Dwelling Appliances Private Limited (Previously known as Adneet Trade Links Private Limited) vs Income Tax Officer, Ward-1(3), Delhi

This appeal in ITA No.2642/Del/2026 for assessment year 2017-18 has arisen from the appellate order dated 18.01.2024 passed by the learned Addl/JCIT(A)-12, Mumbai(DIN & Order No. ITBA/APL/S/250/2023-24/1059846305(1)) under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) , which appeal in turn has arisen from the assessment order dated 29.11.2019 passed by the learned Assessing office under Section 143(3) of the Act(Order No. ITBA/AST/S/143(3)/2019-20/102317809(1)).

The appeal is filed belatedly by 725 days beyond the time prescribed u/s 253(3) of the 1961 Act. The assessee has duly filed an affidavit dated 12.03.2026 praying for condonation of delay. It is submitted in the said affidavit that the Chartered Accountant of the assessee namely Shri Mahesh Karia who was representing the matter before ld. CIT(A) died in February, 2026 , and a new Counsel Shri Avijit Dey, Advocate was appointed in the first week of March, 2026, and only then, the assessee came to know that the ld. CIT(A) has already dismissed the appeal of assessee by passing an ex-parte appellate order on 18.01.2024. It is averred in the affidavit that the assessee then immediately took steps to file this appeal.

The brief facts of the case are that the assessee filed return of income declaring income of Rs. 1,14,016/-. The case of the assessee was selected by Revenue for framing scrutiny assessment through CASS for examination of the issue of low income in comparison to high loans/advances/investment in shares appearing in the Balance Sheet and low expenses debited in Profit & Loss account incurred for earning exempt income as compared to high investments. Statutory notice under Section 143(2) of the Act was issued by the Assessing Officer on 20.08.2018 , and claimed by the AO to have been duly served on the assessee. Further , notice under Section 142(1) was issued by the AO to the assessee. The assessee duly participated in the assessment proceedings. The assessee has deposited cash of Rs. 2,50,000/- in HDFC Bank account No. 50200005975242 , on 13.12.2016 during demonetization period. Regarding disallowance u/s 14A, the AO also observed that the assessee has claimed that no expenses were incurred to earn exempt income, and the assessee has claimed to have earned no exempt income during the year under consideration. The Assessing Officer also observed that as per books of accounts , the assessee has made investment of Rs. 38,45,54,081/- as on 31.03.2017 to earn income which did not form part of total income . The AO observed that the assessee has incurred an expenditure of Rs.10,50,558/-. The AO observed that the assessee has not made any disallowance u/s 14A , and the disallowance u/s 14A r.w.r. 8D is called for. The AO worked out disallowance u/s 14A r.w.r. @1% of Rs. 39,08,52,040/- being monthly average of the value of the investment, which does not form or shall not form part of the total income, and accordingly disallowance of Rs. 39,08,520/- was worked out by the AO. Since , disallowance u/r 8D should not exceed the amount of expenditure, the AO restricted disallowance to the tune of Rs. 10,50,558/-. The Assessing Officer further observed that the assessee has claimed closing cash in hand balance as on 08.11.2016 to be Rs. 4,80,000/-. It was observed by the AO that the assessee has shown commission income of Rs. 11,64,574/- in its P&L Account. The assessee has shown opening cash balance of Rs. 1,37,862/- as on 31.03.2016 and cash in hand as on 31.03.2017 of Rs. 1,31,012/- . The AO observed that the assessee has deposited cash of Rs.2,50,000/- in HDFC Bank.The AO observed that there has been no capital receipt/revenue receipt received in cash disclosed in the financials and no withdrawal has been made. The assessee did not reply before the AO in response to query made to explain the cash deposits in the bank and cash in hand. The AO observed that alleged cash in hand as on 08.11.2016 amounting to Rs. 4,80,000/- which was deposited in HDFC Bank and Indian Bank ( being SBN’s during demonetization period) remained unproven i.e. source of which remained unexplained, and the AO made additions to the tune of Rs. 4,80,000/- to the income of the assessee u/s 69A of the 1961 Act.

