HOULIHAN LOKEY AD vs. IORY (INDIA) PRIVATE LIMITED,MUMBAIVS.ASSISTANT COMMISSIONER OF INCOME TAX - 15(1)(2), MUMBAI

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ITA 3767/MUM/2025Status: DisposedITAT Mumbai08 October 2025AY 2012-135 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the appellate order was passed ex parte, primarily due to the assessee's lack of proper compliance during the appeal proceedings. Consequently, the issues were not properly adjudicated due to the absence of a reply from the assessee. In the substantial interest of justice, the Tribunal set aside the appellate order and restored the entire matter back to the Assessing Officer (AO) for passing a fresh assessment order. The AO was directed to provide the assessee with an adequate opportunity of hearing to present its case. The assessee was cautioned against seeking frivolous adjournments and was expected to remain cooperative. The issue of penalty under Section 271(1)(c) was implicitly part of the de novo assessment, as the entire matter was restored to the AO. No specific finding was given on the merits of the disallowance or the penalty invocation, as the case was remanded.

What were the facts?

The assessee, Houlihan Lokey Advisory (India) Private Limited, filed an appeal against the order dated 31.03.2025 passed by the Learned Commissioner of Income-tax, Appeal, ADDL/JCIT(A)-1, Bengaluru. This order upheld the disallowance of Rs. 14,37,357 made by the Assistant Commissioner of Income-Tax-15(1)(2) in the assessment order dated 25.02.2015 for Assessment Year 2012-13. The disallowance pertained to a "Provision for Expenses." The assessee claimed this provision was for expenses to be incurred in the future, for which bills were not yet raised and TDS was not deducted. The Assessing Officer (AO) disallowed it, stating only incurred expenses are deductible. The assessee appealed to the CIT(A), submitting additional evidence. The CIT(A) obtained a remand report from the AO and issued a notice to the assessee, but the assessee did not respond. Consequently, the CIT(A) dismissed the appeal.

What were the issues?

1. Whether the Learned CIT(A) erred in upholding the disallowance of "Provision for Expenses" amounting to Rs. 14,37,357, on the grounds that only actually incurred expenses are deductible and that TDS was not deducted on the provision, thereby violating Section 40(a)(ia) of the Income-tax Act, 1961? 2. Whether the Learned CIT(A) erred in violating the principles of natural justice by not serving notice on the assessee's registered email IDs, only placing a notice on the income-tax web portal after more than a month, and not considering additional evidence filed by the assessee? 3. Whether the Learned CIT(A)/AO erred in invoking penalty proceedings under Section 271(1)(c) of the Act for concealment of particulars of income or furnishing inaccurate particulars of income for AY 2012-13? Assessee's Contentions: - The Learned CIT(A) did not provide adequate opportunity to respond to notices and dismissed the appeal based solely on the assessment order and remand report. - The assessee was unaware of any remand report being forwarded for its comments. - In the interest of justice and fair play, the appellate order should be set aside, and the matter remanded to the AO for de novo assessment. Revenue's Contentions: - The Learned DR relied on the orders of the authorities below. - The Learned DR did not object to the proposition of remanding the matter to the AO.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 282,Section 40(a)(ia),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Before: SHRI ANIKESH BANERJEE & SHRI PRABHASH SHANKAR

For Appellant: Shri Hiten Thakkar, Adv
For Respondent: Shri Hemanshu Joshi (Sr. DR)
Hearing: 07.08.2025Pronounced: 07.10.2025

PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 31.03.2025 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax, Appeal, ADDL/JCIT(A)-1 Bengaluru [hereinafter referred to as “CIT(A)"] pertaining to assessment order passed u/s.143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 25.02.2015f or the Assessment Year [A.Y.] 2012-13. Page 2 A.Y. 2012-13 Houlihan Lokey Advisory (India) Private Limited

2.

The grounds of appeal are as under:

1.

