ITAT Visakhapatnam Rules First Appellate Authority Must Adjudicate Appeals on Merit Despite Assessee Non-Cooperation – Section 69A Addition Case Sent Back

Overview of the Tribunal Decision

The Visakhapatnam Division Bench of the Income Tax Appellate Tribunal delivered a significant ruling emphasizing that the Commissioner of Income Tax (Appeals) possesses a statutory obligation to adjudicate appeals based on their merits, even when the assessee demonstrates non-responsiveness during proceedings. In the matter involving Avinash Guptas Godavarthi, the Tribunal granted relief for Assessment Year 2017-18 by setting aside the dismissal order and remanding the entire dispute back for comprehensive examination.

This landmark decision reaffirms fundamental principles of natural justice in tax appellate proceedings and clarifies the scope of duties incumbent upon first appellate authorities under the Income Tax Act, 1961.

Background Facts and Assessment Proceedings

Initial Assessment Actions

The Assessing Officer initiated proceedings and subsequently finalized the assessment under Section 143(3) of the Income Tax Act, 1961. During the assessment process, the revenue authority undertook multiple actions:

  • Applied a profit estimation rate of 15% on business turnover amounting to ₹2.38 crores
  • Made an independent addition of ₹77.78 lakhs concerning other bank credits
  • Characterized ₹2.62 crores as unexplained money under Section 69A of the Income Tax Act, 1961

Assessee's Explanation During Assessment

The revenue authorities provided six separate opportunities to the assessee to furnish explanations regarding:

  1. The source and origin of cash deposits appearing in his banking accounts
  2. Justification for the profit estimation methodology

In response, the assessee submitted that the cash deposits in question actually pertained to M/s. Mangalam Enterprises Private Limited, wherein he held the position of Director. The assessee emphasized that these monetary transactions were duly reflected in the company's financial records.

Furthermore, the assessee filed a sworn affidavit before the Assessing Officer containing the following assertions:

  • The income corresponding to these deposits was already declared in M/s. Mangalam Enterprises Private Limited's tax filings
  • Assessment proceedings for M/s. Mangalam Enterprises Private Limited were concurrently pending

Assessment Officer's Final Decision

Despite receiving the explanations and affidavit, the Assessing Officer remained unconvinced. The revenue authority noted that:

  • No books of accounts were physically produced during proceedings
  • Supporting documentation validating the explanation remained unsubmitted
  • The explanation lacked substantive evidence

Consequently, the Assessing Officer proceeded to confirm all the additions as proposed in the show cause notice.

First Appellate Proceedings Before CIT(A)

Appeal Filing and Grounds

Dissatisfied with the assessment outcome, the assessee approached the CIT(A) challenging the additions. The appeal contended that:

  • The additions made by the Assessing Officer were factually incorrect
  • The additions warranted complete deletion
  • Adequate opportunity for producing evidence was not afforded

CIT(A)'s Approach and Dismissal

The Commissioner of Income Tax (Appeals) issued ten separate notices to the assessee requesting:

  • Detailed explanation of his case
  • Production of relevant documentary evidence
  • Response to specific queries raised

However, the assessee failed to respond to any of the ten notices issued by the first appellate authority. Consequently, viewing the non-prosecution of the appeal, the CIT(A) dismissed the appeal in its entirety without examining the substantive grounds raised.

ITAT Proceedings and Final Ruling

Hearing Circumstances

When the matter came up for hearing before the Income Tax Appellate Tribunal on 28.01.2026:

  • Neither the assessee nor any authorized representative appeared
  • No adjournment request was received
  • The hearing notice sent by the Tribunal office was returned with postal remark "Left without instructions returned to sender"
  • The assessee was unavailable at the address provided

Given the circumstances, the Tribunal determined to dispose of the appeal based solely on the material available on record.

Revenue's Submissions