Neither assessee can withdraw nor CIT(A) can dismiss appeal for non-prosecution. ITAT explains powers/duty of FAA

Neither assessee can withdraw appeal nor CIT(A) can dismiss appeal for non-prosecution. ITAT explains the powers and duty of the First Appellate Authority. Dismisses of appeal by CIT(A) for non-prosecution results as withdrawal of appeal which is not permitted.

ABCAUS Case Law Citation:
ABCAUS 3084 (2019) (07) ITAT

Important Case Laws Cited/relied upon by the parties:
Akansha Singhal vs. DCIT
CIT vs. Kanpur Coal Syndicate 53 ITR 225 (SC)
CIT vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443
CIT vs. Premkumar Arjundas Luthra (HUF) [2016] 240 taxman 133
CIT vs. B.N. Bhattachargee 118 ITR 461 (SC)

The appeal by assessee was filed against the order of the Commissioner of Income Tax (Appeals) in deciding the appeal ex-parte.

It was the contention of the assessee that CIT(A) erred in law on merits in deciding the appeal ex-parte only after issuing notice of hearing for which adjournment application stood filed and noted by the CIT(A), however neither adjournment application was rejected, nor any further date was given. Thus, no proper and reasonable opportunity of hearing had been allowed by CIT(A).

The Tribunal observed that the CIT(A) dismissed the Assessee’s appeal by holding it was non-maintainable on the grounds that the impugned assessment order was not placed on record by the assessee; and that demand notice and challan for payment of appeal fee in compliance of section 249 had not been placed on record by the assessee.

The Tribunal noted that the relevant provisions under the Income Tax Act, 1961 (the Act) regarding maintainability of appeal made to Commissioner (Appeals) and regarding procedure in appeal, and powers of the Commissioner [Appeals] are contained in Sections 249, 250 and 251 of the Act.

The further Tribunal noted that the statutory provisions shows that u/s 250(6) of the Act the CIT(A) was obliged to dispose of the appeal in writing after stating the points for determination and to then pass an order on each of the points which arose for consideration; and the CIT(A) was further obliged to state the reasons for his decision on each such points which arose for determination. Thus, the CIT(A) was duty bound to dispose of the appeal on merits.

The Tribunal also observed that under Section 251(1)(a) and (b) and as per Explanation to Section 251(2) of the Act, the CIT(A) was required to apply his mind to all the issues which arose from the impugned order before him, whether or not these issues had been raised by the Assessee before him. Also, Section 251(1)(a) of the Act provides that while disposing of an appeal against Assessment Order, Commissioner (Appeals) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1) (b) provides that in disposing of an appeal against an order imposing a penalty, Commissioner (Appeals) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty.

The Tribunal opined that on a cumulative consideration the provisions U/s 250(6) read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation of Section 251(2) of the Act, the CIT(A) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merits. Once the Assessee files an appeal U/s 246A of the Act, the Assessee sets in motion the machinery designed for disposal of the appeal under Sections 250 and 251 of the Act.

The Tribunal further observed that if the appeal filed by the assessee fulfils the requirements of maintainability and admissibility prescribed under Sections 246, 246A, 248 and 249 of the Act; neither the Assessee can stop the further working of that machinery as a matter of right by withdrawing the appeal, or by not pressing the appeal, or by non-prosecution of the appeal; nor the first appellate authority, CIT(A) in this case, can halt this machinery by ignoring either the procedure in appeal prescribed U/s 250 of the Act or powers of Commissioner (Appeals) prescribed U/s 251 of the Act.

The Tribunal opined that the CIT(A), the first appellate authority, cannot dismiss assessee’s appeal in limine for non- prosecution without deciding the appeal on merits through an order in writing, stating the points of determination in the appeal, the decision thereon and the reason for the decision.

The Tribunal noted that it is well-settled that powers of CIT(A) are co-terminus with powers of the Assessing Officer. The Hon’ble Supreme Court had held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, that he can do what the ITO can do and also direct him to do what he failed to do.

Also as held by the Hon’ble Supreme Court an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing, the first appellate authority can proceed with the enquiry and if he finds that there has been an under-assessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the Assessing Officer to not complete the Assessment Proceedings by allowing the Assessee to withdraw Return of Income; it is similarly, by analogy, not open for CIT(A) to not pass order on merits on account of non-prosecution of appeal by the Assessee or if the Assessee seeks to withdraw the appeal or if the assessee does not press the appeal.

The Tribunal opined that when the Commissioner (Appeals) dismisses the appeal of assessee for non-prosecution of appeal by the assessee; in effect, indirectly it leads to same results as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise, through dismissal of appeal for non-prosecution of appeal before the first appellate authority; in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee. What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled.

The Tribunal opined that the CIT(A) has no power to dismiss appeal in limine for non-prosecution of appeal by the assessee.

Accordingly, the Tribunal set aside the impugned order of the CIT(A) and restored the matter to the file of the CIT(A) with the direction to pass fresh order.

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