Income Tax Appeals: ITAT Upholds Right to Merits-Based Decision, Sets Aside CIT(A) Orders.


15 February 2024 Income Tax >> Tax Laws  

In a recent ruling of Babubhai Ramanbhai Patel v/s Deputy Commissioner of Income Tax, Circle-1(1)(1), Present Jurisdiction Income Tax Officer, Ward-1(2)(1), Ahmedabad & Another, the Income Tax Appellate Tribunal (ITAT) has set aside orders passed by the Commissioner of Income Tax (Appeals) (CIT(A)) in two separate appeals filed by an assessee for the Assessment Years 2012-13 and 2015-16. The ITAT's decision underscores the crucial requirement for appellate authorities to address the merits of a case, even in ex-parte proceedings, ensuring fairness and adherence to statutory provisions.

The assessee had challenged the disallowance of short-term capital losses by the Assessing Officer, who deemed them "bogus." The CIT(A), however, dismissed the appeals without a substantive discussion of the case, citing the assessee's non-appearance and deeming their actions as dilatory tactics.


 

 

The ITAT, upon reviewing the case, noted that two of the hearing dates before the CIT(A) fell during the COVID-19 pandemic, potentially hindering the assessee's ability to attend. Moreover, the assessee had requested adjournments, which were denied.

Crucially, the ITAT highlighted the CIT(A)'s failure to comply with Section 250(6) of the Income Tax Act, which mandates that appellate orders must state the points for determination, the decision thereon, and the reasons for the decision. The ITAT emphasized that the CIT(A) is obligated to address the grounds of appeal on their merits, even in ex-parte orders.

Citing precedents from the Bombay High Court and various ITAT benches, including CIT v. Premkumar Arjunda, Pawan Kumar Singhal v. ACIT, Ms. Swati Pawa v. DCIT, and HV Metal ARC (P.) Ltd. v. ACIT, the ITAT reiterated that dismissing an appeal for non-prosecution without considering the merits is contrary to the law.

The ITAT observed, "A perusal of the language of the above provisions shows that it is incumbent on the Ld. CIT(A) to make necessary enquiry before passing the order. Further, Ld. CIT(A) is obliged to decide each of the points arising out of the appeal i.e. grounds on merits have to be discussed even in an ex parte order. In view of Section 250(4) and 250(6) of the Act, Ld. CIT(A) has no power to dismiss an appeal on account of non- prosecution, without discussing the merits of the case."

Consequently, the ITAT set aside the CIT(A)'s orders and remanded the cases for fresh adjudication on merits, directing the CIT(A) to provide the assessee with a fair opportunity to present their case. The ITAT also issued a stern warning to the assessee, emphasizing the need for prompt compliance with hearing notices and cautioning that further defaults could result in orders based on available records.

The ruling reinforces the principle that appellate authorities must conduct thorough, merits-based reviews, ensuring that taxpayers receive a fair hearing and that decisions are grounded in sound legal reasoning and factual analysis. This decision serves as a reminder of the importance of procedural fairness and the necessity for appellate bodies to adhere to the statutory requirements of the Income Tax Act.


Section 144, Income Tax Act - 1961  

Section 147, Income Tax Act - 1961  

Section 148, Income Tax Act - 1961  

Section 250, Income Tax Act - 1961  

Section 251, Income Tax Act - 1961

Income Tax Act, 1961