Mandatory Adjudication on Merits: ITAT Delhi Quashes Summary Dismissal of Appeal for Non-Prosecution

In the realm of appellate tax jurisprudence, the statutory obligation of appellate authorities to deliver reasoned judgments stands as a fundamental pillar of justice. The Income Tax Appellate Tribunal (ITAT), Delhi Bench, recently reinforced this critical legal principle in the case of Jusbinder Kour Vs ITO. The Tribunal unequivocally ruled that the Commissioner of Income Tax (Appeals) [CIT(A)] lacks the jurisdiction to summarily dismiss an appeal solely on the grounds of non-compliance or non-prosecution by the assessee.

Even in scenarios where the assessee fails to participate in the proceedings, the appellate authority is legally bound to examine the available records, evaluate the grounds of appeal, and pass a speaking order on the merits of the case. This ruling underscores the mandatory nature of Section 250(6) of the Income Tax Act 1961, ensuring that the right to a fair appellate review is not extinguished merely due to procedural defaults.

The Factual Matrix of the Dispute

The controversy originated from the income tax return filed by the assessee, an individual, for the Assessment Year 2020-21.

Initial Declarations and Departmental Inquiries

On 04.01.2021, the assessee submitted her return of income, declaring a total income of Rs. 10,41,800, which primarily consisted of salary earnings. Subsequently, the tax department's intelligence systems flagged specific high-value transactions associated with the assessee. The Assessing Officer (AO) received concrete information indicating that the assessee had made cash deposits amounting to Rs. 21,90,000 and had executed the purchase of an immovable property valued at Rs. 74,00,000.

The Revenue department formed the view that the quantum of these financial transactions was grossly disproportionate to the income of Rs. 10,41,800 disclosed in the tax return. Consequently, the AO initiated inquiries, requesting the assessee to provide a satisfactory explanation regarding the source of funds for these transactions. The assessee, however, did not furnish any response to these initial inquiries.

Reassessment Proceedings and Statutory Additions

Due to the lack of cooperation, the AO invoked the provisions of Section 147 of the Income Tax Act 1961 to initiate reassessment proceedings. Throughout this phase, multiple statutory notices were issued, including those under Section 148, Section 142(1), and Section 144, alongside formal Show Cause Notices (SCN). Despite these repeated opportunities, the assessee remained non-compliant.

To ascertain the factual position, the AO exercised powers under Section 133(6) of the Income Tax Act 1961 to independently requisition bank statements directly from the assessee's bankers, namely Punjab and Sind Bank and Union Bank of India. The scrutiny of these bank records revealed total cash deposits and other inward credits aggregating to Rs. 80,94,750. It is pertinent to note that the AO fairly excluded a sum of Rs. 34,00,000, which was identified as a legitimate loan receipt, from this calculation.