Commissioner (Appeals) Must Conduct Inquiry and Formulate Points for Determination Even if Assessee Fails to Appear

By | May 20, 2025
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Commissioner (Appeals) Must Conduct Inquiry and Formulate Points for Determination Even if Assessee Fails to Appear

Issue:

Whether the Commissioner (Appeals) can dismiss an appeal and uphold an addition under Section 69A (unexplained money) simply because the assessee failed to respond to notices and appear, without conducting the necessary inquiry and formulating points for determination as mandated by Section 250(4) and 250(6) of the Income-tax Act, 1961.

Facts:

The assessee filed an appeal before the Commissioner (Appeals) challenging an addition made by the Assessing Officer under Section 69A for unexplained money in a bank account. However, the assessee admittedly did not respond to several notices issued by the Commissioner (Appeals) for appearance. Consequently, the Commissioner (Appeals) upheld the Assessing Officer’s order, observing that the assessee had not pursued the appeal and failed to substantiate the source of the credit. This order was subsequently affirmed by the Tribunal.

Decision:

The High Court held that both the order passed by the Commissioner (Appeals) and the affirming order by the Tribunal were to be set aside. The matter was restored to the file of the Commissioner (Appeals) for a fresh hearing and disposal in accordance with the law. The court emphasized that even if the assessee fails to appear, the Commissioner (Appeals) is still obligated to make an inquiry as contemplated under Section 250(4) and to formulate points for determination as required under Section 250(6) of the Income-tax Act, 1961. The absence of such an inquiry and formulation of points in the Commissioner (Appeals)’s order rendered it legally unsound.

Key Takeaways:

  • Mandatory Inquiry by Commissioner (Appeals): Section 250(4) of the Income-tax Act, 1961, casts a duty on the Commissioner (Appeals) to make such further inquiry as he thinks fit, or direct the Assessing Officer to make further inquiry, even if the assessee is not present or does not respond to notices.
  • Formulation of Points for Determination: Section 250(6) of the Income-tax Act, 1961, mandates that the order of the Commissioner (Appeals) shall set forth the points for determination, the decision thereon, and the reasons for the decision. This is a crucial procedural requirement.
  • Consequences of Non-Compliance: Even if an assessee is uncooperative or fails to appear, the Commissioner (Appeals) cannot summarily dismiss an appeal without fulfilling the statutory obligations of conducting an inquiry and formulating points for determination. Failure to do so renders the order legally unsustainable, leading to a remand of the case for fresh adjudication.
HIGH COURT OF CHHATTISGARH
Adim Jati Seva Sahkari Samiti Maryadit Korba Korba P.o.
v.
Income-tax Officer-2
SANJAY K. AGRAWAL and Deepak Kumar Tiwari, JJ.
TAXC No. 70 of 2024
APRIL  21, 2025
Shishir Dixit, Adv. for the Appellant. Ajay Kumrani and Amit Chaudhari, Advs for the Respondent.
ORDER
Sanjay K. Agrawal, J.- This tax appeal preferred under Section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) was admitted for hearing on 03-04-2025 by formulating the following substantial question of law: –
“1. Whether the CIT (Appeals) is justified in dismissing the appeal summarily without deciding the same on merits, by holding that the appellant/assessee has not appeared and supported the appeal, by recording a finding, which is perverse to the record ?
2. Whether the ITAT is justified in affirming the order of CIT (Appeals) by recording the finding which is perverse to the record ?”
2. The Assessing Officer issued notice to the appellant herein under Section 142 (1) (i) of the Act on 06.02.2018 requiring him to file return of income within the due date prescribed in the notice, to which, the appellant did not comply, leading to passing of order of assessment on 11.12.2019 determining the income of the assessee at Rs.2,47,65,369/-. Feeling aggrieved and dissatisfied by the order of assessment, the appellant herein preferred an appeal before the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (for short the “CIT (Appeal)”) under Section 246A of the Act. However, despite notices dated 25.01.2021, 04.11.2022, 15.11.2022 and 29.11.2022, the appellant did not appear to support the appeal, as a result of which, final order has been passed by the CIT (Appeal) on 14.12.2022, whereby the appeal of the appellant has been dismissed. Against the order dated 14.12.2022, the appellant preferred an appeal before the Income Tax Appellate Tribunal, Raipur Bench, Raipur (fort short the “ITAT”) and the ITAT by the impugned order dated 18.09.2023 dismissed the appeal of the appellant and upheld the order of the CIT (Appeal). Hence, this appeal has been filed by the appellant under Section 260A of the Act.
3. Mr. Shishir Dixit, learned counsel for the appellant submits that the CIT (Appeals) was absolutely unjustified in dismissing the appeal on the ground of non appearance of the appellant and it has committed grave error in not deciding the appeal on merits after making an enquiry as provided as under Section 250 (4) the Act and also by formulating the points for determination as provided under Section 250 (6) of the Act. He further submits that the ITAT also did not notice the error committed by the CIT (Appeals) that the CIT (Appeals) has not decided the case on merits in accordance with aforesaid provisions contained in the Act. As such, orders passed by both the Authorities deserve to be set-aside and the matter may be remitted to the CIT (Appeals) for deciding the appeal of the appellant on merits afresh.
4. On the other hand, Mr. Ajay Kumrani, learned counsel for the respondent/Revenue supports the order impugned and submits that Section 250 (4) the Act is directory in nature, therefore, non conducting of an inquiry and not formulating the points for determination would not cause any prejudice to the appellant, therefore, the CIT (Appeals) as well as the ITAT were justified in dismissing the appeal of the appellant. Hence, present appeal is liable to be dismissed.
5. We have heard learned counsel for the parties and considered their rival submissions made herein-above and went through the material available on record with utmost circumspection.
6. Admittedly, the order of assessment was passed on 11.12.2019 by the Assessing Officer determining the income of the assessee as Rs.2,47,65,369/-, against which, the appellant had preferred an appeal before the CIT (Appeals) on 13.01.2020 under Section 246A of the Act. The procedure for determining the appeal has been laid down in Section 250 of the Act which is reproduced hereunder for ready reference:-
“250. Procedure in appeal. (1) The [***] [Joint Commissioner (Appeals) or 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 authorised representative;
(b)the [Assessing Officer], either in person or by a representative.
(3) The [***][Joint Commissioner (Appeals) or the Commissioner (Appeals)] shall have the power to adjourn the hearing of the appeal from time to time.
(4) The [***][Joint Commissioner (Appeals) or 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 [***] [Joint Commissioner (Appeals) or the Commissioner (Appeals)].
(5) The [***][Joint Commissioner (Appeals) or 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 [***][Joint Commissioner (Appeals) or 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 [***][Joint Commissioner (Appeals) or 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.”
7. A Perusal of Section 254 (4) of the Act would show that the Commissioner (Appeals) is obliged to make an inquiry before disposing of the appeal by himself or he may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals). Further, by virtue of Section 250 (6) of the Act the Commissioner (Appeals) is obliged to state the points for determination, the decision therein and also the reasons for the said decision while disposing of the appeal. The said provision is akin to Order 41 Rule 31 of the Civil Procedure Code, 1973, which requires the courts to provide a detailed judgment outlining the points for determination for ensuring clarity and transparency in proceedings.
