VIRAL JEWELLERS,KACHCHH vs. THE ACIT CIRCLE GANDHIDHAM, GANDHIDHAM

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ITA 431/RJT/2026Status: DisposedITAT Rajkot28 July 2026AY 2012-133 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal set aside the ex parte order of the CIT(A) and restored the matter for fresh adjudication. This was done in the interest of natural justice to provide the assessee with another opportunity to be heard.

What were the facts?

The Assessing Officer disallowed interest paid by the assessee to partners on their capital accounts, citing a lack of authorization in the partnership deed. This disallowance was made under Section 154 of the Act. The assessee's appeal before the CIT(A) was dismissed ex parte due to non-compliance with notices.

What were the issues?

Whether the CIT(A)'s ex parte order was justified and if the assessee deserves a fresh opportunity to present its case.

Which sections of the Income-tax Act were involved?

Section 154,Section 143(3),Section 263,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Rajkot Bench, Rajkot

Before: Dr. Arjun Lal Saini & Shri Sonjoy Sarma

For Appellant: Ms. Devina Patel, Ld. AR
For Respondent: Shri Arbind Kumar Mishra, Ld. Sr. DR
Hearing: 29/06/2026Pronounced: 28/07/2026

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट। In The Income Tax Appellate Tribunal, Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member And Shri Sonjoy Sarma, Judicial Member

आयकर अपील सं./ITA No. 431/RJT/2026 [ �नधा�रण वष�/Assessment Year: 2012-13 ] Viral Jewellers The ACIT Circle 47, Jubeli Colony Near Jubilee Garden, IT Office, Gandhidham-370201 Vs. Bhuj-370001, Gujarat Gujarat �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAIFV1989M (अपीलाथ�/Appellant) (��यथ�/Respondent) Appellant by : Ms. Devina Patel, Ld. AR Respondent by : Shri Arbind Kumar Mishra, Ld. Sr. DR Date of Hearing : 29/06/2026 Date of Pronouncement : 28/07/2026

:: ORDER :: Per, Shri Sonjoy Sarma, JM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2012-13, is directed against the order under section 250 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the Commissioner of Income Tax (Appeal) [hereinafter referred to as ‘Ld.CIT(A)’], dated 06.01.2026, which in turn arises out of an order passed by assessing officer u/s. 154 of the Act, dated 11.05.2018.

2.

Brief facts of the case are that the assessee filed its return of income for the relevant assessment year declaring a total income of Rs.48,07,147/-. Subsequently,

ITA No. 431/RJT/2026 Viral Jewellers an assessment under section 143(3) of the Income-tax Act, 1961, was completed accepting the returned income. Thereafter, pursuant to proceedings under section 263 of the Act, a fresh assessment under section 143(3) read with section 263 was passed, again accepting the same total income. Subsequently, the Assessing Officer noticed that the assessee had debited a sum of Rs.46,06,539/- towards interest payable on the standing credit balances of the partners’ capital accounts. It was observed that the partnership deed did not contain any clause authorising payment of interest to the partners or specifying the rate of such interest. Accordingly, the Assessing Officer invoked the provisions of section 154 of the Act, holding that the allowance of such interest constituted a mistake apparent from the record, and passed an order under section 154, recomputing the total income at Rs.94,13,686/- by disallowing the aforesaid interest expenditure of Rs.46,06,539/-.

3.

Aggrieved by the said order, the assessee preferred an appeal before the Ld. Commissioner of Income-tax (Appeals). However, the appeal was dismissed ex parte on account of non-compliance with the notices issued on the dates fixed for hearing.

4.

Still aggrieved by the order of the Ld. CIT(A) assessee has now preferred the present appeal before the Tribunal. It has been submitted that the assessee could not effectively represent its case before the Ld. CIT(A) as the notices were not duly received.

5.

On the other hand, Ld. DR supported the decision of the authority below.

6.

We, after hearing the rival submission of the parties and considering the facts and circumstances of the case, and in the interest of natural justice, we are of the

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ITA No. 431/RJT/2026 Viral Jewellers view that the assessee deserves one more opportunity of being heard. Accordingly, we set aside the impugned ex parte order of the Ld. CIT(A) and restore the matter to his file for fresh adjudication in accordance with law after providing the assessee with a reasonable opportunity of being heard. The assessee is also directed to cooperate with the appellate proceedings and to comply with all notices issued by the Ld. CIT(A) without seeking unnecessary adjournments.

7.

In the result, the appeal of the assessee is allowed, for statistical purposes.

Order pronounced in the open court on this 28th day of July, 2026.

Sd/- Sd/- [ Dr. Arjun Lal Saini ] [ Shri Sonjoy Sarma ] लेखा सद�य/Accountant Member �याियक सद�य/Judicial Member राजकोट/Rajkot िदनांक/ Date: 28/07/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Rajkot 6. Guard File By order //True Copy// Sr. Private Secretary ITAT, Rajkot

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