BLS Kendra Private Limited vs Income Tax Officer

PER RAMIT KOCHAR, AM:

This appeal in ITA No. 462/Del/2026 for Assessment Year: 2022-23 has arisen form the learned CIT(A)’s appellate order u/s 250 of the Income-tax Act, 1961(in Short “Act”),dated 10.12.2025 in DIN & Order No: ITBA/NFAC/S/250/2025-26/ 1083516100(1), which in turn has arisen from the assessment order dated 22.03.2024 passed by the AO u/s 143(3) r.w.s. 144B of the 1961 Act (DIN : ITBA/AST/S/143(3)/ 2023-24/1063204008(1).

Brief facts of the case are that assessee company is engaged in an e-governance project which was awarded to the company by Punjab State government to provide citizen services with the setting up of Sewa Kendras (i.e. Punjab Sewa Kendra). The assessee has filed the return of income on 21.10.2022, declaring total income of Rs.4,09,22,870/-. The case of the assessee was selected by Revenue for framing scrutiny assessment under CASS on the grounds of high value cash deposits. During the course of assessment proceedings, Statutory notices u/s 143(2) , 142(1) and SCN’s were issued by the AO to the assessee. The assessee participated in assessment proceedings, and submitted its response/replies. The AO observed that the assessee has shown trade payable of Rs.27,55,510/- to M/s Knightood Corporate Security in its books of accounts, and provided confirmation received from the said party along with its PAN, Address etc.. The Assessment Unit issued notice u/s 133(6) of the Act to the said creditor M/s Knighthood Corporate Security, and in response the amount confirmed by the said party was to the tune of Rs.24,83,743/- i.e. there was difference of Rs.2,71,767/-. The assessee explained that there are voluminous transactions of the assessee with the said party and there could be difference due to accounting method/procedures adopted by M/s Knighthood Corporate Security. The AO rejected the contentions of the assessee , and brought to tax the aforesaid differential of Rs. 2,71,767/- as income of the assessee u/s 68 r.w.s, 115BBE of the 1961 Act being an unexplained credits in the books of accounts of the assessee. Thus, the income of the assessee was assessed by the AO to the tune of Rs.4,11,94,637/- as against returned income of Rs. 4,09,22,870/-.

Aggrieved, the assessee filed first appeal with Ld. CIT(A) . During the course of appellate proceedings, the ld. CIT(A) issued as many as three notices to the assessee dated 29.10.2025, 17.11.2025 and 27.11.2025. But, there was no response from the assessee. The Ld. CIT(A) dismissed the appeal of the assessee ex-parte on account of non-prosecution of its appeal by the assessee , and the assessment order passed by the AO was upheld by Ld. CIT(A) mainly on the grounds that the assessee has remained non-compliant during appellate proceedings and no further documents or explanations were furnished by the assessee to rebut the findings recorded by the AO.

Still aggrieved, the assessee has filed second appeal with the Tribunal. At the outset, the Ld. Counsel for the assessee submitted that the Ld. CIT(A) has passed an ex-parte appellate order without discussing the issues arising in the appeal on merits. It was submitted that three notices were issued by ld. CIT(A) within a short spent time of less than one month , and thereafter appeal was dismissed on 10.12.2025 . It was submitted that Principles of natural justice are breached. It was stated by the ld. Counsel for the assessee that if one more opportunity is provided, the assessee will furnish all the requisite evidences/documents in support of its contentions to rebut the findings of the AO. Prayers were made to restore the matter back to the file of ld. CIT(A) for fresh adjudication. The Ld. Sr. DR relied upon the order of the authorities below.

We have considered rival contentions and perused the material on record. We have culled out facts in brief and contentions of both the parties in the preceding para’s of this order and the same are not repeated. We have observed that the assessee did not participated in the first appellate proceedings before ld. CIT(A), while ld. CIT(A) issued as many as three notices albeit in short span of one month , the last notice was dated 27.11.2025. Thereafter, the appellate order was passed by ld. CIT(A) on 10.12.2025. The ld. CIT(A) disposed off the appeal in an hurried manner. Principles of natural justice and fair hearings are clearly breached. Further, the ld. CIT(A) dismissed the appeal of the assessee ex-parte without deciding the issues arising in the appeal on merits, mainly on the ground of non-prosecution of its appeal by the assessee. The appellate order passed by ld. CIT(A) is a non speaking order passed ex-parte 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) (Now Provisions of 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(Now Section 362 of the Income-tax Act, 2025). The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A(Now Section 365 of the Income-tax Act, 2025). 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) of the 1961 Act ( 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 CIT(A) is clearly in violation of section 250(6) of the 1961 Act (Now Section 359(4) of the 2025 Act) and liable to be set aside. Merely stating the assessment order passed by AO is upheld, and that the assessee has not submitted details/documents/evidences before ld. CIT(A) to rebut the findings of the AO 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 its contentions. Thus, the assessee is equally responsible for its woes as the assessee did not comply with the notices issued by ld. CIT(A). The ld. Counsel for the assessee has made statement before the Bench that if one more opportunity is provided and matter is remanded to ld. CIT(A), the assessee will come forward and submit all the details. 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 359(4) of the 2025 Act. We clarify that we have not commented on merits of the issues, and ld. CIT(A) shall adjudicate appeal of the assessee uninfluenced by observations in this order. 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.