Subject: Relevant portion of the order of Ld. CIT(A) is reproduced as under
Referred Sections:
Section 144 of The Income Tax Act,
Sections 250 and 251 of I.T. Act
section 246A
section 245HA,
Section 251(1)(a) and (b) of I.T. Act
Referred Cases / Judgments
CIT vs. Kanpur Coal Syndicate 53 ITR 225 (SC)
CIT vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443
CIT vs. B.N. Bhattachargee 118 ITR 461 (SC)
CIT vs. Premkumar Arjundas Luthra (HUF) [2016] 240 taxman 133
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: `C': NEW DELHI)
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
&
SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
ITA No:- 1912/Del/2018
(Assessment Year: 2013-14)
HV Metal ARC Pvt. Ltd., ACIT,
New Delhi. Vs. Circle 11(1),
New Delhi.
PAN No: AABCH8468B
APPELLANT RESPONDENT
Assessee by : Sh. Rakesh Jain, Adv. &
Sh. Gurjeet Singh, Adv.
Revenue by : Sh. M.N. Kumar Sathe, Sr. DR
ORDER
PER: ANADEE NATH MISSHRA, AM
This appeal by the Assessee is filed against the order dated 29.12.2017 of Ld.
CIT(A)-22, New Delhi, for Assessment Year 2013-14. The grounds of appeal are as
under:
"i. Because the action is under challenge on facts & law since the findings
recorded qua appeal dismissal is in violation to the principles of natural &
substantial justice for a decision in accordance with law.
ITA No.-1912/Del/2018.
HV Metal ARC Pvt. Ltd.
ii. Because the action is being challenged on acts & law, for making the
addition amounting Rs. 75,80,669/- for disallowance to the extent of the 2%
of Total expenses amounting Rs. 37,90,33,493/-."
(2) An ex parte Assessment Order was passed on 17.03.2016 under Section 144 of
The Income Tax Act, 1961 ("The I.T. Act", for short) wherein adhoc disallowance of 2%
out of the total expenses of Rs. 37,90,33,493/-, amounting to Rs. 75,80,669/-, was
made.
(2.1) Aggrieved, the assessee filed an appeal before Ld. CIT(A), who, vide aforesaid
order dated 29.12.2017 dismissed the Assessee's appeal, on the ground that no
compliance was made to notices of hearings issued by the Ld. CIT(A). The Ld. CIT(A)
presumed that the Assessee did not wish to pursue the appeal, and passed an ex parte
order dismissing the appeal. Relevant portion of the order of Ld. CIT(A) is reproduced
as under:
" 4.1 From the perusal of the above, as there has been no compliance in respect
of above notices, therefore, it is presumed that the appellant does not wish to
pursue the appeal.
5. As a result, the appeal is dismissed."
(2.1.1) In effect, the Ld. CIT(A) dismissed the appeal of Assessee in limine for the
reason of non-prosecution of appeal by Assessee.
(2.2) Aggrieved again, the Assessee is now in appeal before Income Tax Appellate
Tribunal (ITAT). At the time of hearing before us, the Ld. Counsel for Assessee stated
that the assessee could not attend the hearings fixed by the Ld. CIT(A) because none
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of the hearing notices were served on the Assessee. He submitted that the assessee
wishes to prefer appeal against the Assessment Order in case the Assessment Order is
not set aside by ITAT. On the other hand, the Ld. Departmental Representatives (DR)
supported the order of the Ld. CIT(A) pointing out that despite four notices of hearing
issued by the Ld. CIT(A), the Assessee did not appear before him.
(3) We have heard both sides attentively and patiently. We have also carefully
perused the materials on the record. We find that the order of Ld. CIT(A) does make a
mention of the hearing notices issued by him, but the order does not contain any
reference of the actual service of these notices. The Ld. DR also failed to produce any
evidence that the notices of hearings issued by the Ld. CIT(A) were actually served on
the Assessee. We also find that the Ld. CIT(A) has not passed speaking order on
merits of the additions made by the AO, and the only basis for dismissing the
Assessee's appeal was non-prosecution of the appeal by the assessee in appellate
proceedings before Ld. CIT(A) which led the Ld. CIT(A) to the presumption that the
Assessee did not wish to pursue the appeal. As noted earlier in para (2.1.1), the Ld.
