ITAT Remands Case: CIT(A) Cannot Dismiss Appeal for Non-Prosecution Without Adjudicating on Merits

By | January 12, 2026
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ITAT Remands Case: CIT(A) Cannot Dismiss Appeal for Non-Prosecution Without Adjudicating on Merits

 

Issue

  1. Procedural Validity: Can the Commissioner of Income Tax (Appeals) [CIT(A)] dismiss an appeal in limine (at the threshold) solely for non-prosecution (non-appearance of the assessee) without deciding the specific issues on their merits?

  2. Underlying Merits (To be decided):

    • Whether land sold by the assessee, situated 8 kms from municipal limits, qualifies as a “Capital Asset” under Section 2(14).

    • Whether cash deposits of Rs. 13 Lakhs (Rs. 10L from agriculture + Rs. 3L from dairy) are exempt under Section 10(1) or taxable as business income.

Facts

  • Assessee: An individual.

  • Assessment Year: 2021-22.

  • The Dispute:

    • Land Sale: The assessee sold rural agricultural land. The AO treated the gain as Short-Term Capital Gain (STCG). The assessee argues the land is outside the definition of a “Capital Asset” as it is 8km away from municipal limits.

    • Cash Deposits: The AO treated cash deposits in the bank as unexplained income. The assessee claims Rs. 10 Lakhs is agricultural income (exempt) and Rs. 3 Lakhs is from dairy farming (business income), arguing that tax should apply only on the profit margin (presumptive 8%), not the gross deposit.

  • Procedural History: The original assessment was completed ex-parte under Section 144. The assessee appealed to the CIT(A), but failed to respond to notices.

  • CIT(A)’s Action: The CIT(A) dismissed the appeal for non-prosecution without discussing the merits or the grounds raised.

Decision

1. Duty of CIT(A) under Section 250(6):

  • The Tribunal held that the CIT(A) has no power to dismiss an appeal for non-prosecution.

  • Section 250(6) of the Income Tax Act mandates that the order of the CIT(A) must be in writing and shall state:

    • The points for determination.

    • The decision thereon.

    • The reasons for the decision.

  • Even if the assessee is absent, the CIT(A) is duty-bound to examine the grounds raised (regarding Section 2(14) and agricultural income) and decide them on merits based on the material on record.

2. Verdict:

  • The CIT(A)’s order was set aside as it was contrary to the principles of natural justice and statutory requirements.

  • Remand: The matter was restored to the file of the CIT(A) with a direction to adjudicate the appeal afresh on merits after providing a reasonable opportunity to the assessee. [Matter Remanded]

Key Takeaways

  • Speaking Order Mandatory: An Appellate Authority cannot simply close a file because the appellant didn’t show up. They must pass a “speaking order” addressing the legal and factual arguments raised in the appeal memo.

  • Rural Land Defense: Land situated beyond specific distances (2km/6km/8km) from municipal limits (based on population) is not a Capital Asset. Any gain from its sale is not subject to Capital Gains Tax.

  • Cash Deposit Strategy: When explaining cash deposits from a business (like dairy farming) where no books are maintained, arguing for a Net Profit rate (e.g., 8% u/s 44AD) is a better defense than allowing the AO to tax the entire gross deposit.

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH
Swaran Kaur
Manakpur Kallar, Manauli,
vs
The AO Ropar
ITA No. 779/Chd/ 2025
Date of Pronouncement : 08/01/2026

Source :- Judgement