Facts of the Case

The assessee, an individual, filed his return of income on 24.05.2019 declaring total income of ₹7,96,783 for Assessment Year 2017-18.

The assessment was completed under Section 144 of the Income Tax Act, 1961 at a significantly enhanced total income of ₹37,60,351.

Aggrieved by the additions, the assessee filed an appeal before the first appellate authority (NFAC). However, due to repeated non-compliance with notices issued by the NFAC, the appeal was dismissed in the absence of any evidence from the assessee.

Issues Involved

  1. Whether dismissal of the appeal for non-compliance without adjudicating on merits was justified.
  2. Whether the assessment involved misapplication of presumptive taxation under Section 44AD.
  3. Whether additions under Section 69A and other disallowances were sustainable.
  4. Whether deductions under Sections 80C and 80TTA were wrongly restricted.
  5. Whether the assessee deserved another opportunity to present evidence.

Petitioner’s Arguments (Assessee)

The assessee challenged the assessment and appellate order on several grounds, including:

  • Misapplication of presumptive taxation under Section 44AD.
  • Incorrect determination of gross receipts exceeding the statutory threshold.
  • Arbitrary assessment of business income.
  • Unjustified addition of ₹12,50,000 as unexplained income under Section 69A.
  • Additional disallowances including ₹4,43,224.
  • Non-allowance or restriction of deductions claimed under Sections 80C and 80TTA.

The assessee also filed an application for condonation of delay of 30 days in filing the appeal before the Tribunal, stating that he had been seriously ill and bedridden, preventing timely filing.

Respondent’s Arguments (Revenue)

The Revenue pointed out that:

  • The assessee had repeatedly failed to comply with notices during appellate proceedings.
  • Multiple opportunities were granted by the NFAC without response.

However, the Departmental Representative did not object to condonation of delay or restoration of the matter.

Court Order / Findings (ITAT Allahabad)

The Tribunal made the following findings:

Condonation of Delay

The delay of 30 days in filing the appeal was condoned, as the explanation of serious illness was found genuine and beyond the control of the assessee.

Non-Compliance Before NFAC

It was observed that the assessee had completely failed to comply with notices during the first appellate proceedings, despite several opportunities.

Need for Substantial Justice

Notwithstanding the defaults, the Tribunal held that the assessee should be granted one more opportunity to present his case in the interest of substantial justice.

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 adequate opportunity to the assessee
  • Warned the assessee to fully comply with future notices

The Tribunal clarified that failure to cooperate in the restored proceedings would permit the NFAC to decide the matter based on available records, even ex-parte.

Important Clarification

  • Appellate authorities should ordinarily decide matters on merits rather than dismissing appeals solely for non-compliance.
  • Delay in filing appeals can be condoned where sufficient cause is demonstrated.
  • Restoration of proceedings is intended to secure substantial justice, not to reward negligence.
  • Assessees must cooperate in subsequent proceedings to avoid adverse orders.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771229004_PAWANTIWARISULTANPURVS.ITOSULTANPUR.pdf

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