Pranav B Prem

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has strongly criticized the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), for ignoring binding remand directions issued in a previous round of litigation involving a disputed addition of ₹50 lakh under Section 69 of the Income Tax Act.

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The Tribunal, comprising Judicial Member Sanjay Garg and Accountant Member Makarand V. Mahadeokar, expressed dismay over the fact that the CIT(A) failed to summon the supplier for cross-examination or record the statement of the bank officer as explicitly directed by the Coordinate Bench. Instead of following the judicial instructions, the CIT(A) merely reproduced conclusions previously drawn by the investigation wing, relying again on the untested statement of Shri Alpeshkumar Vitthalbhai Patel. The Tribunal noted that this denial of the opportunity to rebut evidence goes against the principles of natural justice.

The assessee, Ashapura Stone Industries, is engaged in quarrying and trading stone products. During reassessment proceedings initiated under Section 147, the Assessing Officer made an addition of ₹50 lakh, treating the advance given to M/s. Umiya Industries for the purchase of machinery as bogus. This was based entirely on the statement of Shri Alpeshkumar Patel, who allegedly ran a paper concern providing accommodation entries.

In the first round of appeal, the CIT(A) had dismissed the case ex parte. When the matter reached the Tribunal earlier, it set aside that order and issued specific directions. These included allowing the assessee to cross-examine the supplier and ensuring that the statement of the bank officer involved in sanctioning a machinery loan was recorded. The Tribunal emphasized that the CIT(A) must provide a fair opportunity of hearing and assess the matter afresh on merits.

Despite these clear directions, the CIT(A), in the second round, once again confirmed the ₹50 lakh addition. The appellate order was silent on any steps taken to comply with the Tribunal’s instructions. It merely reiterated that the investigation wing had confirmed no actual business activity at Umiya Industries’ premises and concluded that the entity was a shell concern.

During the hearing, the assessee's counsel submitted that none of the required directions had been followed. The order under challenge was described as a mechanical reproduction of previous findings without any genuine effort to evaluate the evidence or ensure procedural fairness. The Departmental Representative, with fairness, conceded the failure of the CIT(A) to comply with the Tribunal’s earlier directions.

The ITAT, after examining the record, confirmed the lapse and observed that the CIT(A) had ignored its statutory obligation. The directions issued under Section 254(1) were not optional but binding, and non-compliance undermined the rule of law. The Tribunal remarked that even if the failure arose from administrative indifference or oversight, such conduct amounted to judicial insubordination.

Setting aside the CIT(A)’s order dated 04.03.2025, the Tribunal once again remanded the matter for fresh adjudication with clear directions to comply with its earlier order. It also emphasized the need for the appellate authority to document the steps taken to fulfil the directions issued.

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Before concluding, the Tribunal highlighted that repeated non-compliance with remand directions, even if unintentional, erodes judicial efficacy and public trust. It called upon the Central Board of Direct Taxes (CBDT) to take note of the matter and, if needed, issue guidance to ensure strict adherence to appellate directions, particularly where procedural safeguards are involved. Accordingly, the appeal of the assessee was allowed for statistical purposes.

Appearance

Counsel For Appellant: Hardik Vora, AR

Counsel For Respondent: Hargovind Singh, Sr.DR

Cause Title: Ashapura Stone Industries V. ITO

Case No: ITA No.725/Ahd/2025

Coram: Shri Sanjay Garg [Judicial Member],  Makarand V.Mahadeokar [Accountant Member]