Section 250(6) Income Tax Act | Ex-Parte Orders Must Decide Appeals On Merit : ITAT Pune

The Income Tax Appellate Tribunal, Pune Bench has delivered a crucial ruling on the procedural requirements for ex-parte appellate orders under Section 250(6) of the Income Tax Act, 1961. The judgment clarifies that appellate authorities cannot merely dismiss appeals for non-prosecution without addressing the substantive issues on merits, reinforcing principles of natural justice in tax adjudication.

Background & Facts

The Dispute

The appellant, Devtech M2M Limited, a company engaged in manufacturing electrical machinery, faced additions totaling ₹4.88 crore in its assessment for AY 2020-21. The additions included:

• ₹4.86 crore under Section 68 for unexplained unsecured loans from an individual
• ₹1.43 lakh disallowance of scientific research expenditure

The case was selected for limited scrutiny to verify high creditors and donation claims.

Procedural History

The dispute progressed through multiple stages:

• 22.09.2022: Assessing Officer passed order u/s 143(3) r.w.s. 144B making additions
• 19.03.2025: CIT(A)/NFAC dismissed the appeal ex-parte for non-prosecution
• 04.02.2026: ITAT restored the matter to CIT(A) with directions

The Assessee's Position

The appellant attributed non-compliance to an employee's oversight in communicating notices from CIT(A)/NFAC. It argued that the appellate authority failed to decide the appeal on merits as required by Section 250(6), which mandates written orders stating points for determination, decisions, and reasons.

The Legal Issue

The central question before the Tribunal was whether an appellate authority can dismiss an appeal ex-parte without deciding the substantive issues on merits, merely citing non-prosecution, when Section 250(6) explicitly requires reasoned orders.

Arguments Presented

For the Appellant

• Contended that Section 250(6) mandates reasoned orders on merits
• Argued that ex-parte dismissal without substantive consideration violates principles of natural justice
• Cited employee oversight as a bona fide reason for non-compliance
• Requested restoration with an opportunity to present evidence

For the Revenue

• Highlighted that the assessee sought adjournment once and failed to comply with three notices
• Argued that persistent non-compliance justified ex-parte dismissal
• Suggested levying costs for the assessee's conduct

The Court's Analysis

The Tribunal examined the statutory framework governing appellate proceedings, focusing on Section 250(6). The provision requires that appellate orders:

1. Be in writing
2. State points for determination
3. Record decisions on those points
4. Provide reasons for the decisions

"Since the Ld. CIT(A) / NFAC in the instant case has dismissed the appeal for non-prosecution and has not decided the appeal on merit, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of Ld. CIT(A) / NFAC."

The Tribunal distinguished between procedural non-compliance and substantive adjudication. While acknowledging the assessee's persistent non-compliance, it held that Section 250(6) imposes a mandatory obligation on appellate authorities to decide appeals on merits, regardless of the assessee's conduct. The judgment emphasized that ex-parte orders must still comply with statutory requirements, stating:

"The Ld. CIT(A) / NFAC has not decided the appeal on merit as per provisions of section 250(6) of the Act which reads as under: (6) The order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision."

The Tribunal balanced procedural fairness with the assessee's conduct by:

1. Restoring the matter to CIT(A) for fresh consideration
2. Directing the assessee to submit evidence without seeking adjournments
3. Levying a cost of ₹2,000 for non-compliance

The Verdict

The Tribunal allowed the appeal for statistical purposes and restored the matter to the CIT(A)/NFAC with directions to:

1. Decide the appeal on merits after considering the assessee's evidence
2. Ensure compliance with Section 250(6) requirements
3. Pass a reasoned order stating points of determination and decisions The assessee was directed to pay ₹2,000 as costs within one month.

What This Means For Similar Cases

Ex-Parte Orders Must Comply With Section 250(6)

The judgment establishes that appellate authorities cannot bypass the mandatory requirements of Section 250(6) even in ex-parte proceedings. Practitioners should:

• Challenge ex-parte orders that fail to state points of determination or reasons
• Argue that Section 250(6) creates a substantive right to reasoned decisions
• Cite this judgment to seek restoration of appeals dismissed without merit consideration

Costs As A Deterrent, Not A Substitute For Adjudication

While the Tribunal levied costs for non-compliance, it clarified that:

• Costs cannot replace substantive adjudication
• Appellate authorities must still decide appeals on merits
• Practitioners can use this precedent to argue against punitive dismissals without reasoned orders

Strategic Considerations For Non-Compliant Assessees

For assessees facing ex-parte dismissals:

• Immediate Action: File restoration applications citing this judgment
• Documentation: Maintain records of attempts to comply with notices
• Costs: Be prepared to pay nominal costs as a condition for restoration
• Evidence: Prepare to submit all requisite details at the first opportunity