The Income Tax Appellate Tribunal, Mumbai, has reaffirmed that procedural irregularities cannot override substantive justice when an assessee acts in good faith and is denied a fair opportunity to cure technical defects. This ruling reinforces the principle that appellate forums must prioritize adjudication on merits over technical dismissals.
Background & Facts
The Dispute
The assessee, Vicky Agro Food Products & Suppliers Pvt. Ltd., filed its income tax return for Assessment Year 2012-13 declaring nil income on 29.09.2012. The return was processed under section 143(1). Subsequently, the case was selected for scrutiny, and notices under section 143(2) and section 142(1) were issued from August 2013 onwards. The Assessing Officer passed an order under section 143(3) dated 20.03.2015, making three major additions totaling Rs. 1,70,14,650: (i) Rs. 15,14,650 as unexplained share capital and premium under section 68; (ii) Rs. 25,00,000 as unexplained cash credit in bank account under section 68; and (iii) Rs. 1,30,00,000 as unexplained investment in property under section 69.
Key Facts
- The assessee filed its return on 29.09.2012
- Scrutiny notice issued on 06.08.2013
- Notices under section 142(1) issued intermittently between 2013 and 2015
- Assessment order passed on 20.03.2015
- Appeal filed before CIT(A)-14, Mumbai on 08.04.2015
- Letter dated 02.04.2015 from Chartered Accountant confirmed filing of Form 35 with grounds of appeal and statement of facts
- Appellate proceedings migrated to National Faceless Appeal Centre (NFAC) under CBDT’s faceless appeal scheme
- No record of Form 35, grounds of appeal, or statement of facts found on NFAC portal
- Notices issued by CIT(A) on 09.09.2024 and 23.12.2024 sought submissions but did not mention missing documents
- Final notice dated 29.07.2025 directed upload of Form 35, grounds, and statement of facts
- Impugned order dated 16.09.2025 dismissed appeal as infructuous due to incomplete documents
Procedural History
- 29.09.2012: Return filed declaring nil income
- 06.08.2013: Notice under section 143(2) issued
- 20.03.2015: Assessment order passed under section 143(3)
- 08.04.2015: Appeal filed before CIT(A)-14, Mumbai
- 02.04.2015: Letter from Chartered Accountant confirming filing of Form 35 with enclosures
- 2021: Company ceased operations; accounting staff departed
- 2024: Case migrated to National Faceless Appeal Centre
- 09.09.2024: CIT(A) notice requesting ground-wise submissions
- 23.12.2024: Second notice issued without mentioning document deficiency
- 29.07.2025: Third notice directing upload of Form 35, grounds, and statement of facts
- 16.09.2025: CIT(A) dismissed appeal as infructuous
- 16.03.2026: ITAT Mumbai pronounces order
The Parties' Positions
For the Appellant
The assessee contended that it had filed the appeal with all required documents on 08.04.2015, as evidenced by the letter dated 02.04.2015. It argued that the migration of the case to the faceless platform did not absolve the appellate authority of its duty to ensure transfer of the complete record. The assessee further submitted that the notices issued by CIT(A) never indicated a deficiency in the appeal papers, leading to a bona fide belief that the appeal was being processed. Dismissal without opportunity to cure violated principles of natural justice.
For the Respondent
The Departmental Representative relied on the CIT(A)’s finding that Form 35 and supporting documents were not available on the electronic system. It argued that the appellate authority was bound by the records available on the faceless portal and could not proceed without them. The Department did not dispute the assessee’s claim of good faith but maintained that procedural compliance under the faceless scheme was mandatory.
Relief Sought
The assessee sought setting aside of the CIT(A)’s order dated 16.09.2025 and restoration of the appeal for adjudication on merits. It also requested an opportunity to submit the missing documents, including Form 35, grounds of appeal, and statement of facts.
The Legal Issue
The central question was whether an appellate authority under Section 250 of the Income Tax Act, 1961 may dismiss an appeal as infructuous solely on the ground of missing documents, without first providing the assessee a clear opportunity to cure the defect, particularly when the assessee acted in good faith and the documents were allegedly filed prior to migration to the faceless system.