8. The Hon’ble Supreme Court in the matter of Commissioner of Income-Tax, Patiala v. Ambala Flour Mills AIR 1972 SC 83 : 1970 (2) SCC 96 has observed that the Appellate Assistant Commissioner has plenary power to dispose of the appeal. Their Lordships have further held that the scope of his powers being conterminous with that of the Income-tax Officer and the Appellate Commissioner can do what the Income-tax Officer can do and can also direct the Income-tax Officer to do what he has failed to do. The following was held that at Para 12 of the above judgment :
“12. In Commissioner of Income-tax, U.P. v. Kanpur Coal Syndi- cate 53 ITR 225 this Court held that-where the income-tax Officer assessed the income of an association of persons under Section 31(3)(b), the Appellate Assistant Commissioner was competent to set aside the assessment and to direct the Incometax Officer to assess the members individually. The Court observed that the Appellate Assistant Commissioner had under the Act plenary powers in disposing of an appeal, the scope of his powers being conterminous with that of the Income-tax Officer he can do what the Income-tax Officer can do and can also direct the Income-tax Officer to do what he has failed to do.”
9. Similarly, in the matter of CIT (Central) v. Premkumar Arjundas Luthra (HUF) (Bombay)/(2017) 297 CTR 614 decided by the High Court of Bombay, it has been held that the once an assessee files an appeal, the Commissioner of Income-Tax (Appeals) is obliged to dispose of the appeal on merits.
10. At this stage, we deem it appropriate to take note of Section 251 of the Act which provides the power of Commissioner (Appeals).
“251. Powers of the [Joint Commissioner (Appeals) or the Commissioner (Appeals)].—(1) In disposing of an appeal, the [***] the Commissioner (Appeals)] shall have the following powers—
(a)in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment***;
[Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;]
[(aa) in an 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.
(1A) *** **** ***
(2) The [***][Joint Commissioner (Appeals) or 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 Joint Commissioner (Appeals) or 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 the Joint Commissioner (Appeals) or the Commissioner (Appeals) by the appellant.”
11. By virtue of Section 251 (1) (a) & (b) the Commissioner of Income-Tax (Appeals) has power to confirm, reduce, enhance or annul the assessment and also to reduce the penalty.
12. In Premkumar Arjundas Luthra (HUF) (supra), in relation to the aforesaid provision, it is also held that while considering the appeal, the Commissioner of Income-tax (Appeals) 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 the above judgment following was held at Para 8:-
“8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(Appeals), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the 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(Appeals) 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(Appeals) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to subsection (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(Appeals) 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(Appeals). 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(Appeals) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(Appeals) 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(Appeals) 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(Appeals) to dismiss the appeal on account of nonprosecution 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(Appeals) 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(Appeals) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.”
13. Reverting back to the present case, in light of above quoted decision of the Supreme Court and also considering the observation made by the Bombay High Court in Premkumar Arjundas Luthra (supra), it is explicit that after filing the appeal before the CIT (Appeals), the appellant, admittedly, did not respond to the notices issued by the CIT (Appeals) for his appearance. Therefore, the CIT (Appeals), while observing that the appellant has not pursued the appeal despite being granted several opportunities and he failed to substantiate the source of credit in his bank account either by oral or documentary evidence, upheld the order passed by the assessing officer in making the addition of Rs.2,47,65,369/- holding it to be unexplained money under Section 69-A of the Act and dismissed the appeal of the appellant. The said order of the CIT (Appeals) has been affirmed by the ITAT by the order impugned dated 18.09.2023. However, from perusal of the order of CIT (Appeals), it nowhere appears that any inquiry has been made as contemplated under Section 250 (4) and 250 (6) of the Act. Even if the appellant did not make his appearance, the points for determination ought to have been formulated, but the same has not been done as provided under Section 250 (6) of the Act. As such, order of the CIT (Appeals) is completely vitiated on account of non compliance of Sections 250 (4) and 250 (6) of the Act, which the ITAT was supposed to take note of and rectify the defects by directing the CIT (Appeals) to decide the appeal on merits after complying the provisions contained in Section 250 (4) and (6) of the Act, however, the ITAT has perpetuated the said illegality by affirming the order of the CIT (Appeals).
14. In view of the above, the order passed by the CIT (Appeals) dated 14.12.2022 is hereby set aside and, subsequently, the order passed by the ITAT on 18.09.2023 is also set aside. The matter is restored to the file of the CIT (Appeals) for hearing and disposal afresh in accordance with law after making inquiry, as stipulated under Section 250 (4) of the Act and, also after formulating the points for determination as required under Section 250 (6) of the Act, within a period of 60 days from the date of receipt of copy of this order. Further, the appellant would be at liberty to appear before CIT (Appeals) and support his case.
15. Consequently, both the substantial questions of law are answered in favour of the appellant/assessee and against the respondent/Revenue.
16. The present tax appeal is accordingly allowed leaving the parties to bear their own cost(s).