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Facts
The assessee, a partnership firm, filed a return of income declaring 'Nil' income after setting off brought forward losses. The Assessing Officer made additions and disallowances. On appeal, the CIT(A) dismissed the appeal ex-parte due to non-compliance with notices.
Held
The Tribunal held that the CIT(A) erred in passing an ex-parte order without granting a reasonable opportunity of being heard, violating principles of natural justice. The adjournments sought by the assessee were for bona fide reasons.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte without adjudicating on merits, despite the assessee seeking adjournments for reasonable causes.
Sections Cited
143(3), 250
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI NARENDER KUMAR CHOUDHRY
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 01.07.2025 passed by the Ld. Commissioner of income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, raising following grounds:
1.The Hon'ble CIT(A) has erred in passing an ex-parte order, without appreciating(disregarding) the facts / reasons for which appellant had requested for adjournment.
The Hon'ble CIT(A) has erred in passing an ex 2. The Hon'ble CIT(A) has erred in passing an ex-parte order, parte order, not only without having granted a reasonable opportunity of not only without having granted a reasonable opportunity of not only without having granted a reasonable opportunity of being heard but without having adjud being heard but without having adjudicated upon statements of icated upon statements of facts and grounds of appeal
inspite of the same being on record facts and grounds of appeal inspite of the same being on record facts and grounds of appeal inspite of the same being on record of the Hon'ble CIT(A) [NFAC] having been already filed along of the Hon'ble CIT(A) [NFAC] having been already filed along of the Hon'ble CIT(A) [NFAC] having been already filed along with form no 35 i.e memo of appeal. with form no 35 i.e memo of appeal.
3. The Hon'ble CIT(A) [NFAC] has failed in appreciating that the 3. The Hon'ble CIT(A) [NFAC] has failed in appreciating that the 3. The Hon'ble CIT(A) [NFAC] has failed in appreciating that the Ld. Assessing Officer has erred in assessing the income at Rs. Assessing Officer has erred in assessing the income at Rs. Assessing Officer has erred in assessing the income at Rs. 1,77,08,085/ 1,77,08,085/- as against Rs. Nil disclosed by appellant in as against Rs. Nil disclosed by appellant in return of income filed, without appreciating the facts of the case return of income filed, without appreciating the facts of the case return of income filed, without appreciating the facts of the case as well as law. as well as law. Without prejudice to above, appellant submits that: Without prejudice to above, appellant submits that:
4. The Hon'ble CIT(A) [NFAC] has failed in appreciating that the The Hon'ble CIT(A) [NFAC] has failed in appreciating that the The Hon'ble CIT(A) [NFAC] has failed in appreciating that the Ld. Assessing Officer has erred in treating the profit earned on Ld. Assessing Officer has erred in treating the profit earned on Ld. Assessing Officer has erred in treating the profit earned on sale of TDR under the head capital gain without appreciating sale of TDR under the head capital gain without appreciating sale of TDR under the head capital gain without appreciating the fact that the said transaction was carried out by appellant the fact that the said transaction was carried out by appellant the fact that the said transaction was carried out by appellant in the regular course of business which fact was a matter of he regular course of business which fact was a matter of he regular course of business which fact was a matter of record of the Ld. Assessing Officer. record of the Ld. Assessing Officer.
5. The Hon'ble CIT(A)[NFAC] has failed in appreciating that the 5. The Hon'ble CIT(A)[NFAC] has failed in appreciating that the 5. The Hon'ble CIT(A)[NFAC] has failed in appreciating that the Ld. Assessing Officer has erred in treating the transaction Ld. Assessing Officer has erred in treating the transaction Ld. Assessing Officer has erred in treating the transaction relating to purchase and sale of TDR, relating to purchase and sale of TDR, under the head capital under the head capital gain, not only without appreciating the fact that the transactions gain, not only without appreciating the fact that the transactions gain, not only without appreciating the fact that the transactions in the course of real estate business of appellant were done in in the course of real estate business of appellant were done in in the course of real estate business of appellant were done in the earlier years as well wherein the same were accepted by the earlier years as well wherein the same were accepted by the earlier years as well wherein the same were accepted by department which fact too was brought to n department which fact too was brought to notice of Ld. otice of Ld. Assessing Officer during course of assessment proceedings. Assessing Officer during course of assessment proceedings. Assessing Officer during course of assessment proceedings.
