Aostaf Industries Ltd vs The Assessing Officer, Assessment Unit, New Delhi

PER RAMIT KOCHAR, AM:

This appeal is filed by the assessee against the order passed by the learned Commissioner of Income Tax(Appeals) NFAC, Delhi [CIT(A), in short] dated 19.11.2025 u/s 250 of the Income Tax Act, 1961 (DIN & Order No. ITBA/NFAC/S/250/2025-26/1082775433(1)), which in turn has arisen from the assessment order dated 27.02.2025 passed by the AO u/s 147 r.w.s. 144 r.w.s. 144B of the 1961 Act (DIN: ITBA/AST/S/147/2024-25/1073755919(1)).

Brief facts of the case are that the assessee company has filed income-tax return for assessment year:2019-20 on 31.10.2019 u/s 139(1) of the 1961 Act , declaring total income of Rs. 20,72,270/-. Thereafter the AO was in receipt of credible information through insight portal , wherein it was found that it was case of STR enquiry in case of M/s D. S. Trading Company (Prop. Deepak Singh) [PAN: HINPS9612A] who was found involved in providing accommodation entries to various beneficiaries. Later, another information was received by the AO from ADIT (Inv.) , Unit-4(3), New Delhi vide letter dated 30.12.2024 , wherein the assessee was identified taking fraudulent Input Tax Credit (ITC) for the transaction of Rs. 3,60,98,675/- by entering into bogus purchase transaction with the mentioned entity, i.e., M/s D S Trading Company (Prop. Deepak Singh) [PAN: HINPS9612A]. It was also found that the assessee has entered into bogus sale transaction of Rs. 1,44,60,974/- with another shell/paper entity, namely, Ravi Incorporation (Prop. Ravi Shekhar Singh) [PAN: GXFPS4288L]. From the order passed u/s 148A(d) of the 1961 Act, dated 19.04.2023,it was observed by the AO that the assessee failed to represent his case before the AO. Thus, based on material on record, the case of the assessee was reopened by the AO by invoking provisions of Section 147/148 of the 1961 Act. During the course of the reassessment proceedings, notice u/s 148 dated 19.04.2023 was issued by the AO to the assessee, but there was no return of income filed by the assessee in response thereof. Statutory notices u/s 142(1) as well SCN’s u/s 144 were issued by the AO to the assessee, but no reply was filed by the assessee, except on one occasion on 13.01.2025 when the assessee sought adjournment in response to SCN u/s 144 dated 07.01.2025 issued by the AO. Since, there was no representation from the assessee, the AO passed the best judgment assessment ex-parte wherein after detailed discussions and deliberation, the AO made the addition to the income of the assessee in the hands of the assessee , firstly to the tune of Rs. 3,60,98,675/- in respect of bogus purchases from D S Trading Company and secondly to the tune of Rs. 2,89,219/- being commission receipt on bogus sales to Ravi Incorporation. Thus, the income of the assessee was assessed at Rs. 3,84,58,164/- as against returned income of Rs. 20,72,270/- , vide reassessment order dated 27.02.2025 passed by the AO u/s 144 r.w.s. 147 r.w.s. 144B of the 1961 Act.

Aggrieved, the assessee filed first appeal with the ld. CIT(A) . During the course of appellate proceedings , the ld. CIT(A) issued as many as four notices, and only on one occasion with respect to notice dated 19th September, 2025 issued by ld. CIT(A), the assessee sought adjournment. While wrt three other notices issued by ld. CIT(A) out of total four notices, the assessee did not submitted any response/reply before ld. CIT(A) . The appeal of the assessee was dismissed by ld. CIT(A) ex-parte mainly on the ground of non-prosecution of its appeal by the assessee and the assessment framed by the AO was upheld by ld. CIT(A) .

Aggrieved , the assessee filed second appeal with ITAT. None appeared for the assessee when this appeal was called for hearing before the Bench.

