The Income Tax Appellate Tribunal (ITAT), Delhi, has underscored the mandatory requirement under Section 250(6) of the Income Tax Act, 1961 for the Commissioner of Income Tax (Appeals) [CIT(A)] to pass a reasoned and speaking order on merits, even in cases of assessee non-compliance. In a significant ruling, the Tribunal set aside an ex-parte appellate order that merely upheld the assessment order without independent application of mind, remanding the matter for fresh adjudication with directions to comply with statutory obligations.
Background & Facts
The Dispute
The appellant, Amerex Private Limited, filed its return of income for Assessment Year (AY) 2022-23 on 02.11.2022, declaring an income of Rs. 34,48,566. The case was selected for scrutiny assessment under the Computer Assisted Scrutiny Selection (CASS) mechanism. The Revenue alleged that the assessee had made substantial purchases from non-filing suppliers, raising suspicions of bogus expenses to reduce taxable income. The genuineness of these expenses was thus required to be verified.
Key Facts
Return Filing: The assessee filed its return on 02.11.2022 for AY 2022-23.
Scrutiny Selection: The case was selected under CASS due to discrepancies between purchases and turnover reported in GSTR-1 returns.
Assessment Proceedings: The Assessing Officer (AO) issued statutory notices under Sections 143(2) and 142(1) of the Act, along with show-cause notices (SCNs). The assessee failed to fully comply with these notices.
Notices to Suppliers: The AO issued notices under Section 133(6) to the suppliers from whom the assessee claimed purchases. None of the suppliers responded.
Ex-Parte Assessment: Due to the assessee's non-cooperation, the AO passed an ex-parte assessment order on 17.03.2024, making additions of Rs. 3,89,40,234 to the assessee's income.
Procedural History
17.03.2024: AO passed ex-parte assessment order under Section 144 r.w.s 144B of the Act.
First Appeal: The assessee filed an appeal before the CIT(A). The CIT(A) claimed to have issued multiple notices on 18.07.2024, 27.10.2025, 21.11.2025, and 01.12.2025, but the assessee responded only to the first two, seeking adjournments. The assessee attributed its non-compliance to the inadvertence of its accountant.
09.12.2025: The CIT(A) dismissed the appeal ex-parte, upholding the AO's additions without independent verification or reasoned order.
22.06.2026: The assessee filed the present appeal before the ITAT, accompanied by an affidavit undertaking to comply with all requisite details if granted another opportunity.
Relief Sought
The assessee sought the setting aside of the CIT(A)'s order dated 09.12.2025 and remand of the matter for fresh adjudication on merits, with an opportunity to present all relevant details and documents.
The Legal Issue
The central question before the ITAT was whether the CIT(A) is obligated under Section 250(6) of the Income Tax Act, 1961 to pass a reasoned and speaking order on merits, even in cases where the assessee fails to comply with notices, or whether the CIT(A) can dismiss the appeal ex-parte merely by upholding the AO's order.
Arguments Presented
For the Appellant
The CIT(A) failed to comply with Section 250(6), which mandates a reasoned order stating the points for determination, the decision thereon, and the reasons for such decision.
The appellate order was cryptic and non-speaking, merely upholding the AO's order without independent application of mind or verification of facts.
The assessee's non-compliance was due to inadvertence of its accountant, and the assessee was willing to cooperate if granted another opportunity.
The principles of natural justice were breached as the CIT(A) did not conduct any independent inquiry, such as issuing notices under Section 133(6) to suppliers or summons under Section 131 to the assessee's directors.
For the Respondent
The assessee was non-cooperative during both assessment and appellate proceedings, failing to respond to multiple notices issued by the AO and CIT(A).
The suppliers from whom the assessee claimed purchases also did not comply with notices under Section 133(6), raising suspicions of bogus expenses.
The CIT(A) was justified in dismissing the appeal ex-parte due to the assessee's persistent non-compliance.
The Court's Analysis
The ITAT meticulously examined the statutory obligations of the CIT(A) under Section 250(6) of the Act, which requires the appellate authority to pass a reasoned and speaking order on merits. The Tribunal observed:
"The ld. CIT(A) is required and obligated to pass appellate order in compliance with the provisions of section 250(6), as ld. CIT(A) is required to pass reasoned and speaking order on merits in accordance with law. Reference is drawn to provisions of Section 250(6), wherein ld. CIT(A) has to state point for determination, his decision and reasons thereof."
The Tribunal held that the CIT(A)'s order was cryptic and non-speaking, merely upholding the AO's order without independent verification or application of mind. The CIT(A) did not conduct any independent inquiry, such as issuing notices to suppliers or summoning the assessee's directors, to verify the genuineness of the expenses. The Tribunal emphasized that the appellate order is not an ultimate final order, as it is subject to further appeal before the ITAT and higher courts. Thus, the reasoning and decision of the CIT(A) are crucial for higher appellate authorities to adjudicate the matter effectively.
The ITAT further noted:
"If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not comply with the notices issued by ld. CIT(A) ex-parte without adjudicating issues arising in the appeal on merits, such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6), and also higher appellate authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits."
While acknowledging the assessee's non-compliance with notices issued by both the AO and CIT(A), the Tribunal held that the CIT(A) cannot abdicate its statutory duty to pass a reasoned order. The Tribunal clarified that the CIT(A)'s powers are co-terminus with those of the AO, including the power of enhancement, and thus, the CIT(A) must exercise these powers judiciously.
The Verdict
The ITAT set aside the appellate order dated 09.12.2025 passed by the CIT(A) and remanded the matter to the file of the CIT(A) for fresh adjudication. The Tribunal directed the assessee to comply with all notices issued by the CIT(A) during the remand proceedings, failing which the CIT(A) would be free to decide the appeal ex-parte on merits, in accordance with Section 250(6). The Tribunal clarified that it had not commented on the merits of the issues and allowed the appeal for statistical purposes.
What This Means For Similar Cases
Mandatory Compliance with Section 250(6): A Non-Negotiable Obligation
Reasoned Order on Merits: The CIT(A) must pass a reasoned and speaking order under Section 250(6), stating the points for determination, the decision thereon, and the reasons for such decision, irrespective of the assessee's compliance or non-compliance.
Independent Verification: The CIT(A) cannot merely uphold the AO's order without conducting an independent inquiry. This includes issuing notices under Section 133(6) to suppliers or summons under Section 131 to relevant parties to verify the genuineness of claims.
Natural Justice: The principles of natural justice mandate that the assessee be given a fair opportunity to present its case, and the appellate authority must apply its mind independently to the facts and law.
Consequences of Non-Compliance by Assessee
While the assessee's non-compliance with notices can lead to adverse inferences, it does not absolve the CIT(A) of its statutory duty to pass a reasoned order.
The Tribunal's decision underscores that the assessee's non-cooperation does not justify a cryptic or non-speaking order. However, persistent non-compliance may result in ex-parte orders after due process.
Precedential Value for Higher Appellate Authorities
Judicial Hierarchy: The ITAT's ruling reinforces that appellate orders are subject to further appeal, and thus, must contain reasoned decisions to enable higher authorities to adjudicate effectively.
Remand Directions: In cases where the CIT(A) fails to comply with Section 250(6), the ITAT is likely to set aside the order and remand the matter for fresh adjudication, as seen in this case.
Practitioners should ensure that appeals before the CIT(A) are accompanied by comprehensive submissions and compliance with notices to avoid adverse orders. However, even in cases of non-compliance, the CIT(A) must adhere to statutory obligations to pass a reasoned order.