6. The Hon'ble CIT(A) [NFAC] has failed in appreciating that the 6. The Hon'ble CIT(A) [NFAC] has failed in appreciating that the 6. The Hon'ble CIT(A) [NFAC] has failed in appreciating that the Ld. Assessing Officer has erred in disallowing the remuneration Ld. Assessing Officer has erred in disallowing the remuneration Ld. Assessing Officer has erred in disallowing the remuneration paid to partner amounting to Rs. 55,50,000/ paid to partner amounting to Rs. 55,50,000/- - without appreciating the facts of the case as well as law. preciating the facts of the case as well as law.
7. The Hon'ble CTT(A) [NFAC] has failed in appreciating that the 7. The Hon'ble CTT(A) [NFAC] has failed in appreciating that the 7. The Hon'ble CTT(A) [NFAC] has failed in appreciating that the Ld. Assessing Officer has erred in disallowing the interest paid Ld. Assessing Officer has erred in disallowing the interest paid Ld. Assessing Officer has erred in disallowing the interest paid to partner amounting to Rs.55,68,085/ to partner amounting to Rs.55,68,085/- without appreciating without appreciating the facts of the the facts of the case as well as law.
8. Without prejudice to above grounds, the appellant submits
8. Without prejudice to above grounds, the appellant submits
8. Without prejudice to above grounds, the appellant submits that the Hon'ble CIT(A) has failed in appreciating that Ld. that the Hon'ble CIT(A) has failed in appreciating that Ld. that the Hon'ble CIT(A) has failed in appreciating that Ld. Assessing Officer has erred in calculating the short term capital Assessing Officer has erred in calculating the short term capital Assessing Officer has erred in calculating the short term capital gain at Rs.1,40,85,502/ gain at Rs.1,40,85,502/-, by allowing the net l , by allowing the net loss of Rs.49,88,085/ Rs.49,88,085/- (derived by him) without appreciating the facts (derived by him) without appreciating the facts & figures of case and without considering the fact, that & figures of case and without considering the fact, that & figures of case and without considering the fact, that assuming for argument sake though not admitted that even if assuming for argument sake though not admitted that even if assuming for argument sake though not admitted that even if an amount of Rs. 1,90,73,560/ an amount of Rs. 1,90,73,560/- (derived by Assessing Officer (derived by Assessing Officer as short term capital gain) was liable to tax as short term term capital gain) was liable to tax as short term term capital gain) was liable to tax as short term capital gain even in such a situation the losses brought forward capital gain even in such a situation the losses brought forward capital gain even in such a situation the losses brought forward from earlier years were available to be set off which have not from earlier years were available to be set off which have not from earlier years were available to be set off which have not been allowed /considered by Ld. Assessing Officer. been allowed /considered by Ld. Assessing Officer.
9. Without prejudice to a 9. Without prejudice to above grounds, the appellant further bove grounds, the appellant further submits that the Hon'ble CIT(A) has failed in appreciating that submits that the Hon'ble CIT(A) has failed in appreciating that submits that the Hon'ble CIT(A) has failed in appreciating that Ld. Assessing Officer has erred in calculating the long term Ld. Assessing Officer has erred in calculating the long term Ld. Assessing Officer has erred in calculating the long term capital gain at Rs.36,22,583/ capital gain at Rs.36,22,583/- (derived by him) without (derived by him) without appreciating the facts & figures of cas appreciating the facts & figures of case and without considering e and without considering the fact, that assuming for argument sake though not admitted the fact, that assuming for argument sake though not admitted the fact, that assuming for argument sake though not admitted that even if an amount of Rs. 36,22,583/ that even if an amount of Rs. 36,22,583/- (derived by (derived by Assessing Officer as long term capital gain) was liable to tax as Assessing Officer as long term capital gain) was liable to tax as Assessing Officer as long term capital gain) was liable to tax as long term capital gain, even then in such a situ long term capital gain, even then in such a situation the losses ation the losses brought forward from earlier years were available to be set off brought forward from earlier years were available to be set off brought forward from earlier years were available to be set off which had not been allowed/considered by Ld. Assessing which had not been allowed/considered by Ld. Assessing which had not been allowed/considered by Ld. Assessing Officer.
10. The appellant craves leave to add, amend, alter &/ or vary 10. The appellant craves leave to add, amend, alter &/ or vary 10. The appellant craves leave to add, amend, alter &/ or vary any of the grounds at the time or before the hea any of the grounds at the time or before the hearing of this ring of this appeal. 11. 11.