Aggrieved, the assessee filed first appeal before the learned CIT(A). Learned CIT(A) has claimed to have issued as many as five notices to the assessee , but assessee did not responded to the notices. Learned CIT(A) proceeded to decide the appeal on the basis of material available on record. Learned CIT(A), in the absence of the reply, dismissed the appeal of the assessee ex-parte without deciding the issues on merits, by holding that the assessee is not interested in persuing its appeal.

Aggrieved, the assessee has now filed second appeal with the Tribunal. At the outset, learned Counsel submitted that learned CIT(A) has dismissed the appeal of the assessee ex-parte in-limine without deciding the issue’s arising on merits wherein assessment order was upheld on the grounds that the assessee is not interested in persuing its appeal. It is submitted that the appellate order passed by learned CIT(A) is not sustainable keeping in view the provisions of Section 250(6) , as the ld. CIT(A) has not decided issues arising in the appeal on merits. It was prayed that appellate order of ld. CIT(A) be set aside and the matter may be restored to the file of ld. CIT(A) for denovo adjudication.

I have considered rival contentions and perused the material on record. The facts in brief and contentions of both the parties are recorded in the preceding para’s of this order, and are not repeated again.While framing assessment , the AO made two additions to the income of the assessee, firstly u/s 14A r.w.r. 8D to the tune of Rs. 10,50,558/- , and secondly u/s 69A to the tune of Rs. 4,80,000/- for unexplained cash deposits(SBN’s during demonetization period) in the bank by invoking provisions of Section 69A. I have observed that learned CIT(A) has passed an ex-parte order dismissing the appeal of the assessee in-limine , by upholding assessment order passed by the AO. It is true that despite as many as five notices issued by ld. CIT(A), the assessee did not participated in the appellate proceedings before ld. CIT(A) as it did not submitted any reply/response. I have observed that ld. CIT(A) has not given his independent reasoning before dismissing the appeal of the assessee. The ld. CIT(A) did not even called for the assessment records, and dismissed the appeal of the assessee exparte. No independent verifications were done by the ld. CIT(A). The assessee has claimed that there is no exempt income earned by it as is emerging from the assessment order, but the ld. CIT(A) did not consider the applicable binding judicial precedents as well law on the said proposition before adjudicating the appeal. The assessee has specifically raised this ground before ld. CIT(A) that the assessee has not earned any exempt income , and disallowance u/s 14A as were made by the AO is not sustainable. The assessee has now contended before ITAT that limited scrutiny is converted into full scrutiny by AO without obtaining approval from competent authorities. The ld. CIT(A) is required to pass a reasoned and speaking order by giving his independent reasoning , as is required u/s 250(6) . I have observed that the ld. CIT(Appeals) has not decided the appeal on merits, and the appeal of the assessee was dismissed ex-parte in limine without deciding the issues arising in the first appeal on merit in accordance with law by simply upholding the assessment order, mainly on the grounds of non-compliance by the assessee to the notices issued by ld. CIT(A). The appellate order passed by ld. CIT(A) is a non speaking cryptic order passed ex-parte in limine without deciding the issue arising in the appeal on merits. Even, there is no mention as to the date of issuance and service of the five notices claimed to have been effected by ld. CIT(A) on to the assessee. The ld. CIT(A) is required and obligated to pass appellate order in compliance with the provisions of section 250(6), 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), wherein ld. CIT(A) has to state point for determination, his decision and reasons thereof. The ld. CIT(A) even did not made any independent enquiry and verifications. Reference is drawn to provisions of Section 250(4).The appellate order passed by ld. CIT(A) is subject to further appeal with ITAT u/s 253. The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A. 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) ex-parte 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) , 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 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 in response to notices 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 claimed to have been 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 . The assessee has claimed that the assessee did not earn any exempt income, and hence no disallowance u/s 14A r.w.r. 8D is called for. The assessee has also claimed that limited scrutiny is converted into complete scrutiny without obtaining requisite approval from competent authorities, and hence the assessment order is vitiated to that effect what was beyond the scope of limited scrutiny . These as well other contentions raised by the assessee requires verification, investigation and examination by authorities below. 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 passed by 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). I clarify that I 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. I order accordingly.

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