NFAC Must Decide Appeal on Merits, Cannot Dismiss for Non-Prosecution: ITAT Delhi

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 30 April held that the National Faceless Appeal Centre (NFAC) cannot dismiss an appeal for non-prosecution and must decide it on merits under Section 250 of the Income Tax Act.

A Bench comprising Judicial Member Sudhir Kumar and Accountant Member Manish Agarwal heard an appeal against the NFAC order dated 11 September 2025 for Assessment Year 2012-13 and condoned a delay of 53 days after accepting the taxpayer's explanation of illness supported by a medical certificate. It held:

“The appeal should have been decided on merit as per the provision of the section 250 of the Act. The appeal was decided ex-parte without giving the opportunity of being heard to the assessee.”

Section 250 of the Income Tax Act governs appellate procedure and requires the appellate authority to decide appeals on merits after granting an opportunity of hearing.

The record showed that Pritam Singh, the taxpayer filed a return of income. The department then initiated reassessment proceedings based on information regarding cash deposits of Rs. 43.19 lakh in a bank account. The Assessing Officer completed the reassessment and determined total income at Rs. 60.35 lakh after making additions. The NFAC dismissed the appeal because the taxpayer did not appear.

Before the Tribunal, the taxpayer argued that the NFAC did not grant an effective opportunity of hearing. The Revenue argued that sufficient opportunities had been provided and justified the dismissal.

The Bench held that the appellate authority must decide appeals on merits even when a party does not participate and cannot dispose of proceedings solely for non-prosecution. It found that the NFAC acted contrary to Section 250.

Therefore, the Tribunal set aside the NFAC order and remanded the matter. It directed the NFAC to grant a “final opportunity” to the taxpayer to present submissions and to decide the appeal in accordance with law. It also directed the taxpayer to cooperate in the proceedings.

Accordingly, the ITAT allowed the appeal for statistical purposes.