ITAT Mumbai Restores Appeal Dismissed Ex Parte: Merits Adjudication Cannot Be Bypassed Despite Repeated Non-Compliance
Case Overview
Case Name: Mukesh Mishra Vs ACIT (ITAT Mumbai)
Appeal Number: ITA No. 5853/MUM/2026
Date of Order: 08/10/2026
Assessment Year: 2020-2021
Forum: Income Tax Appellate Tribunal, Mumbai
Background and Context
The Mumbai Bench of the Income Tax Appellate Tribunal recently addressed a situation where the first appellate authority — the National Faceless Appeal Centre (NFAC), Delhi — had disposed of an appeal without examining any of the contested grounds on their merits. Despite acknowledging a persistent pattern of non-participation by the assessee throughout the proceedings, the Tribunal concluded that denying a substantive adjudication was not a permissible outcome under the statutory framework. Accordingly, the matter was sent back to the Commissioner of Income Tax (Appeals) for a fresh hearing.
It is critical to note what this order does not accomplish. The Tribunal's restoration order neither deletes any addition, nor validates any deduction claimed by the assessee, nor endorses his explanations regarding investment sources. The only outcome is that the assessee receives one more opportunity to place his case before the first appellate authority — an opportunity he must use meaningfully.
The Assessee's Background and Non-Compliance During Reassessment
The assessee is an individual whose income comprised salary and capital gains. Notably, he had not filed his return of income under Section 139 of the Income Tax Act, 1961 for Assessment Year 2020-2021.
Acting on information sourced through the Department's Risk Management System (RMS) portal, the Assessing Officer issued a notice under Section 148. In response, the assessee filed a return on 12 July 2024, declaring a total income of ₹23,38,410.
However, the cooperation largely ended there. A series of notices issued under Section 142(1) by the Assessing Officer went substantially unanswered. The sole meaningful response — dated 7 January 2025 — did little more than reproduce the statement of total income and the basic particulars already declared in the return filed under Section 148. The assessee additionally failed to respond to the show-cause notice issued during the assessment proceedings.
Given this absence of substantive participation, the Assessing Officer proceeded to frame the assessment under Section 143(3) read with Section 147, relying entirely on the information available on record. Several additions and disallowances followed.
Additions and Disallowances Challenged Before the Appellate Authorities
The assessee's appeal raised multiple disputes, which are summarised below. These represent the assessee's contentions only — the Tribunal has not adjudicated their factual or legal correctness.
Short-Term Capital Gains Addition
An addition of ₹11,71,078 was made on account of short-term capital gains arising from the sale of securities. The Assessing Officer computed this by deducting the current-year securities purchase value of ₹3,67,369 from the sale consideration of ₹15,38,447. The assessee's position is that the actual cost of acquisition and the period of holding must be examined in accordance with Section 45 to Section 48 of the Income Tax Act, 1961, rather than the mechanical method adopted.
Unexplained Investment — Securities Settled Without Delivery
An addition of ₹63,40,996 was made under Section 69 as unexplained investment, relating to purchases of securities settled otherwise than through actual delivery. The assessee argued that the nature and source of these transactions require proper examination, and that any profit or loss arising therefrom should be assessed to tax appropriately rather than being treated as unexplained investment in its entirety.
Unexplained Investment — Securities Purchases
A further addition of ₹3,67,369 was made under Section 69 on account of securities purchases, on the ground that no supporting documentary evidence was available. The assessee contended that these purchases were made from a regular bank account maintained by him, and that the source of funds is fully explainable from disclosed income.