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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI MANJUNATHA. G, HON’BLE
PER MANJUNATHA. G, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 23.12.2022 and pertains to assessment year 2018-19.
The brief facts of the case are that, the appellant is a firm engaged in the business of construction activity. The assessee
:-2-: ITA. No: 199/Chny/2023 has filed its return of income for the assessment year 2018-19 on 31.10.2018, admitting a total loss of Rs. 21,02,74,487/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has paid interest on capital accounts of partners over and above the rates specified in partnership deed, in violation of provisions of section 40(b) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) and thus, after considering relevant submissions of the assessee disallowed a sum of Rs. 9,50,68,042/- towards interest paid on partners capital account. The assessee carried the matter in appeal before the first appellate authority, but could not succeed. The ld. CIT(A), for the reason stated in their appellate order dated 23.12.2022 dismissed appeal filed by the assessee and sustained additions made towards disallowance of interest on partners capital account. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
The Ld. Counsel for the assessee, referring to notice u/s. 250 of the Act, issued by the NFAC, Delhi, dated 20.12.2022 submits that the CIT(A) directed the assessee to submit relevant details on or before 23.12.2022. The assessee has filed a petition for admission of additional evidences u/r. 46A of the :-3-: ITA. No: 199/Chny/2023 Income-tax Rules, 1962, on 23.12.2022, but the CIT(A) without considering petition filed by the assessee has dismissed appeal vide their order dated 23.12.2022, in violation of principle of natural justice. Therefore, he submits that one more opportunity of hearing may be given to the assessee to file necessary evidence to justify its case.
The ld. Sr. DR, AR V Sreenivasan, Addl. CIT, submits that since the CIT(A) has not considered petition filed by the assessee u/r. 46A of I.T. Rules 1962, the matter may be set aside to the file of the lower authorities to give one more opportunity of hearing to the assessee.
We have heard both the parties and considered relevant material available on record. We find that although the ld. CIT(A) gave time to the appellant to submit necessary details on or before 23.12.2022, but the appeal filed by the assessee has been dismissed on 23.12.2022 itself, even though the assessee has filed petition for admission of additional evidence u/r. 46A of I.T. Rules, 1962, on 22.12.2022 itself. In our considered view, the CIT(A) has dismissed appeal filed by the assessee without considering the petition filed by the assessee, in violation of principle of natural justice and thus, we are of the considered
:-4-: ITA. No: 199/Chny/2023 view that the issue needs to go back to the file of the Assessing Officer to consider additional evidence filed by the assessee to justify its case, in respect of disallowance of interest on partners capital account. Thus, we set aside the order passed by the CIT(A) and restore the issue back to the file of the Assessing Officer and direct the Assessing Officer to reconsider the issue denovo in accordance with law, after providing reasonable opportunity of hearing to the assessee. Needless to say, the assessee shall furnish necessary details without seeking any adjournment.