CIT(A) dismissed assessee's appeal in limine for non-prosecution of appeal by Assessee.
(3.1) On perusal of records before us, we find that the impugned appellate order of
Ld. CIT(A) was received by the assessee on 08/03/2018, and the assessee promptly
filed this appeal in ITAT on 19/03/2018. The assessee also filed a petition for Early
Hearing of this appeal, which was heard on 27/7/2018 by a Co-ordinate Bench of ITAT
and Early Hearing was granted, fixing the hearing on 10/10/2018. The appellant
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assessee attended the hearing on the first date of hearing itself i.e. on 10/10/2018 and
the appeal of the assessee was heard on that day. From these facts we conclude that
the assessee has not only filed this appeal promptly, but also has vigorously preferred
the appeal and has sincerely prosecuted its appeal in ITAT.
(4) The relevant provisions under I.T. Act regarding procedure in appeal, and
powers of the Commissioner [Appeals] are contained in Sections 250 and 251 of I.T.
Act, which are reproduced below for ready reference:
"250. (1) The Commissioner (Appeals) shall fix a day and place for the hearing of
the appeal, and shall give notice of the same to the appellant and to the Assessing
Officer against whose order the appeal is preferred.
(2) The following shall have the right to be heard at the hearing of the appeal--
(a) the appellant either in person or by an authorized representative;
(b) the Assessing Officer, either in person or by a representative.
(3) The Commissioner (Appeals) shall have the power to adjourn the hearing of
the appeal from time to time.
(4) The Commissioner (Appeals) may, before disposing of any appeal, make such
further inquiry as he thinks fit, or may direct the Assessing Officer to make further
inquiry and report the result of the same to the Commissioner (Appeals).
(5) The Commissioner (Appeals) may, at the hearing of an appeal, allow the
appellant to go into any ground of appeal not specified in the grounds of appeal, if
the Commissioner (Appeals) is satisfied that the omission of that ground from the
form of appeal was not wilful or unreasonable.
(6) The order of 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.
[(6A) In every appeal, the Commissioner (Appeals), where it is possible, may hear
and decide such appeal within a period of one year from the end of the financial
year in which such appeal is filed before him under sub-section (1) of section 246A
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(7) On the disposal of the appeal, the Commissioner (Appeals) shall communicate
the order passed by him to the assessee and to the Principal Chief Commissioner
or Chief Commissioner or Principal Commissioner or Commissioner.
251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the
following powers--
(a) In appeal against an order of assessment, may confirm, reduce, enhance or
annual the assessment
(aa) In appeal against the order of assessment in respect of which the proceeding
before the Settlement Commission abates under section 245HA, he may, after
taking into consideration all the material and other information produced by the
assessee before, or the results of the inquiry held or evidence recorded by, the
Settlement Commission, in the course of the proceeding before it and such other
material as may be brought on his record, confirm, reduce, enhance or annul the
assessment;
(b) In an appeal against an order imposing a penalty, he may confirm or cancel
such order or vary it so as either to enhance or to reduce the penalty;
(c) In any other case, he may pass such orders in the appeal as he thinks fit.
(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or
reduce the amount of refund unless the appellant has had a reasonable opportunity
of showing cause against such enhancement or reduction.
Explanation.--In disposing of an appeal, the Commissioner (Appeals) may
consider and decide any matter arising out of the proceedings in which the order
appealed against was passed, notwithstanding that such matter was not raised
before the Commissioner (Appeals) by the appellant." Se
More
(4.1) A perusal of the above provisions of law shows that U/s 250(6) of I.T. Act the Ld.
