Corporate Tax

CIT (A) has no Power to Dismiss Appeal Without Deciding Merits of Case

In the case of Saw Chhaganlal Arjanbhai Thacker Medical & Education Trust Vs The DCIT/ACIT, CPC 2022, the tribunal held that the CIT (A) has no power to dismiss appeal of the assessee without discussing the case on merits. The tribunal further observed that the order of dismissal of appeal should be based on the merits of the case through order in writing, stating the points of determination, the decision and the reason thereon. The tribunal, in this case, allowed the appeal of the assesse and directed the CIT (A) for fresh adjudication based on the merits of the case.

Fasts of the Case

The facts of the case are:

1. The assessee has filed the Income Return on the date of 12-03-2016, which declares the total income as “NIL” in the AOP (Trust) status as the assessee has claimed deductions under Section 11 of the Income Tax, 1961.
2. The CPC, Bangalore, has issued an intimation to assessee u/s 143 (1) of the act , which states that the deductions claimed by the assessee u/s 11 is not maintainable, and the total income shall be Rs 2, 73, 857.
3. By way of the above intimation, the DCIT has made adjustments by not providing deductions of Rs 4, 01,053 claimed by the assessee u/s 11 of the Income Tax Act, 1960.
4. Being aggrieved by the adjustments, the assesseehas made an appeal taking the ground that CIT (A) has no power to dismiss appeal of the assessee without determining the points of grounds.
5. The appeal is dismissed by CIT (A). Being aggrieved by the dismissal of the appeal, the assessee filed an appeal at the tribunal.

Observations of the CIT (A)

It is observed by CIT (A) that the intimation was sent to the assesse on 12-03-2016 and was received on the date itself. It is stated that the assessee filed the appeal on 03-06-2020, which implies that there is a delay of 4 years in the filing of the appeal and there is no explanation or reasons for the delay in the filing being supplied by the assessee.

Moreover, the CIT (A) has presented an opportunity to the assessee by issuing notices on various dates during the appellate proceedings but there was no reply received by the CIT (A). Therefore, the assessee’s appeal is dismissed on the non-adherence to the timeline enumerated under the statute and hence due to noncompliance on the part of the assessee, there is no reason for the delay in filing the appeal. Therefore, the question of whether CIT (A) has no power to dismiss appeal of the assessee does not arise.

Grounds of Appeal

1. The CIT (A), National faceless Appeal Centre has mistakenly dismissed the appellant’s appeal.
2. The assessee also alleged that CIT (A) has no power to dismiss appeal of assessee without discussing the case on merits.
3. The CIT (A), National faceless Appeal Centre, has mistakenly held that the appellant has no reason for the delay in filing the appeal.
4. The CIT (A), National faceless Appeal Centre have mistakenly held that there was no reply from the assessee within the stipulated time as the appellant filed the adjournment applications against the notices under Section 250 of the act, which were not rejected by CIT (A).
5. The CIT (A), National faceless Appeal Centre has mistakenly upheld the CPC’s actions in making adjustments to the appellant’s income by denying deductions under Section 11 of Rs 4, 01,053.

Issue of the case

Whether the CIT (Appeal) has the power to dismiss appeal of the assessee without deciding on merits of the case?

Observations of the Tribunal

The tribunal observed that CIT (A) had not mentioned any adjournment applications in the order filed by the assessee for seeking time to present its case. Moreover, the CIT (A) has passed an ex parte appellate order because of the delay in filing the appeal without going on the merits of the case or discussing various grounds of appeal in the order. Henceforth, the CIT (A) has no power to dismiss appeal of assessee.

 The tribunal further took note of Section 250 (5) and Section (6) of the act, which state that:

(4) The Commissioner (Appeals) may make further enquiry or direct the assessing officer to undertake further inquiry before disposing of the appeal and reports the results of the inquiry to the commissioner (Appeals)

 (6) The order of the Commissioner (Appeals) shall state the point of determination, decision and the reasons for such decision while disposing of the appeal in writing.

From the plain reading of the above sections, it is noted by the tribunal that CIT (A) shall, by himself or through an assessing officer, make a necessary inquiry before dismissing the appeal. Further, the CIT (A) is under an obligation to decide on each point of the appeal, i.e. grounds on merits also need to be discussed on an ex-parte order. Therefore, applying the above section, it is observed by the tribunal that the CIT (A) has no power to dismiss appeal of assessee on account of non –prosecution and without deciding on the merits of the case.

The tribunal took note of the case CIT v. Premkumar Arjunda(2107) 297 CTR 614 (Bombay) and agreed with the observations of the Bombay High Court. The court states that a plain reading of Section 251 (1) (a) and (b) & explanation of Section 251 (2) of the act mandates that CIT (A) shall apply its mind to all the issues which arise from the order before him, whether or not the appellant has raised the same before him. Therefore, it is held by the court that CIT (Appeal) has no power to dismiss appeal for non-prosecution.

The tribunal further referred to the case of Pawan Kumar Singhal v. ACIT, 2019, wherein the Delhi ITAT holds the same views and held that CIT (A) has no power to dismiss appeal of the assessee for non–prosecution without deciding the case on merits through an order in writing, stating points for determination, decision and reason thereon. The Delhi ITAT takes a similar opinion in the case of Swati Pawa v. DCIT,2019, wherein it isheld thatin terms of Section 250, the CIT (A) has no power to dismiss appeal of assessee for non-prosecution and is obliged to dismiss the appeal only on the merits of the case by passing a speaking order.

The tribunal further relies on the case of Nisarhusen Amdali Lakhani, ITA 532/Ahd/2018, wherein the Ahmedabad ITAT has set-aside the order of the CIT (A) as the order shows that CIT (A) has failed to address various points of determination and dismissed the appeal of the appellant for his non–appearance. The Ahmedabad tribunal relies on Section 250 (6) of the actand states that the CIT (A) shall pass the order based on points of determination accompanying the reasons thereon. Thus, the CIT (A) has no power to dismiss appeal of assessee without deciding the merits of the case.

Decision of the Tribunal

Based on the decision of various high courts and tribunals, it is held by the tribunal that CIT (A) has made a default in facts and law and has summarily rejected the assessee’s appeal by passing non-speaking order. The tribunal also held that the order of CIT (A) does not mention any grounds of appeal raised by the assessee and is not decided on the merits of the case. Further, the tribunal also held that the CIT (A) has no power to dismiss appeal of the assessee. Therefore, the tribunal has set aside the order of CIT (Appeal) and directed that an opportunity of being heard be given to the assessee so that case can be decided on the merits.

Conclusion

The tribunal in the case has allowed the assessee’s appeal and granted an opportunity to present the reason for the delay in filing of appeal before CIT (Appeal). The tribunal has upheld the reasoning mentioned in Section 251 (4) & (6) of the Income Tax Act, 1961^[1] and held that the CIT (A) has no power to dismiss appeal of the assessee without determining the point of grounds for appeal. Henceforth, the CIT (A) shall, before dismissing the appeal, undertake further inquiry by himself or through the assessing officer. Therefore, it is pertinent to mention that even though the order is passed as ex-parte, it shall consist of grounds of appeal, decision and reason for such decision.

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