11. The The The appellant appellant appellant therefore therefore therefore prays prays prays that that that additions/disallowances/variations made by the Ld. Assessing additions/disallowances/variations made by the Ld. Assessing additions/disallowances/variations made by the Ld. Assessing Officer, confirmed by Hon'ble CIT(A) not being in accordance Officer, confirmed by Hon'ble CIT(A) not being in accordance Officer, confirmed by Hon'ble CIT(A) not being in accordance with the provisions of law, may please be deleted and / or the with the provisions of law, may please be deleted and / or the with the provisions of law, may please be deleted and / or the order passed by Hon'ble CIT(A) may please be set aside back d by Hon'ble CIT(A) may please be set aside back d by Hon'ble CIT(A) may please be set aside back for fresh adjudication for fresh adjudication and oblige.
2. Briefly stated, facts of the case are that the assessee a Briefly stated, facts of the case are that the assessee a Briefly stated, facts of the case are that the assessee a partnership firm, filed its return of income on 02.01.2022 declaring filed its return of income on 02.01.2022 declaring filed its return of income on 02.01.2022 declaring total income at Rs. Nil after setting off total income at Rs. Nil after setting off brought forward losses brought forward losses amounting to Rs.70,76,171/ amounting to Rs.70,76,171/-. The return of income filed by the . The return of income filed by the assessee was selected for scrutiny and statutory notices under the assessee was selected for scrutiny and statutory notices under the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) were issued and complied tax Act, 1961 (in short ‘the Act’) were issued and complied tax Act, 1961 (in short ‘the Act’) were issued and complied with. The Assessing Officer in asses with. The Assessing Officer in assessment completed u/s 143(3) of nt completed u/s 143(3) of the Act on 28.12.2022 made following additions/disallowance: ct on 28.12.2022 made following additions/disallowance: ct on 28.12.2022 made following additions/disallowance:
Sl No. Nature of additions/disallowance Nature of additions/disallowance Amount (Rs.) 1. Disallowance of Remuneration as Disallowance of Remuneration as 55,50,000/- discussed in para 4.6.2 discussed in para 4.6.2 2. Disallowance of Interest expense as Disallowance of Interest expense as 55,68,085/- discussed in Para 4.6.3 discussed in Para 4.6.3 3 Addition on account of STCG Addition on account of STCG 1,90,73,560/- 4 Addition on account of LTCG Addition on account of LTCG ' 36,22,583/-
On further appeal, the Ld. CIT(A) dismissed the appeal in On further appeal, the Ld. CIT(A) dismissed the appeal in On further appeal, the Ld. CIT(A) dismissed the appeal in default due to non-compliance of the notices issued by compliance of the notices issued by him. compliance of the notices issued by
We have heard the rival submissions and perused the material have heard the rival submissions and perused the material have heard the rival submissions and perused the material available on record. The learned CIT(A), in paragraph 5 of the available on record. The learned CIT(A), in paragraph 5 of the available on record. The learned CIT(A), in paragraph 5 of the impugned order, has tabulated the details of notices issued for impugned order, has tabulated the details of notices issued for impugned order, has tabulated the details of notices issued for hearing, which are reproduced hereinbelow: hearing, which are reproduced hereinbelow:
S.No. Date of Notice Date of Notice Date of Hearing Remarks 1. 10.12.2024 10.12.2024 25.12.2024 Adjournment sought Adjournment sought 2. 17.02.2025 17.02.2025 24.02.2025 Adjournment sought for Adjournment sought for 15 days 3. 03.03.2025 03.03.2025 10.03.2025 Adjournment sought for Adjournment sought for 15 days 4.1 From the above, it is evident that the assessee had sought From the above, it is evident that the assessee had sought From the above, it is evident that the assessee had sought adjournments on all three occasions. However, before us, the all three occasions. However, before us, the all three occasions. However, before us, the learned Counsel for the assessee submitted that there were bona learned Counsel for the assessee submitted that there were bona learned Counsel for the assessee submitted that there were bona fide reasons for seeking such adjournments. In support, a tabular fide reasons for seeking such adjournments. In support, a tabular fide reasons for seeking such adjournments. In support, a tabular chart has been placed on record explaining the reasons for non- chart has been placed on record explaining the reasons for non chart has been placed on record explaining the reasons for non compliance, which is reproduced as under: is reproduced as under:
