SARA TOWERS PRIVATE LIMITED,AURANGABAD vs. THE INCOME TAX OFFICER, WARD-2(4), PUNE

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ITA 837/PUN/2023Status: DisposedITAT Pune10 August 2023AY 2013-144 pages
AI SummaryRemanded

What did the Tribunal hold?

The ITAT found that the NFAC did not follow the principles of natural justice by giving insufficient opportunities to the assessee, especially considering the COVID-19 pandemic period. The matter was remanded back to the NFAC for fresh adjudication.

What were the facts?

The assessee debited ₹25,00,161/- as finance cost for interest on pre-EMI paid to customers. The AO disallowed this as a business expenditure, treating it as a personal liability of the customer. The NFAC dismissed the appeal ex-parte due to the assessee's non-response.

What were the issues?

Whether the NFAC violated principles of natural justice by providing insufficient opportunities for appeal. Whether the interest on pre-EMI paid to customers is a disallowable business expenditure.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 263,Section 37(1),Section 250,Section 246A(1)(a),Section 251(1)(a),Section 250(6)

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Income Tax Appellate Tribunal, PUNE ‘SMC’ BENCH, PUNE

Before: HON’BLE SHRI S. S. GODARA & SHRI G. D. PADMAHSHALI

For Appellant: Shri Manoj Jain
Pronounced: 10/08/2023

बिधम / V/s Income Tax Officer, Ward-2(4), Aurangabad. . . . . . . . प्रत्यर्थी / Respondent द्वधरध/ Appearances Assessee by : Shri Manoj Jain Revenue by : Shri R Y Balawade, Addl. CIT सुनवाई की तारीख / Date of conclusive Hearing : 09/08/2023 घोषणा की तारीख / Date of Pronouncement : 10/08/2023 आदेश/ ORDER PER G. D. PADMAHSHALI, AM; This appeal is filed by the assessee against DIN & order No. ITBA/NFAC/S/250/2023-24/1053792634(1) dt. 19/06/2023 passed u/s 250 of Income Tax Act, 1961 [in short ‘the Act’] by National Faceless Appeal Centre [in short ‘NFAC’] of which ascended out of an order of assessment passed u/s 143(3) r.w.s 263 of the Act by Income Tax Officer, Ward-(4), Aurangabad [in short ‘AO’] for assessment year 2013-14 [in short ‘AY’].

ITAT-Pune Page 1 of 4

2.

Briefly stated facts of the case are; 2.1 The assessee is a Private Limited Company engaged in the business of construction of residential housing projects etc., whose Return of Income filed u/s 139(1) of the Act was subjected to scrutiny under CASS mechanism by issue of notice u/s 143(2) of the Act.

2.2 In the absence of any cogent evidences against an amount of ₹25,00,161/- debited to Profit and Loss Account as a finance cost attributable to interest payment on pre-EMI paid to customers, the Ld. AO disallowed the aforestated sum and framed the assessment u/s 143(3) of the Act noting his findings at para 6.2 placed at page no.3 of the order : ‚6.2 It is also noticed that an amount of Rs.25,00,161/- being interest on Pre-EMI of customers was debited which is reflected in Finance cost. The AR of the assessee produced the submission on this issue and the same has been considered. However the contention of the assessee is not acceptable. The Pre-EMI amount would be paid by the buyer on the flats initially and on sale it is adjusted against the security deposit given to the buyer. However, the ledger account do not show any security deposit. Hence, it cannot be claimed as business expenditure u/s 37(1) of the IT Act. As the same is personal liability of the individual customer i.e. Buyer of the flat(s). Thus, the same is disallowed u/s 37(1) of the IT Act and added to the total income of the assessee. Penalty u/s 271(1)(c) also initiated for inaccurate particulars of income. (Addition of Rs.25,00,161/-)‛ ITAT-Pune Page 2 of 4 2.3 Aggrieved by the aforestated disallowance, the assessee filed an appeal before the Ld. NFAC u/s 246A(1)(a) of the Act. During the first appellate proceedings, the Ld. NFAC provided as much as five opportunities to the assessee however same remained unresponded. In the absence any response forthcoming from the assessee, Ld. NFAC reiterating the findings of tax authority below has culminated the proceedings ex-parte placing reliance on the decision of Hon’ble Apex Court in ‘Ashokji Chanduji Thakur Vs PCIT’ reported in 130 Taxmann.com 130 [Equivalent Citation 282 Taxmann 307 (SC)].

2.4 Aggrieved by the aforestated ex-parte adjudication of Ld. FAA, the appellant assessee set-up this case alleging the violation of principle of natural justice in the former to merits thereof.

3.

We have heard rival contentions, perused the material placed on record in light of rule 18 of ITAT-Rules 1963 and note that, the proceedings before the Ld. NFAC commenced prior to nationwide lockdown owning to COVID-19 and discontinued during pandemic period. Post COVID-19 the proceedings were reassumed by issue of first notice dt. 15/05/2023 calling upon the assessee to comply within a less than further 15 days. On assessee’s failure to respond, the Ld. NFAC further called upon the assessee by issue of two notices viz; 31/05/2023 and 12/06/2023 affording thereby less than 8 days to comply, which for the reason remained unattended by the appellant.

ITAT-Pune Page 3 of 4

4.

We note that, in the aforestated circumstances, the Ld. NFAC in the absence of cogent evidential material and in the evince of restriction placed by 251(1)(a) of the Act, had to culminate the proceedings merely quoting para 6.2 of the assessment order. This adjudication, however in our considered view is not in consonance with the provision of sub-section (6) of section 250 of the Act. For the reason, we deem fit to remand the matter back to the file of Ld. NFAC with a direction to deal therewith de-nova after according not more than three opportunities and pass a speaking order in terms of section 250(6) of the Act. We also direct the appellant assessee to co-operate with the Ld. NFAC in speedy disposal of the appeal without seeking unreasoned adjournment.

5.

In result, the appeal is ALLOWED FOR STATISTICAL PURPOSE.

In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Thursday, 10th day of August, 2023.

-S/d- -S/d- S. S. GODARA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/ PUNE; ददनाांक / Dated : 10th day of August, 2023. आदेश की प्रनिनलनपअग्रेनषि / Copy of the Order forwarded to : 1.अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The Pr. CIT, Pune 4. The CIT(A), NFAC Delhi 5. DR, ITAT, Bench ‘SMC’, Pune 6.गार्डफ़ाइल / Guard File. *SGR आदेशानुसार / By Order वररष्ठदनजीसदिव / Sr. Private Secretary आयकरअपीलीयन्यायादधकरण, पुणे / ITAT, Pune.

ITAT-Pune Page 4 of 4

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