The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has restored an income tax appeal for fresh adjudication after finding that the Commissioner of Income Tax (Appeals) had dismissed it without deciding the disputed additions and disallowances on their merits.

Although the taxpayer had repeatedly failed to participate in the assessment and appellate proceedings, the bench of Challa Nagendra Prasad (Judicial Member) and Rakesh Kumar Lodha  (Accountant Member) considered it appropriate to grant another opportunity in the interest of substantive justice and directed him to take the appeal proceedings more seriously and support his grounds with written submissions and evidence.

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The taxpayer, an individual earning income from salary and capital gains, had not furnished a return under Section 139 of the Income-tax Act, 1961, for the relevant assessment year.

Based on information available on the department’s portal under the Risk Management System, the Assessing Officer issued a notice under Section 148. In response, the taxpayer filed his return on July 12, 2024, declaring total income of ₹23,38,410.

However, according to the Tribunal’s account of the proceedings, he did not respond to most notices issued under Section 142(1). A limited response submitted on January 7, 2025, contained a statement of total income and information about the income disclosed in the return filed pursuant to the reassessment notice.

The taxpayer also failed to comply with the Assessing Officer’s show-cause notice. Consequently, the officer completed the assessment using the information available, making additions relating to securities transactions, unexplained investments and salary income, while disallowing certain deductions.

Before the Tribunal, the taxpayer challenged an addition of ₹11,71,078 as short-term capital gains on the sale of securities.

His grievance was that the Assessing Officer had taken securities sale proceeds of ₹15,38,447 and mechanically treated purchases of ₹3,67,369 during the year as the acquisition cost. He argued that the actual acquisition cost and holding period of the securities should have been examined under Sections 45 to 48.

The appeal also challenged an addition of ₹63,40,996 under Section 69 concerning purchases of securities settled otherwise than by actual delivery. The taxpayer contended that the nature and source of these transactions had not been properly appreciated and sought taxation of the resulting profit or loss instead of treating the purchase amount as unexplained investment.

A separate addition of ₹3,67,369 under Section 69 related to securities purchases. The taxpayer maintained that these purchases were funded through his regular bank account from income earned by him.

Another disputed addition of ₹17,84,600 under Section 69 concerned investment in immovable property. He similarly claimed that the payment came from his regular bank account and that the source could be explained.

These explanations formed part of the taxpayer’s grounds of appeal; the Tribunal did not determine whether they were substantiated.

The taxpayer challenged the disallowance of ₹2 lakh claimed as interest on a housing loan, arguing that he had not received an adequate opportunity to furnish supporting documents.

He also disputed the disallowance of deductions totalling ₹2.25 lakh under Chapter VI-A. These comprised ₹1.50 lakh under Section 80C, ₹25,000 under Section 80D and ₹50,000 under Section 80CCD(1B).

His grounds stated that the claims related to provident fund, life insurance, medical insurance and National Pension System contributions made during the year.

An additional amount of ₹1,161 brought to tax under the head “Income from Salary” on account of alleged short disclosure was also challenged.

After the assessment, the taxpayer approached the National Faceless Appeal Centre. However, he again failed to submit explanations, evidence or written arguments supporting his appeal.

The first appellate authority recorded that neither an adjournment request nor written submissions had been furnished despite hearing notices being issued to the email address available in the ITBA module and supplied in Form 35. It then disposed of the appeal ex parte without deciding its merits through an order dated March 10, 2026.

Before the ITAT, the taxpayer argued that dismissal without adjudicating the grounds was contrary to Section 250(6) and violated the principles of natural justice. His grounds also stated that notices had been sent exclusively to an email address he did not regularly access and that his non-participation was not wilful.

His representative, Ms. Ketki Rajeshirke, requested that the matter be sent back to the Commissioner of Income Tax (Appeals) for another opportunity to contest the additions.

The Revenue’s representative, Shri Prasana Prakash Tewari, opposed the request, describing the taxpayer as habitually non-compliant.

The Tribunal expressly acknowledged the taxpayer’s conduct. It noted that he had failed to file the original return, had not seriously participated in reassessment after filing the return in response to Section 148, and had provided no response before the first appellate authority to substantiate his grounds.

Nevertheless, the bench found that the appeal had been dismissed without a decision on the merits.

Considering the factual circumstances and the interest of substantive justice, it restored the matter to the Commissioner of Income Tax (Appeals). The Tribunal directed that another opportunity be provided by issuing notice to an email address to be communicated by the taxpayer.

It also directed him to take the proceedings more seriously and submit written arguments together with evidence supporting the grounds raised in Form 35.

The appeal was allowed for statistical purposes. The order provides a fresh opportunity for appellate examination; it does not delete the disputed additions or allow the deductions claimed.

The taxpayer must now substantiate his challenges before the Commissioner of Income Tax (Appeals), who will reconsider the matter following the Tribunal’s directions.

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