The Income Tax Appellate Tribunal, Amritsar, has reaffirmed a foundational principle of tax appellate procedure: the Commissioner of Income Tax (Appeals) has a statutory duty to decide every appeal on its merits, regardless of whether the assessee appears or prosecutes the appeal. This ruling clarifies that procedural default cannot override substantive justice in income tax adjudication.
Background & Facts
The Dispute
The appellant, Ranjana Devi, a homemaker, faced an income tax assessment for Assessment Year 2017-18 after depositing Rs. 12,00,000 in cash into her Bank of India account during the demonetization period. The Assessing Officer (AO) initially accepted her return declaring income of Rs. 2,69,960 in an order dated 13.11.2019 under Section 143(3). However, the Principal Commissioner of Income Tax (PCIT), Bathinda, invoked Section 263 to reopen the assessment, directing a de novo assessment. The AO subsequently issued notices under Section 142(1) and Section 133(6), to which the appellant responded with detailed documentation.
Key Facts
- The appellant declared cash deposits of Rs. 12,00,000 in her savings account (Account No. 636110110000558) during November 2016, coinciding with demonetization.
- She explained the source as Rs. 10,00,000 in gifts from her father, Sh. Tarsem Kumar, and brother, Sh. Jishu Garg, and Rs. 2,00,000 from personal savings, stridhan, and husband’s contributions.
- The appellant submitted notarized affidavits from both donors, along with their Income Tax Returns, bank statements, and capital accounts.
- The AO issued notices under Section 133(6) to both donors on 23.02.2023; both responded confirming the gifts.
- Despite this, the AO made an addition of Rs. 11,50,000 under Section 69A, rejecting the explanations.
- The original assessment order dated 13.11.2019 was set aside by PCIT on 15.03.2022 under Section 263.
- The revised assessment order was passed by the AO on 28.03.2023.
Procedural History
- 13.11.2019: Original assessment under Section 143(3) accepted return of Rs. 2,69,960.
- 15.03.2022: PCIT Bathinda passed order under Section 263, setting aside original assessment and directing de novo assessment.
- 28.03.2023: AO passed revised assessment order adding Rs. 11,50,000 under Section 69A.
- 28.02.2025: CIT(A) upheld the AO’s order without addressing the appellant’s submissions or the documentary evidence on record.
- 19.03.2026: Hearing before ITAT Amritsar; no representative appeared for the appellant.
- 20.03.2026: ITAT pronounced order.
The Parties' Positions
For the Appellant (via Statement of Facts)
- Provided complete documentation proving source of funds, including affidavits, bank statements, and ITRs of donors.
- Demonstrated compliance with Section 133(6) notices; donors confirmed receipt.
- Argued that the AO and CIT(A) ignored evidence already on record.
For the Respondent (Department)
- Relied on AO’s order and CIT(A)’s confirmation.
- Did not file a separate written submission before ITAT.
- Did not appear before the Tribunal.
Relief Sought
The appellant sought: (1) setting aside of the CIT(A)’s order; (2) deletion of the addition of Rs. 11,50,000; (3) restoration of the original assessment; and (4) a direction for de novo adjudication with proper opportunity of hearing.
The Legal Issue
The central question was whether the Commissioner of Income Tax (Appeals) has the authority to dismiss an appeal under Section 250 of the Income Tax Act, 1961 for non-prosecution or non-appearance by the assessee, or whether it is legally bound to decide the appeal on its merits.
Arguments Presented
For the Appellant
The appellant’s submissions, though not presented orally before the Tribunal, were documented in the Statement of Facts and Form 35. The core contention was that the CIT(A) failed to examine the voluminous documentary evidence already on record - including affidavits, bank statements, and ITRs of donors - which were submitted to the AO and were accessible to the CIT(A). The appellant relied on the legal principle that once an appeal is filed, the CIT(A) must apply its mind to all issues arising from the impugned order, whether or not raised by the appellant.
For the Respondent
The Department did not file any written submissions and did not appear before the Tribunal. The learned DR merely relied on the orders of the AO and CIT(A), without offering any legal argument or rebuttal to the appellant’s evidence or the precedent cited.
The Court's Analysis
The Tribunal emphasized that Section 250 imposes a mandatory duty on the CIT(A) to dispose of every appeal on its merits. The CIT(A) is not a passive arbiter but a statutory appellate authority with powers co-extensive with the AO under Section 251(1). The Tribunal relied on the binding precedent of the Bombay High Court in Pr. CIT(Central) v. Premkumar Arjundas Luthra (HUF), [2017] 297 CTR 614, which held:
"...it is not open to the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him."
The Tribunal noted that the CIT(A) did not refer to any of the documents submitted by the appellant, nor did it discuss the findings of the AO or the responses to Section 133(6) notices. The mere fact that the appellant did not appear before the CIT(A) did not absolve the appellate authority of its statutory obligation to examine the record. The Tribunal observed that the documents were part of the department’s own file and were accessible to the CIT(A). Failure to review them constituted a violation of natural justice and statutory mandate.
The Tribunal further clarified that the power to dismiss appeals for non-prosecution was expressly withdrawn by the legislature with effect from 01.06.2001, and the CIT(A) must now adjudicate on all issues arising from the assessment order.
The Verdict
The appeal was allowed for statistical purposes. The Tribunal set aside the order of the CIT(A) dated 28.02.2025 and remanded the matter to the CIT(A) for de novo adjudication. The CIT(A) was directed to provide a fresh opportunity of hearing to the appellant and to decide the appeal on merits, taking into account all documents already on record, including the affidavits, bank statements, and ITRs of the donors. No monetary relief was granted as the matter was remanded.
What This Means For Similar Cases
CIT(A) Cannot Avoid Adjudication on Technical Grounds
- Practitioners must now argue that non-appearance or non-prosecution by the assessee does not justify dismissal of an appeal under Section 250.
- The CIT(A) is statutorily bound to examine the entire record, even if the appellant is unrepresented.
Documentary Evidence on Record Must Be Considered
- If evidence (affidavits, ITRs, bank statements) is submitted to the AO and forms part of the department’s file, the CIT(A) cannot ignore it.
- Failure to discuss such evidence renders the order legally unsustainable.
Procedural Compliance Is Non-Negotiable
- Appeals under Section 250 are not subject to withdrawal or abandonment by the assessee.
- The CIT(A) must independently apply its mind to every issue arising from the impugned order, even if not specifically raised in the grounds of appeal.
