Facts of the Case

The assessee, Shri Vimal Kumar Jain, filed his return of income for Assessment Year 2009-10. The assessment resulted in multiple additions, including disallowance of ₹2,85,600 under Section 40A(3) for cash expenditure, addition of ₹35,00,000 invoking Section 40A(3), and addition of ₹18,00,000 under Section 68 on account of unexplained credits. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Udaipur. The CIT(A), by order dated 07.08.2012, dismissed the appeal ex-parte and confirmed all additions by merely observing that no submissions were made by the assessee during appellate proceedings, without discussing facts or adjudicating grounds on merits. Aggrieved, the assessee filed an appeal before the Tribunal.

Issues Involved

Whether the CIT(A) was justified in passing a summary and mechanical order without adjudicating the grounds of appeal on merits, whether confirmation of additions under Sections 40A(3) and 68 without discussion violates principles of natural justice, and whether such an order is sustainable under Section 250(6) of the Income-tax Act.

Petitioner’s Arguments

The assessee contended that the CIT(A) failed to act as a quasi-judicial authority and dismissed the appeal mechanically without application of mind. It was argued that none of the grounds raised in Form No. 35 were adjudicated on merits and the additions were confirmed merely by reproducing the assessment order. The assessee submitted that such an approach is in clear violation of principles of natural justice and statutory mandate under Section 250(6), which requires a reasoned speaking order.

Respondent’s Arguments

The Revenue supported the order of the CIT(A) and submitted that since the assessee failed to make submissions during appellate proceedings, the CIT(A) was justified in confirming the additions made by the Assessing Officer.

Court Order / Findings

The ITAT Jodhpur Bench examined the impugned appellate order and observed that the CIT(A) had disposed of the appeal in a summary manner without discussing the facts, contentions or evidence on record. The Tribunal noted that the CIT(A) did not adjudicate even a single ground of appeal on merits and merely reiterated that no submissions were made by the assessee. The Tribunal held that the CIT(A), being a quasi-judicial authority, is duty-bound to adjudicate each ground of appeal independently by passing a reasoned speaking order, even in cases of non-appearance. The Tribunal found the impugned order to be in gross violation of principles of natural justice and Section 250(6) of the Act. Accordingly, the Tribunal set aside the order of the CIT(A) and restored the matter to his file with a direction to adjudicate the appeal afresh on merits after granting adequate opportunity of being heard to the assessee.

Important Clarification

The Tribunal clarified that appellate authorities cannot dispose of appeals mechanically or summarily. Even in cases of non-compliance or non-appearance, the CIT(A) is required to decide appeals on merits by passing a reasoned speaking order. Failure to do so renders the appellate order unsustainable in law.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The order dated 07.08.2012 passed by the CIT(A), Udaipur was set aside, and the matter was remanded back to his file for de novo adjudication in accordance with law after granting adequate opportunity of being heard to the assessee.

Link to Download Order - https://www.mytaxexpert.co.in/uploads/1768994015_SHRIVIMALKUMARJAINUDAIPURVS.ACITUDAIPUR.pdf

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