Facts of the Case

The assessee, a co-operative society registered under the Uttar Pradesh Cooperative Societies Act, 1965, filed its return of income for Assessment Year 2017-18 declaring NIL income.

The Assessing Officer completed the assessment under Section 144 read with Section 143(3), determining total income at ₹8,37,240 and raising a tax demand of ₹4,04,020.

Aggrieved, the assessee filed an appeal before the National Faceless Appeal Centre (NFAC). However, due to repeated non-compliance with notices, the appeal was dismissed in limine by the appellate authority without adjudicating on merits.

The assessee then approached the Income Tax Appellate Tribunal challenging the ex-parte dismissal.

Issues Involved

  1. Whether the NFAC was justified in dismissing the appeal for non-compliance without deciding the case on merits.
  2. Whether the assessee was denied proper opportunity of hearing.
  3. Whether assessment under Section 144 was valid when status of the assessee was allegedly misidentified.
  4. Whether presumptive taxation under Section 44AD could be applied to a co-operative society.
  5. Whether the matter should be restored for fresh adjudication.

 Petitioner’s Arguments (Assessee)

The assessee contended that:

  • The appellate order was passed ex-parte without considering facts and circumstances.
  • The secretary of the co-operative society was unaware of online notice procedures and relied on previous counsel.
  • The assessment wrongly treated the assessee as an individual instead of a co-operative society.
  • Section 44AD was incorrectly applied, as it is applicable only to individuals, HUFs, and partnership firms (excluding LLPs), not co-operative societies.
  • The assessment was based merely on bank deposits rather than actual receipts disclosed in the return.
  • Initiation of penalties under Sections 270A and 272A(1) was illegal.

 Respondent’s Arguments (Revenue)

The Revenue pointed out that:

  • The assessee repeatedly failed to respond to notices during appellate proceedings.
  • The NFAC granted several opportunities before dismissing the appeal.
  • Therefore, the dismissal for non-compliance was justified.

 Court Order / Findings (ITAT Allahabad)

The Tribunal made the following observations:

  • The appeal before the Tribunal was delayed by 420 days, but the delay was condoned after considering the explanation and absence of objection from the Revenue.
  • There was complete non-compliance by the assessee before the appellate authority.
  • Nevertheless, in the interest of substantial justice, the assessee deserved one more opportunity to present its case.

Accordingly, the Tribunal:

  • Set aside the ex-parte order of the NFAC
  • Restored the matter to the NFAC for fresh adjudication
  • Directed the NFAC to provide proper opportunity of hearing
  • Cautioned the assessee to fully comply with future proceedings, failing which the authority may decide the case on available material

 Important Clarification

Dismissal of an appeal for non-compliance without deciding on merits may violate principles of natural justice.

Appellate authorities should ordinarily adjudicate issues rather than summarily dismiss appeals.

Procedural lapses, particularly in faceless proceedings, may justify restoration.

Delay in filing appeals can be condoned where sufficient cause is shown.

Restoration does not decide the merits but ensures fair opportunity of hearing.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771228949_MALWANKISANSEWASAHKARISAMITILIMITEDMALWANFATEHPURFATEHPURVS.INCOMETAXOFFICER24FATEHPUR.pdf

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