Arguments Presented
For the Appellant
The learned Authorised Representative relied on the letter dated 02.04.2015, which explicitly stated that Form 35, grounds of appeal, and statement of facts were enclosed. It was submitted that the notices issued by CIT(A) on 09.09.2024 and 23.12.2024 did not indicate any deficiency, thereby creating a legitimate expectation that the appeal was in order. The assessee argued that the faceless appeal scheme does not override the statutory obligation under Section 250(6) to pass a reasoned order. The dismissal without opportunity to rectify violated the principles of natural justice as upheld in State of U.P. v. Krishna Mishra and K. S. Puttaswamy v. Union of India. The assessee expressed willingness to submit all documents immediately.
For the Respondent
The Departmental Representative contended that under the faceless appeal scheme, the appellate authority is bound by the digital record. Since Form 35 and supporting documents were not available on the portal, the appeal could not be adjudicated. The Department argued that the burden of ensuring digital compliance rests with the assessee and that the CIT(A) acted within its procedural mandate.
The Court's Analysis
The Tribunal emphasized that Section 250(6) mandates the appellate authority to dispose of the appeal by passing a reasoned order stating the points for determination and the decision thereon. The dismissal of an appeal without adjudicating the merits is contrary to this statutory mandate unless the defect is incurable or the assessee has acted in bad faith.
"The dismissal of the appeal by the learned CIT(A) merely on the ground that the grounds of appeal and statement of facts were not available on record, without examining the earlier correspondence and without providing adequate opportunity to cure the alleged defect, is not in consonance with the mandate of section 250(6) of the Act."
The Tribunal noted that the appeal was originally filed before the jurisdictional CIT(A)-14, Mumbai, and the records were subsequently migrated to the NFAC. The absence of documents on the electronic portal cannot be attributed to the assessee if the transfer process was incomplete. The Tribunal held that the notices issued prior to dismissal failed to specify the deficiency, depriving the assessee of a meaningful opportunity to respond.
The Tribunal further observed that procedural compliance must not override substantive justice, particularly when the delay in filing the appeal before this Tribunal was condoned due to genuine circumstances arising from cessation of business and loss of accounting staff. The assessee’s conduct was found to be bona fide, and the failure to upload documents was not due to negligence or mala fide intent.
The Tribunal distinguished this case from those where the assessee deliberately withholds documents or ignores repeated notices. Here, the assessee had acted promptly upon discovering the dismissal and had previously submitted all documents in physical form.
The Verdict
The appeal is allowed for statistical purposes. The order of the learned CIT(A) dated 16.09.2025 is set aside. The matter is restored to the file of the learned CIT(A) for adjudication on merits. The assessee is directed to furnish Form No. 35, statement of facts, and grounds of appeal before the CIT(A) within 30 days of receipt of this order. The CIT(A) shall afford the assessee a reasonable opportunity of being heard and pass a reasoned order on the merits of the appeal.
What This Means For Similar Cases
Procedural Defects Must Be Cured, Not Penalized
- Practitioners must now argue that dismissal under Section 250 for missing documents is invalid if the appellate authority fails to issue a specific notice identifying the deficiency
- A general request for "submissions" does not constitute adequate notice under natural justice
- The burden shifts to the appellate authority to prove that documents were never received, not to the assessee to prove they were sent
Faceless Appeals Do Not Override Statutory Fairness
- Migration to the faceless platform does not absolve the authority of its duty to ensure complete transfer of records from jurisdictional offices
- If documents were filed physically before migration, the authority must verify their existence in the physical archive before declaring the appeal incomplete
- Assessees can rely on contemporaneous correspondence (e.g., letters from CAs) as evidence of prior filing
Good Faith and Business Cessation Are Legally Recognized
- Cessation of business, loss of staff, and non-monitoring of portals due to operational shutdown constitute sufficient cause for delay
- Courts and tribunals will now consider the practical realities faced by defunct or dormant companies
- Applications for condonation of delay in appeals must be supported by documentary evidence of operational cessation and loss of personnel