Date of Notice Reason for Adjournment 10/12/2024 Adjournment in respect of this notice was sought Adjournment in respect of this notice was sought on account of AR of the appellant being pre- on account of AR of the appellant being pre occupied with filing of applications under VSV occupied with filing of applications under VSV 2024 i.e. Vivad St' Vishwas 2024 for various Vivad St' Vishwas 2024 for various clients which scheme was valid upto 31/12/2024 clients which scheme was valid upto 31/12/2024 17/02/2025 Adjournment in respect of the notice was sought on Adjournment in respect of the notice was sought on account of the AR of the appellant i.e. CA Manisha CA Manisha Ghind having got married in 1B> week of February Ghind having got married in 1B> week of February 2025, was on leave and was expected back to join on leave and was expected back to join on 10/03/2025, in spite of which the next date for spite of which the next date for hearing was fixed on 10/03/2025 03/03/2025 Adjournment in respect of the notice was sought on Adjournment in respect of the notice was sought on account of the AR i.e. CA Manisha Ghind have CA Manisha Ghind have been diagnosed with Jaundice and was adviced to ce and was adviced to take rest 4.2 It was thus contended that the adjournments were sought due It was thus contended that the adjournments were sought due It was thus contended that the adjournments were sought due to unavoidable and reasonable causes, and that the learned CIT(A), to unavoidable and reasonable causes, and that the learned CIT(A), to unavoidable and reasonable causes, and that the learned CIT(A), instead of rejecting the requests and proceeding instead of rejecting the requests and proceeding ex parte ex parte, ought to have granted another have granted another opportunity and decided the matter on opportunity and decided the matter on merits.
4.3 It is evident from the records from the records that the assessee had sought that the assessee had sought adjournments for reasons such as professional pre adjournments for reasons such as professional pre-occupation with occupation with statutory deadlines, marriage of the authorised representative, and statutory deadlines, marriage of the authorised representative, and statutory deadlines, marriage of the authorised representative, and subsequent illness. In our considered view, these constituted ness. In our considered view, these constituted ness. In our considered view, these constituted reasonable causes warranting grant of further opportunity. By reasonable causes warranting grant of further opportunity. By reasonable causes warranting grant of further opportunity. By refusing such adjournment, the learned CIT(A) not only disregarded refusing such adjournment, the learned CIT(A) not only disregarded refusing such adjournment, the learned CIT(A) not only disregarded the principle of natural justice but also failed to exercise the the principle of natural justice but also failed to exercise the the principle of natural justice but also failed to exercise the appellate jurisdiction in accordance with law. jurisdiction in accordance with law.
4.4 We also observe that the learned CIT(A), while disposing of the We also observe that the learned CIT(A), while disposing of the We also observe that the learned CIT(A), while disposing of the appeal ex parte, has not adjudicated the issues raised before him on , has not adjudicated the issues raised before him on , has not adjudicated the issues raised before him on merits. It is well settled that under section 250 of the Income-tax merits. It is well settled that under section 250 of the Income merits. It is well settled that under section 250 of the Income Act, the CIT(A) is duty A) is duty-bound to adjudicate the appeal on merits, bound to adjudicate the appeal on merits, even in the event of non even in the event of non-compliance by the assessee. Denial of such compliance by the assessee. Denial of such opportunity amounts to violation of the principles of natural justice. opportunity amounts to violation of the principles of natural justice. opportunity amounts to violation of the principles of natural justice.
4.5 In view of the above discussion, we set aside the impugned In view of the above discussion, we set aside the impugned In view of the above discussion, we set aside the impugned order of the learned CIT(A) and restore the matter to his file for rder of the learned CIT(A) and restore the matter to his file for rder of the learned CIT(A) and restore the matter to his file for fresh adjudication, in accordance with law, after affording adequate fresh adjudication, in accordance with law, after affording adequate fresh adjudication, in accordance with law, after affording adequate opportunity of hearing to the assessee. opportunity of hearing to the assessee.
4.6 The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly allowed. The remaining grounds of appeal are accordingly rendered allowed. The remaining grounds of appeal are accordingly rendered allowed. The remaining grounds of appeal are accordingly rendered academic and therefore, we are not adjudicating upon at this stage. academic and therefore, we are not adjudicating upon at this stage. academic and therefore, we are not adjudicating upon at this stage.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.