Section 250(6) IT Act | Appellate Authority Must Pass Speaking Order on Merits, Not Dismiss Ex-Parte for Non-Compliance : ITAT Delhi

The Income Tax Appellate Tribunal, Delhi, has reaffirmed that appellate authorities under the Income Tax Act cannot dispose of appeals ex-parte merely due to non-compliance by the assessee without adjudicating the substantive issues. In a significant ruling, the Tribunal emphasized that the duty to deliver a reasoned, speaking order under Section 250(6) is non-negotiable, even when the assessee fails to respond to notices.

Background & Facts

The Dispute

The appellant, Dharmender Gotam, a non-filer for Assessment Year 2017-18, was subjected to a best judgment assessment under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961. The Assessing Officer (AO) relied on data from the Insight Portal, which flagged high-risk transactions including property purchases and sales, equity trading, and derivatives activity. Based on unverified third-party data, the AO attributed the entire transaction value to the appellant, despite evidence of shared ownership, and made additions of Rs. 33,48,17,352/- to his income.

Key Facts

• The appellant did not file a return of income for A.Y. 2017-18.
• The AO received data from the Insight Portal indicating:
  • Purchase of immovable property: Rs. 41,00,000
  • Sale of immovable property: Rs. 10,90,00,000
  • Purchase of equity shares: Rs. 2,65,93,257
  • Sale of equity shares: Rs. 2,64,21,388
  • Sale of futures: Rs. 13,52,99,229
  • Sale of options: Rs. 2,49,902
  • Sale of equity shares (non-delivery): Rs. 9,44,73,017
  • Interest income: Rs. 73,073
• The appellant claimed these transactions were not solely his; for instance:
  • The property purchase of Rs. 41,00,000 was shared equally with his brother, making his share Rs. 20,50,000
  • The property sale of Rs. 10,90,00,000 was incorrect; actual sale was Rs. 53,00,000, with his share being Rs. 13,25,000
  • Equity trading figures were inflated; verified broker statements showed net loss of Rs. 15,77,278.59
• The AO issued notices under Section 148A(b) on 24.02.2024, Section 148 on 15.03.2024, and multiple notices under Section 142(1) and Section 144 between February and December 2024. The appellant did not respond.
• The AO passed an ex-parte assessment order on 15.01.2025.

Procedural History

• 24.02.2024: Notice under Section 148A(b) issued
• 15.03.2024: Notice under Section 148 issued
• 24.02.2024 to 24.12.2024: Multiple notices under Sections 142(1) and 144 issued; no response from assessee
• 15.01.2025: Ex-parte assessment order passed under Section 147 read with Sections 144 and 144B
• 22.09.2025: First appeal filed before CIT(A); four notices issued on 28.07.2025, 14.08.2025, 28.08.2025, and 08.09.2025; no response
• 22.09.2025: CIT(A) dismissed appeal ex-parte without addressing merits, merely upholding AO’s order
• 28.04.2026: Appeal filed before ITAT Delhi; heard and pronounced on same day

The Parties' Positions

For the Appellant

• Argued that the AO’s assessment was based on unverified third-party data and ignored shared ownership structures
• Contended that broker statements from Fairwealth Securities and Angel One Ltd. proved the transaction figures were grossly inflated
• Asserted that notices were not properly served or received, and lack of legal knowledge prevented compliance
• Submitted that the CIT(A) failed to apply mind, did not examine evidence, and passed a non-speaking order
• Filed a paper book (pages 43-101) with supporting documents before ITAT

For the Department

• Maintained that the appellant was given multiple opportunities to file returns and respond to notices
• Stated that non-compliance justified ex-parte assessment and dismissal of appeal
• Relied on precedents including B.N. Bhattacharjee and Principal Commissioner of Income-tax v. NRA Iron & Steel
• Accepted the Tribunal’s suggestion to remand the matter for fresh adjudication

Relief Sought

The appellant sought:

• Setting aside of the CIT(A)’s ex-parte order dated 22.09.2025
• Remand of the case to CIT(A) for fresh adjudication
• Opportunity to submit verified documents and cross-examine evidence
• Reconsideration of additions based on actual ownership shares and broker-certified statements

The Legal Issue

The central question was whether the Commissioner of Income Tax (Appeals) can dismiss an appeal ex-parte under Section 250 without addressing the merits of the case, merely because the assessee failed to respond to notices, thereby violating the mandate of a speaking order under Section 250(6).