CIT(A) was obliged to dispose of the appeal in writing after stating the points for
determination and to then pass an order on each of the points which arose for
consideration; and the Ld. CIT(A) was further obliged to state the reasons for his
decision on each such points which arose for determination. Thus, the Ld. CIT(A) was
duty bound to dispose of the appeal on merits. Moreover, the perusal of Section
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251(1)(a) and (b) of I.T. Act and the further perusal of Explanation of Section 251(2) of
I.T. Act shows that the Ld. CIT(A) was required to apply his mind to all the issues which
arose from the impugned order before him, whether or not these issues had been
raised by the Assessee before him. Also, Section 251(1)(a) of I.T. Act provides that
while disposing of an appeal against Assessment Order, Commissioner (Appeals) shall
have the power to confirm, reduce, enhance or annul the assessment. Similarly, the
section 251(1) (b) provides that in disposing of an appeal against an order imposing a
penalty, Commissioner (Appeals) may confirm or cancel such orders or vary it so as to
either to enhance or to reduce the penalty. On cumulative consideration the provisions
U/s 250(6) read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation of
Section 251(2) of I.T. Act , we come to the conclusion that the Ld. CIT(A) is not
empowered to dismiss the appeal in limine for non-prosecution of appeal and
is obliged to dispose of the appeal on merits. Once the Assessee files an
appeal U/s 246A of I.T. Act, the Assessee sets in motion the machinery
designed for disposal of the appeal under Sections 250 and 251 of I.T. Act. If
the appeal filed by the assessee fulfils the requirements of maintainability
and admissibility prescribed under Sections 246, 246A, 248 and 249 of I.T.
Act; neither the Assessee can stop the further working of that machinery as a
matter of right by withdrawing the appeal, or by not pressing the appeal, or
by non-prosecution of the appeal; nor the first appellate authority, CIT(A) in
this case, can halt this machinery by ignoring either the procedure in appeal
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prescribed U/s 250 of I.T. Act or powers of Commissioner (Appeals)
prescribed U/s 251 of I.T Act. CIT(A), the first appellate authority, cannot
dismiss assessee's appeal in limine for non- prosecution without deciding the
appeal on merits through an order in writing, stating the points of
determination in the appeal, the decision thereon and the reason for the
decision. It is well-settled that powers of Ld. CIT(A) are co-terminus with powers of
the Assessing Officer. Useful reference may be made to order of Apex Court decision in
CIT vs. Kanpur Coal Syndicate 53 ITR 225 (SC) in which it was held that AAC has
plenary powers in disposing off an appeal; that the scope of his power is co-terminus
with that of the ITO, that he can do what the ITO can do and also direct him to do
what he failed to do. In this context, useful reference may also be made to Apex
Court's decisions in the cases of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria
66 ITR 443 and CIT vs. B.N. Bhattachargee 118 ITR 461 (SC) for the proposition
that an assessee having once filed an appeal, cannot withdraw it and even if the
assessee refuses to appear at the hearing, the first appellate authority can proceed with
the enquiry and if he finds that there has been an under-assessment, he can enhance
the assessment. Just as, once the assessment proceedings are set in motion, it
is not open to the Assessing Officer to not complete the Assessment
Proceedings by allowing the Assessee to withdraw Return of Income; it is
similarly, by analogy, not open for Ld. CIT(A) to not pass order on merits by
dismissing the appeal in limine whether on account of non-prosecution of
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appeal by the Assessee or if the Assessee seeks to withdraw the appeal or if
the assessee does not press the appeal. When the Commissioner (Appeals)
dismisses the appeal of assessee in limine for non-prosecution of appeal by the
assessee; in effect, indirectly it leads to same results as withdrawal of appeal by
assessee. When the assessee is not permitted to withdraw the appeal filed
before the first appellate authority, the first appellate authority is duty
bound to not allow a situation to arise, through dismissal of appeal in limine
for non-prosecution of appeal before the first appellate authority; in which,
in effect, indirectly the same results are obtained as arise from withdrawal
of appeal by the assessee. What cannot be permitted in law to be done
directly, cannot be permitted to be done indirectly either, as is well settled.
In view of the foregoing discussion; and on careful perusal of Section 250(6) r.w.s.
