Facts of the Case

The assessee is an individual engaged in fisheries business on commission basis.

For the assessment year under consideration, the case was selected for scrutiny with respect to cash deposits amounting to Rs.14,58,500/- made during the demonetization period.

The Assessing Officer issued several notices under Section 142(1) of the Income Tax Act. However, there was no response from the assessee. Consequently, the Assessing Officer passed an ex-parte assessment under Section 147 read with Section 144 of the Act.

The entire cash deposited during the year was treated as turnover of the assessee, and a net profit rate of 8% was applied on total receipts of Rs.2,00,67,030/-, resulting in an addition of Rs.16,05,362/-.

Aggrieved, the assessee preferred an appeal before the learned CIT(A). During appellate proceedings, notices dated 25.12.2020, 19.03.2021, 14.06.2021, 09.08.2021 and 14.06.2024 were issued. However, there was no compliance from the assessee.

The learned CIT(A) passed an ex-parte order dismissing the appeal.

 Issues Involved

  1. Whether the assessment framed under Section 147 read with Section 144 was valid in law.
  2. Whether passing of ex-parte orders without reasonable opportunity violated principles of natural justice.
  3. Whether application of 8% net profit rate on total receipts without comparable cases was justified.
  4. Whether the CIT(A) failed to decide the appeal on merits as required under Section 250(6) of the Act.

 Petitioner’s Arguments

The learned Counsel for the assessee submitted that:

  • The assessment framed under Section 147 read with Section 144 determining income at Rs.16,05,362/- was bad in law and on facts.
  • Both the Assessing Officer and CIT(A) passed ex-parte orders without providing reasonable opportunity of being heard.
  • The assessee was residing in a remote area without internet facility, which resulted in non-compliance under unavoidable circumstances.
  • The addition of Rs.16,05,362/- was unjustified as the Assessing Officer merely applied 8% net profit rate on total receipts without bringing any comparable case on record.
  • The CIT(A) failed to adjudicate the issues on merits and dismissed the appeal solely on account of non-compliance.
  • The matter should be restored to the file of the CIT(A) for passing a speaking order on merits.

 Respondent’s Arguments

The learned Senior Departmental Representative did not object to the request of the assessee for restoration of the matter to the file of the CIT(A) for adjudication on merits.

 Court Order / Findings

The Tribunal observed that:

  • The CIT(A) passed the ex-parte order on the ground that no one appeared on the dates fixed for hearing.
  • Although notices were issued, the appeal was dismissed without adjudication on merits.
  • The CIT(A) is duty bound to decide the issues on merits and pass a speaking order.

The Tribunal held that compliance with Section 250(6) of the Income Tax Act is mandatory, which requires that the appellate order must:

  • Be in writing;
  • State the points for determination;
  • Contain the decision thereon; and
  • Provide reasons for such decision.

Since the appeal was not decided on merits, the Tribunal set aside the impugned appellate order dated 25.06.2024.

The CIT(A) was directed to decide the appeal afresh by passing a de novo speaking order on merits in accordance with law after providing reasonable opportunity to the assessee and ensuring compliance with Section 250(6).

The assessee was also directed to remain present on the date fixed by the CIT(A).

The appeal was allowed for statistical purposes.

 Important Clarification

The Tribunal did not adjudicate the merits of the addition of Rs.16,05,362/- or the applicability of 8% net profit rate. The matter has been remanded solely for fresh adjudication by the CIT(A).

The order reinforces:

  • The mandatory obligation of appellate authorities to pass speaking orders.
  • The requirement of compliance with Section 250(6).
  • The importance of adherence to principles of natural justice even in cases of non-appearance.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1770886149_VISHVANATHKAUSHAMBIVS.INCOMETAXOFFICER26KAUSHAMBI.pdf 

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