ITAT Restores Appeals Dismissed for Technical Lapse, Directs Adjudication on Merits

The present appeals arise from reassessment orders passed pursuant to information received by the AO from the Investigation Wing following search and seizure action in the Darshanam Group. During the course of post-search enquiries, ledger pages seized from the searched party were found containing entries wherein the assessee’s name appeared against recorded cash loan transactions, marked with the letter “C” indicating cash. Based on this seized material, the Assessing Officer formed the view that the assessee had advanced unexplained cash loans across different years, with the quantum relatable to AY 2016-17 computed at Rs. 75,00,000 and for AY 2019-20 at Rs. 25,00,000. Since the assessee’s declared income of Rs. 3,09,860 in AY 2016-17 and Rs. 3,10,720 in AY 2019-20 was significantly disproportionate to the alleged advances, and no documentary evidence was furnished to disprove the seized entries or establish the veracity of the denial, the AO treated such alleged advances as unexplained, and framed reassessment orders u/s 147 r.w.s. 144B determining total income at Rs. 78,09,860 and Rs. 28,10,720 respectively after invoking the provisions of Section 69 r.w.s. 115BBE.

CIT(A)’s Ruling: The assessee challenged the reassessment orders before the CIT(A) along with grounds of appeal. However, while filing Form No. 35, the Statement of Facts was inadvertently not enclosed. NFAC sent a notice of deficiency instructing the cure of the defect on or before 10.02.2025, but in accordance with the record, the assessee failed to cure the defect within the stipulated time. The CIT(A), rather than considering the issue on merits, rejected the appeals as non-maintainable merely because of the non-submission of the Statement of Facts. Therefore, the additions proposed by the AO were confirmed without giving any thought to the merits and grounds raised. Feeling aggrieved, the assessee preferred further appeals before the Tribunal for restoration of the matters for their adjudication in terms of law.

Central Issue: Whether non-adjudication of appeals on sole reasons of non-filing of Statement of Facts, when otherwise appeals were filed validly with reasons and within the time frame, fulfils the requirements of Section 250(6) necessitating adjudication on merits.

ITAT’s Ruling: The Tribunal noted that both the appeals were unquestionably submitted in the prescribed form with reasons for appeal and well within the limitation period. It held that non-filing of a Statement of Facts, being a formality, does not make the appeal non-maintainable or empower the CIT(A) to reject the case summarily without consideration of the issues on merits. The Tribunal underscored the statutory obligation under Section 250(6) upon the first appellate authority to prepare points for determination and make findings thereon supported by reasons. It reiterated that the appellate scheme of jurisprudence of the Act requires meaningful adjudication, and technical weaknesses such as non-filing of Statement of Facts cannot thwart the legislative objective of providing appellate scrutiny. The Tribunal also took note of the fair concession by the Departmental Representative that the dismissal without adjudication on merits was legally improper.

Therefore, the Tribunal set aside the impugned orders, restored both appeals to the file of the CIT(A), and directed fresh adjudication on merits in accordance with law after granting reasonable opportunity of hearing to the assessee. The Tribunal also clarified that it was not expressing any view on the substantive additions made u/s 69 r.w.s. 115BBE and all issues remain open for reconsideration. With these observations, both appeals were allowed for statistical purposes.

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