250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation to Section 251(2) of I.T. Act; it is
amply clear that Ld. CIT(A) has no power to dismiss appeal in limine for non-
prosecution of appeal by the assessee. We draw support from order of Hon'ble Bombay
High Court in the case of CIT vs. Premkumar Arjundas Luthra (HUF) [2016] 240
taxman 133 for the propositions that Ld. CIT(A) is required to apply his mind to all
issues which arise from impugned order before him whether or not same had been
raised by appellant before him; and that CIT(A) is obliged to dispose of the appeal on
merits. In this case, it was held as under:
"8...... it is very clear once an appeal is preferred before the CIT(A), then in disposing of
the appeal, he is obliged to make such further inquiry that he thinks fit or direct the
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Assessing Officer to make further inquiry and report the result of the same to him as
found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A)
to dispose of an appeal in writing after stating the points for determination and then
render a decision on each of the points which arise for consideration with reasons in
support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the
CIT(A) would have the power to confirm, reduce, enhance or annul an assessment
and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also
makes it clear that while considering the appeal, the CIT(A) would be entitled to
consider and decide any issue arising in the proceedings before him in appeal filed for
its consideration, even if the issue is not raised by the appellant in its appeal before the
CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not
open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged
to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of
the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing
Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that
the powers of the CIT(A) is co-terminus with that of the Assessing Officer i.e. he can do
all that Assessing Officer could do. Therefore just as it is not open to the Assessing
Officer to not complete the assessment by allowing the assessee to withdraw its return
of income, it is not open to the assessee in appeal to withdraw and/or 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. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for
non-prosecution as is evident from the provisions of the Act."
(4.1.1.) We have already noted in foregoing paragraph (3.1) of this order, that the
assessee has not only filed the appeal promptly, but also has vigorously preferred the
appeal and has sincerely prosecuted its appeal in ITAT. At the time of hearing before
us, the Assessee's Counsel has expressed the wish to pursue appeal against the
Assessment Order, if the Assessment Order is not set aside. Thus, there is nothing in
the subsequent conduct of the assessee, after the assessee received the impugned
order dated 29.12.2017 of Ld. CIT(A), to validate the presumption of Ld. CIT(A) that
the assessee did not wish to pursue the appeal. Further, we have also noted the facts,
that the order of Ld. CIT(A) does not make any mention of actual service of notices of
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hearing on the assessee; and that the Ld. DR failed to bring any evidence for our
consideration to prove actual service of notices of hearing on the assessee. In the
absence of proof of service of notice of hearing on the assessee, requirements U/s
250(1) and (2) in procedure in appeal prescribed U/s 250 of I.T. Act cannot be said to
have been fulfilled. Unless the hearing notice is served on the assessee, the
assessee's right to be heard at the hearing cannot be exercised by the
Assessee. Commissioner (Appeals) is duty bound to provide reasonable
opportunity of being heard to the assessee. Valid service of notice of hearing
is part of that duty. On cumulative consideration of these facts and circumstances,
and the legal position, the presumption of Ld. CIT(A), that the assessee did not wish to
pursue the appeal, stands demolished and the impugned order of Ld. CIT(A) based on
this presumption has no legs to stand. In any case, when the requirement U/s
250(1) and (2) of I.T. Act are not complied with at the end of Ld. CIT(A), the
appellate order passed U/s 250(6) of I.T. Act by Ld. CIT(A) suffers from
infirmity and cannot be upheld. For the removal of this infirmity, the order
passed by Ld. CIT(A) needs to be set aside for fresh order at his end.
(4.2) In view of the foregoing paragraphs (3.1), (4), (4.1) and (4.1.1) of this order, we
hold that the Ld. CIT(A) erred in dismissing the appeal of the Assessee in limine for
non-prosecution of appeal by assessee. We set aside the impugned order of the Ld.
CIT(A) and we direct the Ld. CIT(A) to pass denovo order as per law, in accordance
with Sections 250 and 251 of I.T. Act; for fresh disposal of appeal filed by the assessee
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HV Metal ARC Pvt. Ltd.
before Ld. CIT(A) against the aforesaid Assessment Order dated 17.03.2016. In the
result, Appeal of the Assessee is treated as partly allowed for statistical purposes.
Order pronounced in the open court on 16/10/2018
Sd/- Sd/-
(H.S. SIDHU) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 16.10.2018
Pooja/-
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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Date of dictation
10/10/2018
Date on which the typed draft is placed before the
12/10/2018
dictating Member
Date on which the typed draft is placed before the
Other Member
Date on which the approved draft comes to the Sr. 12 /10/2018
PS/PS
Date on which the fair order is placed before the 12 /10/2018
Dictating Member for pronouncement
Date on which the fair order comes back to the Sr. 16/12/2018
PS/PS
Date on which the final order is uploaded on the 16/10/18
website of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order
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