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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 06/01/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2014–15.
In its appeal, the assessee has raised the following grounds:–
M/s. Vidarbha Mining Pvt. Ltd. ITA no.574/Mum./2023 “1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in passing ex- parte order without granting sufficient opportunity of being heard to the appellant.
2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing a sum of Rs.1,20,13,104/-, claimed as business expenditure (leading to a loss) by the assessee, without appreciating the fact and circumstances of the case.
3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in treating the interest income and write back of excess provision of interest totaling to Rs.54,29,048/- under the head Income from other sources instead of Business Income, without considering the facts and circumstances of the case.
4. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in treating the compensation of Rs.4 crores as a capital loss and not including the same for the computation of total income, thereby increasing the long term capital gain by Rs.4 crores, without considering the facts and circumstances of the case.
5. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in Computing the value of depreciable fixed assets transferred under the slump sale as Rs.4,55,23,811/- instead of Rs.5,68,87,052/-, thus increasing the long term capital gain on transfer of mining business by Rs. 1,13,63,241/- without considering the facts and circumstances of the case.
6. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in treating the trade payable of Rs.5,71,14,142/- as alleged income of the assessee u/s 41(1) of the Act, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing the short term capital loss of Rs.3.15.65.005/ on sale of equity shares, without considering the facts and circumstances of the case.
8. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in adding the compensation of Rs.4 crores and loss on sale of shares of Rs.3,15,65,005/- while calculating the Book Profit u/s 115JB of the Act, without considering the facts and circumstances of the case.
The appellant craves leave to add, amend, alter or delete the said ground of appeal.”
M/s. Vidarbha Mining Pvt. Ltd. ITA no.574/Mum./2023
The brief facts of the case are: The assessee is a domestic private limited company, engaged in the business of mining of minerals, metals, or composition. For the year under consideration, the assessee filed its return of income on 08/11/2014, declaring a loss of Rs.3,18,04,157. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, from the perusal of the audited statement of profit and loss account, it was observed that the revenue from operations is Nil. It was further observed that the mining operations were discontinued during December 2012 and after its discontinuation the mining operations were never restarted any time before the slump sale of the mining business vide slump sales agreement dated 13/12/2013. In support of its claim of loss of Rs.1,32,43,776 under the head “Business Income”, the assessee submitted that the sale of the business is quite a long process which takes a substantial time to complete and the assessee has to incur a few routine expenditures, which are recurring in nature. The Assessing Officer (“AO”) vide order dated 28/12/2016 passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that the revenue from operations during the relevant previous year is Nil and the only amount credited to the profit and loss account are (a) profit on transfer of business; (b) interest on loan, FDR and income tax refund; and (c) excess provision of interest write back. Thus, admittedly no revenue is earned from the business operations. The AO further held that though the interest income was taxed under the head “Business Income” in the immediately preceding assessment year, facts related to that year are different from the facts of the present Page | 3
M/s. Vidarbha Mining Pvt. Ltd. ITA no.574/Mum./2023 assessment year, since for the assessment year 2013-14, the assessee had its business operation till December 2012 and also earned revenue of Rs.13,86,77,909 during the previous year relevant to the assessment year 2013-14. Accordingly, the AO assessed the interest income and write back of excess provision of interest both totalling to Rs. 54,29,048 under the head “income from other sources”. Further, various expenses leading to loss under the head “Business Income” were also disallowed except only to the extent of Rs.12,30,672 relatable to the need to maintain the corporate structure and status of the assessee. The AO also added Rs.1,13,63,241 being the excess amount of long-term capital gains arising on slump sale. Further, the AO disallowed the compensation payment of Rs.4 crores by treating the same as a sham and computed the long-term capital gains at Rs.6,43,67,464. The AO treated the trade payable aggregating to Rs.5,71,14,142 not forming part of slump sales as income under section 41(1) of the Act. The AO also disallowed the short-term capital loss of Rs.3,15,65,005 on the sale of equity shares of 3 companies.
In appeal before the learned CIT(A), despite various notices being issued, no reply/submission was filed on behalf of the assessee. Accordingly, vide impugned ex–parte order dated 06/01/2023, the learned CIT(A) dismissed the appeal filed by the assessee for non-prosecution. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned Authorised Representative for the assessee (“learned A.R.”) submitted that the notices of hearing issued by the M/s. Vidarbha Mining Pvt. Ltd. ITA no.574/Mum./2023 learned CIT(A) were not received by the assessee and therefore, the assessee could not comply with the same.
On the other hand, the learned Departmental Representative did not place any material on record to controvert the submissions of the learned AR.
7. We have considered the rival submissions and perused the material available on record. It is evident that the learned CIT(A) has passed the order ex-parte due to the non-appearance of/on behalf of the assessee. It is also evident that the learned CIT(A) has not dealt with the merits of the issues raised by the assessee in its appeal, which we find to be contrary to the provisions of section 250(6) of the Act which requires the order passed by the learned CIT(A) to be in writing and also stating the points for determination, the decision thereon and the reason for the decision. We find that the coordinate bench of the Tribunal in Marvel Industries Ltd. vs DCIT, [2022] 196 ITD 229 (Mumbai-Trib.) held that irrespective of the non-appearance of the assessee before the CIT(A), the CIT(A) ought to have dealt with the issues so raised by the assessee-appellant on merits and by way of speaking order and in accordance with the law. Therefore, in view of the above, we deem it fit and proper to restore the matter to the file of the learned CIT(A) for de novo adjudication of the appeal on merits after consideration of all the details/submissions as may be filed by the assessee. Needless to mention that no order shall be passed without affording reasonable opportunity of hearing to the parties. Further, the assessee is directed to appear before the learned CIT(A) on all the dates of hearing as may be fixed without any default. As the matter is being restored to the file of the learned CIT(A) for adjudication on Page | 5
M/s. Vidarbha Mining Pvt. Ltd. ITA no.574/Mum./2023 merits, the other grievances raised by the assessee on merits do not call for adjudication at this stage. Accordingly, grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 27/04/2023