Arguments Presented

For the Appellant

The appellant’s counsel argued that Section 250(6) mandates that the CIT(A) must record the points for determination, his decision, and reasons therefor. Merely upholding the AO’s order without analyzing the disputed facts or evaluating the evidence constitutes a failure to perform a statutory duty. Reliance was placed on B.N. Bhattacharjee to clarify that while non-prosecution can lead to dismissal, it cannot substitute for adjudication on merits. The appellant emphasized that the documents now submitted - broker statements, property deeds, and ownership agreements - were not available during the CIT(A) proceedings due to lack of notice and legal awareness, and must be examined in a fair hearing.

For the Respondent

The Department contended that the appellant had been given ample opportunity to comply with notices at both AO and CIT(A) levels. The non-response demonstrated indifference to statutory obligations. The Department relied on Principal Commissioner of Income-tax v. NRA Iron & Steel to argue that appellate authorities are entitled to dismiss appeals for non-prosecution. However, the Department conceded that the CIT(A)’s order lacked reasoning and agreed that remand was appropriate to ensure procedural fairness.

The Court's Analysis

The Tribunal observed that while the appellant’s non-compliance with notices was undeniable, the CIT(A)’s failure to engage with the substantive grounds of appeal rendered the order legally unsustainable. The CIT(A) did not examine the disputed transaction values, did not call for the assessment record, did not make inquiries under Section 133(6), and did not consider the appellant’s claim of shared ownership or the broker-certified statements.

"The appellate order passed by ld. CIT(A) is a non-speaking cryptic order passed ex-parte in limine without deciding the issue arising in the appeal on merits."

The Tribunal emphasized that Section 250(6) is not a procedural formality but a substantive requirement. The CIT(A) is not a rubber stamp of the AO’s order; he is an independent adjudicator with powers co-terminus with the AO, including the power of enhancement. A non-speaking order deprives higher authorities of the ratio decidendi necessary for meaningful appellate review.

The Tribunal distinguished B.N. Bhattacharjee and other precedents cited by the Department, noting that those cases involved appellants who had actively participated in proceedings but later abandoned them. Here, the appellant had never been given a fair opportunity to present his case on merits. The Tribunal held that dismissal for non-compliance cannot override the statutory obligation to deliver a reasoned order.

The Tribunal further noted that the documents submitted before it - broker statements, property agreements, and bank records - were material and required verification. To deny the appellant a chance to substantiate his claims would violate the principles of natural justice and render the entire process arbitrary.

The Verdict

The appeal was allowed for statistical purposes. The Tribunal set aside the CIT(A)’s order dated 22.09.2025 and remanded the matter to the CIT(A) for fresh adjudication. The CIT(A) is directed to afford the appellant a full opportunity to present evidence, including the documents submitted before the Tribunal, and to verify them through inquiries under Section 133(6) if necessary. The CIT(A) must pass a speaking order under Section 250(6), addressing each ground of appeal with reasoning. If the appellant fails to comply with notices during the remand proceedings, the CIT(A) may proceed ex-parte, but only after complying with Section 250(6).

What This Means For Similar Cases

A Speaking Order Is Mandatory, Not Optional

• Practitioners must now argue that any CIT(A) order that merely upholds the AO’s order without analysis is void ab initio
• Non-compliance by the assessee does not absolve the appellate authority of its duty to reason
• Orders lacking reasons for decision are liable to be set aside even if the outcome appears correct

Evidence Submitted Late Can Be Considered on Remand

• Documents not filed before CIT(A) due to lack of awareness or service defects may be admitted on remand
• Tribunals will permit fresh evidence if it is material and was genuinely unavailable earlier
• The burden shifts to the department to verify or rebut such evidence during remand proceedings

Procedural Lapses Cannot Override Substantive Justice

• The doctrine of vigilantibus non dormientibus jurasubveniunt cannot be used to bypass statutory mandates
• Courts will prioritize fair hearing over technical dismissal, especially in complex tax matters
• Practitioners should routinely challenge non-speaking appellate orders as jurisdictionally defective