reproduced below for ready reference:

“250. (1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the Assessing Officer against whose order the appeal is preferred.

(2) The following shall have the right to be heard at the hearing of the appeal—

(a) the appellant either in person or by an authorized representative;

(b) the Assessing Officer, either in person or by a representative.

(3) The Commissioner (Appeals) shall have the power to adjourn the hearing of the appeal from time to time. 

(4) The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals).

(5) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable.

(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.

[(6A) In every appeal, the Commissioner (Appeals), where it is possible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of section 246A

(7) On the disposal of the appeal, the Commissioner (Appeals) shall communicate the order passed by him to the assessee and to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers—

(a) In appeal against an order of assessment, may confirm, reduce, enhance or annual the assessment

(aa) In appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;

(b) In an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) In any other case, he may pass such orders in the appeal as he thinks fit.

(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation.—In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.”

(4.1) A perusal of the above provisions of law shows that U/s 250(6) of I.T. Act the Ld. CIT(A) was obliged to dispose of the appeal in writing after stating the points for determination and to then pass an order on each of the points which arose for consideration; and the Ld. CIT(A) was further obliged to state the reasons for his decision on each such points which arose for determination. Thus, the Ld. CIT(A) was duty bound to dispose of the appeal on merits. Moreover, the perusal of Section 251(1)(a) and (b) of I.T. Act and the further perusal of Explanation of Section 251(2) of I.T. Act shows that the Ld. CIT(A) was required to apply his mind to all the issues which arose from the impugned order before him, whether or not these issues had been raised by the Assessee before him. Also, Section 251(1)(a) of I.T. Act provides that while disposing of an appeal against Assessment Order, Commissioner (Appeals) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1) (b) provides that in disposing of an appeal against an order imposing a penalty, Commissioner (Appeals) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty. On cumulative consideration the provisions U/s 250(6) read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation of Section 251(2) of I.T. Act , we come to the conclusion that the Ld. CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merits. Once the Assessee files an appeal U/s 246A of I.T. Act, the Assessee sets in motion the machinery designed for disposal of the appeal under Sections 250 and 251 of I.T. Act. If the appeal filed by the assessee fulfils the requirements of maintainability and admissibility prescribed under Sections 246, 246A, 248 and 249 of I.T. Act; neither the Assessee can stop the further working of that machinery as a matter of right by withdrawing the appeal, or by not pressing the appeal, or by non-prosecution of the appeal; nor the first appellate authority, CIT(A) in this case, can halt this machinery by ignoring either the procedure in appeal prescribed U/s 250 of I.T. Act or powers of Commissioner (Appeals) prescribed U/s 251 of I.T Act. CIT(A), the first appellate authority, cannot dismiss assessee’s appeal in limine for non- prosecution without deciding the appeal on merits through an order in writing, stating the points of determination in the appeal, the decision thereon and the reason for the decision. It is well-settled that powers of Ld. CIT(A) are co-terminus with powers of the Assessing Officer. Useful reference may be made to order of Apex Court decision in CIT vs. Kanpur Coal Syndicate 53 ITR 225 (SC) in which it was held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, that he can do what the ITO can do and also direct him to do what he failed to do. In this context, useful reference may also be made to Apex Court’s decisions in the cases of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 and CIT vs. B.N. Bhattachargee 118 ITR 461 (SC) for the proposition that an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing, the first appellate authority can proceed with the enquiry and if he finds that there has been an under-assessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the Assessing Officer to not complete the Assessment Proceedings by allowing the Assessee to withdraw Return of Income; it is similarly, by analogy, not open for Ld. CIT(A) to not pass order on merits on account of non-prosecution of appeal by the Assessee or if the Assessee seeks to withdraw the appeal or if the assessee does not press the appeal. When the Commissioner (Appeals) dismisses the appeal of assessee for non-prosecution of appeal by the assessee; in effect, indirectly it leads to same results as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise, through dismissal of appeal for non-prosecution of appeal before the first appellate authority; in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee. What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled. In view of the foregoing discussion; and on careful perusal of Section 250(6) r.w.s. 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation to Section 251(2) of I.T. Act; it is amply clear that Ld. CIT(A) has no power to dismiss appeal in limine for non-prosecution of appeal by the assessee. We draw support from order of Hon’ble Bombay High Court in the case of CIT vs. Premkumar Arjundas Luthra (HUF) [2016] 240 taxman 133 for the propositions that Ld. CIT(A) is required to apply his mind to all issues which arise from impugned order before him whether or not same had been raised by appellant before him; and that CIT(A) is obliged to dispose of the appeal on merits. In this case, it was held as under:

“8 it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act. ”

(5) In view of the foregoing paragraphs, we are of the view that the Ld. CIT(A) erred in dismissing Assessee’s appeal on merits in a summary manner, without giving detailed reasons for his order, on various grounds of appeal before him. We further hold that the Ld. CIT(A) erred in passing a non-speaking order on each of the points which arose for his consideration and he failed in discharging the statutory obligation to state the reasons for his decision on each such points, which arose for determination in assessee’s appeal before the Ld. CIT(A). Therefore, we set aside the impugned order dated 15/02/2016 of Ld. CIT(A); and we direct the Ld. CIT(A) to pass denovo order as per law, in accordance with Sections 250 and 251 of I.T. Act, for fresh disposal of appeal filed by the Assessee before the Ld. CIT(A) against the aforesaid Assessment Order dated 31/12/2013.

(5) In the result, Assessee’s appeal is treated as partly allowed for statistical purposes.

Order pronounced in the open court on  04/01/2019