ARVINDBHAI MOHANBHAI LIMBASIYA,RAJKOT vs. ASSISTANT COMMISSIONER, RAJKOT

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ITA 761/RJT/2025Status: DisposedITAT Rajkot13 July 2026AY 2017-184 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the matter to the CIT(A) for fresh adjudication, granting the assessee one final opportunity to present its case. This was done to uphold principles of natural justice, subject to the assessee paying costs.

What were the facts?

The Assessing Officer disallowed interest expenditure on borrowed funds advanced as unsecured loans to related parties without proper verification of creditworthiness. The assessee's appeal before the CIT(A) was dismissed ex parte due to non-compliance with notices.

What were the issues?

Whether the assessee was denied a proper opportunity to be heard before the CIT(A) due to non-service of notices, and if so, whether the appeal should be remanded for fresh adjudication.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 142(1),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: Shri Darshan Rakholiya, Ld. AR
For Respondent: Shri Ganesh Iyer, Ld. Sr. DR
Hearing: 09/07/2026Pronounced: 13/07/2026

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. 761/RJT/2025 [ �नधा�रण वष�/Assessment Year: 2017-18 ] Arvindbhai Mohanbhai Limbasiya Assistant Commissioner of Income Opp. Meghani Rang Bhavan, Tax, Circle-3(1), Vs. Bhaktinagar Circle, 80ft Road, Rajkot-360005, Gujarat Rajkot-360002, Gujarat �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAYPL7872P (अपीलाथ�/Appellant) (��यथ�/Respondent) Appellant by : Shri Darshan Rakholiya, Ld. AR Respondent by : Shri Ganesh Iyer, Ld. Sr. DR Date of Hearing : 09/07/2026 Date of Pronouncement : 13/07/2026

:: ORDER :: Per, Shri Sonjoy Sarma, JM:

Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2017-18, is directed against the order under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Appeal Centre [in short ‘NFAC’], dated 25.02.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Act, dated 29.12.2019.

ITA No. 761/RJT/2025 Arvindbhai M. Limbasiya 02. The brief facts of the case are that the assessee filed its return of income for the assessment year under consideration declaring a total income of Rs.15,86,830/-. The return was processed under section 143(1) of the Income-tax Act, 1961. Subsequently, the case was selected for scrutiny under CASS, and notices under sections 143(2) and 142(1) of the Act were issued. In response to the notices, the assessee furnished certain details and documents as called for by the Assessing Officer. It was noticed that the assessee was engaged in the business of manufacturing watches and watch parts. On verification of the financial statements, the Assessing Officer observed that the assessee had borrowed substantial funds on which considerable interest expenditure had been incurred. It was further noticed that the borrowed funds had been advanced as unsecured loans to related parties either at a concessional rate of interest or without charging any interest. The Assessing Officer observed that while the assessee had earned interest income of Rs.1,27,27,135/-, it had claimed interest expenditure of Rs.1,25,65,112/- in the Profit and Loss Account. The assessee did not furnish complete financial particulars of the parties to whom the loans had been advanced. Only confirmations and identity details of certain parties were furnished, and the creditworthiness and genuineness of the transactions could not be properly verified. Considering the nature of the transactions and the material available on record, the Assessing Officer made the impugned addition/disallowance and completed the assessment accordingly.

3.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. Commissioner of Income-tax (Appeals). However, due to repeated non- compliance with the notices issued by the CIT(A), the appeal was dismissed ex parte.

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ITA No. 761/RJT/2025 Arvindbhai M. Limbasiya 04. Still, aggrieved by the order of the CIT(A), the assessee has preferred the present appeal before the Tribunal. At the time of hearing, the Ld.AR submitted that the notices issued by the CIT(A) were not properly served upon the assessee and, therefore, the assessee could not effectively represent its case. It was prayed that one more opportunity be granted to substantiate the claim before the appellate authority.

5.

On the other hand, the Ld. DR, supported the orders of the lower authorities.

6.

We have heard the rival submissions and perused the material available on record. It emerges from the record that the conduct of the assessee has been non- cooperative throughout the appellate proceedings, resulting in an ex parte order and unnecessary consumption of valuable judicial time. However, considering the principles of natural justice, we are inclined to grant one final opportunity to the assessee to prosecute the appeal on merits. Accordingly, we restore the matter to the file of the CIT(A) for fresh adjudication after providing adequate opportunity of being heard to the assessee. However, this restoration is made subject to payment of costs of Rs.1,000, which the assessee shall deposit in the Prime Minister’s Relief Fund (or such fund as may be applicable) before the next date of hearing before the CIT(A). Proof of such payment shall be produced before the CIT(A).

The assessee is also directed to cooperate fully with the appellate proceedings and comply with all notices and directions issued by the CIT(A) without seeking unnecessary adjournments. It is made clear that failure to do so may entitle the CIT(A) to decide the appeal in accordance with law on the basis of the material available on record.

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ITA No. 761/RJT/2025 Arvindbhai M. Limbasiya 07. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on this 13th 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: 13/07/2026 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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