MR. PANKAJ SEVANTILAL SHAH,MUMBAI vs. ITO, WARD-30(2)(5), MUMBAI

Per : Kuldip Singh, Judicial Member:

The assessee by filing the present appeal, sought to set aside the impugned order dated 21.02.2023 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2014-15 on the grounds inter-alia that :- “1. The learned Commissioner of Income Tax (Appeals) [CIT(A)'] erred in passing an ex-parte order on 21 February 2023 stating that the Appellant had not requested for adjournment without considering the fact that request for adjournment was made on 5th January 2023 and also on 30 January 2023. 2. The learned CIT(A) erred in disallowing Interest expense of Rs239,629 computed at 12% on interest free loans and advances

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without appreciating that the Appellant had adequate interest free funds. Your appellant submits that the suo-moto and arbitrary action of the Assessing Officer is unwarranted and ought to be quashed and annulled. Without prejudice to the above, the disallowance made by the learned CIT(A) is excessive and ought to be reduced substantially. 3. The learned CIT(A) erred in confirming Assessing Officer's action of disallowing interest expense of Rs 23,210 paid to Mr Vimal Shah under section 40(2)(b) of the Act. Your appellant submits that the arbitrary action of the Assessing Officer is unwarranted and ought to be quashed and annulled. Without prejudice to the above, the disallowance made by the learned CIT(A) is excessive and ought to be reduced substantially. 4. The learned CIT(A) erred in confirming the action of Assessing Officer in making addition of Rs 4,46,800 by considering the purchases made from M/s Rushi Enterprises as unexplained expenditure. Your appellant submits that the arbitrary action of disallowing purchases as unexplained expenditure is merely based on presumptions, assumptions and surmises and ought to be quashed and annulled. Without prejudice to the above, the learned CIT(A) erred in disallowing the entire amount paid to M/s Rushi Enterprises instead of restricting the disallowance to the extent of gross profit margin of the Appellant. Without prejudice to the above, the disallowance made by the learned CIT(A) is excessive and ought to be reduced substantially. 5. Without prejudice to the above, the learned CIT(A) erred in not adjudicating the without prejudice ground of appeal raised by your Appellant in respect of Assessing Officer having erred in expanding the scope of limited scrutiny assessment proceedings initiated under CASS Selection Criteria for review of interest expenses incurred by the Appellant. Your Appellant submits that the action of learned Assessing Officer deserves to be quashed as the same is ultra vires and not in accordance with the provisions of the Act and the binding guidelines of the Central Board of Direct Taxes. 6. Your appellant further reserves the right to add, amend or alter the aforesaid grounds of appeal as he may think fit by himself or by his representatives.”

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income declaring total income of Rs.17,26,230/- was subjected to scrutiny. From the profit and loss account it is noticed by the Assessing Officer (AO) that the assessee has debited an amount of Rs.1,02, 800/- towards interest paid towards unsecured loan and interest on overdraft facility to the tune of Rs.5,07,368/-. Balance Sheet shows that the assessee has availed of secured loan of Rs.47,31,158/- which includes bank overdraft loan of Rs.35,37,654/- and also advanced interest free of loan of Rs.27,58,715/-. AO while examining the financials of the assessee noticed that the assessee has paid interest between 10% to 19% however low interest has been charged on loans and advances given by the assessee to the other parties. Declining the contentions raised baby assessee AO proceeded to hold that the interest at the rate of 12% is charged on the interest free loans and advances and computed the same to Rs.3,31,046/- and added the same back to the income of the assessee. The assessee paid interest to one Shri Vimal P Shah to the tune of Rs.63,000/- at the rate of 19% on loans taken from him whereas the interest paid to other unsecured creditors was @ 10% to 12% and as such excess interest at the rate of 7% paid under section 40(2)(b) of the Income Tax Act,1961 (for short 'the Act') to Vimal P. Shah which comes to Rs.23,210/- is disallowed and added the same back to the income of the assessee. AO also noticed that the assessee has shown purchases of Rs.1,96,74,927/- qua which no detail has been furnished nor the assessee produced the parties during the assessment proceedings. Consequently the AO disallowed the purchases made from M/s. Rushi Enterprises as unexplained expenditure and added the same back to the total income of the assessee to the tune of Rs.4,46,800/-

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and AO thereby framed the assessment under section 143(3) of the Act.

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without taking the adjournment application filed by assessee on record. Providing adequate opportunity of being heard is a sine qua non for the complete and proper adjudication of the controversy at hand by the quasi judicial authority which has not been provided and as such impugned order passed by Ld. CIT(A) is not sustainable in the eyes of law and hence set aside. File is remitted back to the Ld. CIT(A) to decide afresh after providing opportunity of being heard to the assessee.

Order pronounced in the open court on 24.08.2023.

Sd/- (KULDIP SINGH) JUDICIAL MEMBER

Mumbai, Dated: 24.08.2023. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy//

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.