We have considered contention of the ld. Sr. DR , and perused the material on record. The facts in brief are narrated in the preceding para’s of this order , and are not repeated. We have observed that the ld. CIT(A) has issued first notice on 10^th September, 2025 fixing the date of compliance to be on 17^th September, 2025. There was no response from the assessee. The ld. CIT(A) issued second notice dated 19.09.2025 for compliance on 26^th September 2025 . The assessee sought adjournment. The ld. CIT(A) issued third notice dated 30.09.2025 for compliance on 8^th October, 2025, but there was no compliance on the part of the assessee. The ld. CIT(A) issued fourth notice dated 29.10.2025 for compliance on 07.11.2025. The ld. CIT(A) dismissed the appeal of the assessee vide order dated 19.11.2025. The appeal was filed by the assessee with ld. CIT(A) on 29.08.2025. It is observed that ld. CIT(A) even did not specify whether the notices were served on the assessee and the mode and manner in which notices were served on the assessee. It is also observed that ld. CIT(A) dismissed the appeal of the assessee within the short span of time i.e. within three months of filing of the appeal by the assessee, as enumerated above. Principles of natural justice and fair hearing are ingrained in all the action of the statutory authorities. Reference is drawn to judgment and order of Hon’ble Supreme Court in the case of Maneka Gandhi v. UOI , reported in 1978 AIR 597(SC). Principles of natural justice and fair hearings are clearly breached in the instant case , and prejudice is caused to the assessee , as the assessee was non-suited and condemned by ld. CIT(A) without any proper and fair opportunity being afforded to the assessee by ld. CIT(A), by way of dismissal of its appeal by ld. CIT(A) . We have further observed that ld. CIT(A) dismissed the appeal of the assessee ex-parte in limine without deciding the issue arising in the appeal on merits which is in violation of provisions of Section 250(6) of the 1961 Act (Now Section 359(4) of the Income-tax Act, 2025), mainly for the reasons of non-prosecution of its appeal by the assessee as the assessee did not comply with the notices issued by ld. CIT(A). The appellate order passed by ld. CIT(A) is a non speaking order passed ex-parte in limine without deciding the issue arising in the appeal on merits. The ld. CIT(A) is required and obligated to pass appellate order in compliance with the provisions of section 250(6) of the 1961 Act(Now Section 359(4) of the Income-tax Act, 2025), as ld. CIT(A) is required to pass reasoned and speaking order on merits in accordance with law. Reference is drawn to provisions of Section 250(6) of the 1961 Act (Now Section 359(4) of the Income-tax Act, 2025), wherein ld. CIT(A) has to state point for determination, his decision and reasons thereof. The ld. CIT(A) even did not made any enquiry, and not even assessment records were called for by ld. CIT(A). The appellate order passed by ld. CIT(A) is subject to further appeal with ITAT u/s 253 of the 1961 Act (Now Section 362 of the 2025 Act). The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A of the 1961 Act(Now Section 365 of the 2025 Act). The judgment and order passed by Hon’ble High Court is also subject to challenge before Hon’ble Supreme Court. Thus, the appellate order passed by ld. CIT(A) is not a final order, as it is subject to challenge before higher appellate authority. Thus, Reasons which weighed in the minds of the adjudicating authority while adjudicating appeal on merits of the issues are cardinal as the higher appellate authority can then adjudicate appeal on the issues arising in appeal before them, based on decision and reasoning of ld. CIT(A) in deciding the issues. If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not comply with the notices issued by ld. CIT(A) in limine without adjudicating issues arising in the appeal on merits , such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6) (Now Section 359(4) of the 2025 Act) , and also higher appellate authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits . The appellate order of the ld. CIT(A) is clearly in violation of section 250(6) of the 1961 Act(Now Section 359(4) of the 1961 Act), and liable to be set aside. Merely stating the reassessment order passed by AO is upheld, and that the assessee has not submitted details/documents/evidences before ld. CIT(A) is not sufficient. The ld. CIT(A) is not toothless as his powers are co-terminus with the powers of the AO, which even includes power of enhancement. It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A) , and did not file the requisite details/documents to support his contentions. Thus, the assessee is equally responsible for its woes as the assessee did not comply with the notices issued by the AO as well ld. CIT(A). Keeping in view the entire factual matrix as culled out above in the preceding para’s of this order, it will be fair to both the parties as well in the interest of justice, that the appellate order of ld. CIT(Appeals) be set aside and the matter be remanded back to the file of ld. CIT(Appeals) for fresh adjudication after giving proper opportunity of being heard to both the parties w.r.t. the issues arising in the appeal. The assessee is directed to comply with the notice issued by ld. CIT(Appeals) during the appellate proceedings in set aside remand proceedings, otherwise ld. CIT(A) shall be free to decide the appeal ex-parte on merits in accordance with law, after complying with provisions of Section 250(6) of the 1961 Act (Now Section 359(4) of the 2025 Act). We clarify that we have not commented on merits of the issues. Thus, the appellate order passed by ld. CIT(A) is set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication. The appeal of the assessee is allowed for statistical purposes. We order accordingly.

In the result, the appeal filed by the assessee is allowed for statistical purposes.