The learned CIT(A) has, on the facts and circumstances of the case and in law, erred in upholding the decision of the Assistant Commissioner Of Income-Tax-15(1)(2) (learned AO) in disallowing the “Provision for Expenses” amounting to Rs 14,37,357 in computing the total income/ loss of the Appellant on the basis that the expenditure actually incurred is deductible and given that appellant will have to incur these expenses in future, hence the bills were not raised and TDS also not deducted on the said provision.

2.

The learned CIT(A) has, on the facts and circumstances of the case and in law, erred in concluding the CIT(A) proceedings in violation of the principles of natural justice by:

2.

1 Not serving the notice on the Appellant on it's registered email IDs (ie. the proper mode of service of notice as per the provisions of section 282 of the Act read with Rule 127 of the Income-tax Rules, 1961);

2.

2 Only placing the above notice on the income-tax web portal, that too after more than a month had passed after passing of the order, and 2.3 Not taking into consideration the additional evidence filed by the Appellant wherein party wise details, Invoices and ledgers of the above Provision of expenses were submitted (additional evidence was filed by the Appellant as the learned AO had also erred in concluding the assessment proceedings without giving the Appellant an opportunity of being heard in respect of the disallowance made)

3.

The learned CIT(A)/ learned AO erred in invoking penalty proceedings under section 271(1)(c) of the Act for concealment of particulars of income or furnishing of inaccurate particulars of income for the captioned AY.

3.

Brief facts of the case are that in the instant case, the return was filed declaring loss of Rs.62,23,8231-. Subsequently, the case was selected for scrutiny. During the year under consideration, the assessee had shown income from operations at Rs.2,15,01,720/- and other related income at Rs.5,25,163/- and the net loss as per the Profit & Loss Account had been computed at Rs.82,69,798/-. On verification of P&L Account, it was found by AO that the assessee had claimed deduction of Page 3 Houlihan Lokey Advisory (India) Private Limited Rs.14,37,357/-, being provision for expenses which was disallowed on the basis that the expenditure actually incurred is deductible and excess provision is not allowable. Therefore, he disallowed the sum and added to the income.

4.

Aggrieved by the said order of AO, the assessee filed appeal before the ld.CIT(A) and during appellate proceedings submitted additional evidences under Rule 46A of Income Tax Rules, 1962.As per the ld.CIT(A),a remand report had been obtained from the AO and on the basis of the report, opportunity was given to the assessee by way a notice issued. However, the assessee neither produced any written submission nor responded to the said notice even after affording sufficient time. Therefore, the appeal was decided based on the material available on record.It was concluded that the expenses were in the name of provision. No TDS was also deducted on the said provision. Hence, these expenses were not allowable u/s.40(a)(ia) also. Since, the said expenses were not paid during the year under consideration and kept as the provision, the same were not allowable. Thus, the addition was upheld and the appeal was dismissed.

5.

Before us, the ld.DR relied on the orders of the authorities below while the ld.AR has pleaded that the ld.CIT(A) did not allow Page 4 Houlihan Lokey Advisory (India) Private Limited adequate opportunity to respond to the notice and went on to dismiss

the appeal solely on the basis of the assessment order and remand report. It is also submitted that the assessee was never aware of any remand report claimed to have been forwarded by the ld.CIT(A) for its comments. It is stated that in the interest of justice and fairplay the appellate order may be set aside and the entire issue may be remanded to the AO for de novo assessment. The ld.DR did not object to this proposition.

6.

We find that the appellate order has been passed in ex parte manner mainly on account of lack of proper compliance by the assessee during appeal proceedings. Consequently, the issues involved were not adjudicated properly in the absence of any reply from the assessee.

7.

In the light of above observations and in the substantial interest of justice, we set aside the appellate order and restore the entire matter back to the AO for passing the assessment order de novo after allowing adequate opportunity of hearing to the assessee to canvass its case. The assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings before the AO. Page 5 Houlihan Lokey Advisory (India) Private Limited

8.

In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 07/10/2025. ANIKESH BANERJEE (न्यायिक सदस्य /JUDICIAL MEMBER) Place: मुंबई/Mumbai दिनांक / Date 07.10.2025 Lubhna Shaikh / Steno PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) आदेश की प्रतिलिपि अग्रेषित/

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