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Income Tax Appellate Tribunal, “DB” BENCH, JABALPUR
O R D E R
PER PAVAN KUMAR GADALE JM:
1. The assessee has filed the appeal against the order of the National Faceless Appeal Centre (NFAC) / CIT(A) passed u/s 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal:
The learned Commissioner of Income tax (Appeal) NFAC was not justified in issuing the hearing notice on the dates in which there was partial/complete lockdown in the State due to outbreak of COVID-19 pandemic.
Satyendar Kumar Fouzdra. - 2 -
The learned Commissioner of Income tax (Appeal) NFAC was not justified in passing order ex-parte. Though the notices were served on the appellant, but due to extension of due date of filing audit reports as well the Income tax returns, the counsel sought adjournments, however learned Commissioner of Income tax (Appeal) proceeded to pass ex-parte order. Thus order passed is bad in law.
The learned Commissioner of Income tax (Appeal) NFAC was not justified in confirming the addition of Rs.3,67,933 made by the assessing officer mechanically, without conducting any enquiry to determine the fair market interest rates on loans at 12%, so as to arrive to the conclusion that the amount paid by the appellant is excessive or unreasonable in comparison to the fair market value price.
The learned Commissioner of Income tax (Appeal) NFAC was not justified in confirming the addition of Rs.3,67,933 made by the assessing officer without appreciating that these loans were taken in earlier years and in every year, the interest at the rate of 15% was paid and is duly accepted by the AO.
The learned Commissioner of Income tax (Appeal) NFAC was not justified in confirming the addition of Rs.3,67,933 made by the assessing officer without appreciating that the lenders from whom loans were taken, are also charged to tax at higher rate of the income tax slab and hence the finding of AO that loans at high interest rate is given to shift the taxability of profit to lower rates applicable on the lenders.
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The learned Commissioner of Income tax (Appeal) NFAC was not justified in confirming the addition of Rs.3,67,933 made by the assessing officer without appreciating that it is settled law that Once it is established that there was nexus between the expenditure and the purpose of the business the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit.
The appellant craves for leave to amend, add to or omit any ground up to the time of hearing of the appeal. 2. The brief facts of the case are that the assessee is engaged in the business of wholesale trading of kirana goods. The assessee has filed the return of income for the A.Y 2013-14 on 29.09.2013 disclosing a total income of Rs. 22,78,640/-.Subsequently the case was selected for scrutiny under the CASS and notice u/s 143(2) and 142(1) of the Act along with the questionnaire are issued. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and submitted the details and the case was discussed. In the course of assessment proceedings the AO found that the assessee has obtained loans from related parties and has paid interest @ 15%.pa. Further the assessee has submitted that the interest @ 15%p.a, is paid on unsecured loans considering the nature
Satyendar Kumar Fouzdra. - 4 - of business connections and the turnover. Whereas the AO was not satisfied with the explanations and observe that the interest paid by the assessee to the related parties is excessive and restricted the interest payment @12%p.a. and disallowed Rs. 3,67,933/- u/s 40(A)(2) of the Act and assessed the total income of Rs.26,46,570/- and passed the order u/s 143(3) of the Act dated 19.03.2016.
3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A),whereas the CIT(A) has considered the grounds of appeal, statement of facts and findings of the AO and has issued notices of hearing and since there was no compliance by the assessee to notices. Therefore the CIT(A) considering the information on record has confirmed the action of the A.O and dismissed the appeal. Aggrieved by the ex parte order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal.
4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the action of the Assessing officer overlooking the submissions made in the assessment proceedings. Further the assessee has a good case on merits and shall substantiate with the material evidences and prayed for an opportunity to explain before the lower
Satyendar Kumar Fouzdra. - 5 - authorities. Contra, the Ld. DR supported the order of the CIT(A).
5. We heard the rival submissions and perused the material on record. Prima-facie the CIT(A) has passed the order considering the fact that there is no appearance in spite of providing adequate opportunity of hearing and the notices were issued. Therefore, the CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and dismissed the appeal ex-parte confirming the action of the assessing officer. The CIT(A) has issued the notices of hearing referred at Page 2 Para 3 of the order, but there was no response and thus the CIT(A) came to a conclusion that the assessee is not interested and decided the appeal based on the information available on record. Whereas the assessee has raised grounds of appeal challenging the addition by the A.O and there could be various reasons for non appearance which cannot be overruled. Therefore, considering the principles of natural justice shall provide one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the entire disputed issues to the file of the CIT(A) to adjudicate afresh and the assessee should be provided adequate
Satyendar Kumar Fouzdra. - 6 - opportunity of hearing and shall cooperate in submitting the information for early disposal of the appeal. And the grounds of appeal of the assessee are allowed for statistical purposes.
6. In the result, the appeal filed by assessee is allowed for statistical purposes. Orders pronounced in the open court on 14.09.2023