E MS ELECTICALS & ENGINERRS P LTD,MUMBAI vs. CIECLE9(2)(2), AAYKAR BHAVAN

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ITA 1943/MUM/2025Status: DisposedITAT Mumbai24 July 2025AY 2015-20166 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that both the assessment order passed by the AO and the appellate order passed by the CIT(A) were ex-parte, primarily due to the assessee's lack of proper compliance. The Tribunal noted that the CIT(A) had not decided the appeal on merits, which is contrary to the mandate of section 250(6) of the Act, requiring the order to state the points for determination, the decision thereon, and the reasons for the decision. The Tribunal also referred to section 250(4) and section 251(1)(a) and (b), which empower the CIT(A) to conduct further inquiries or direct the AO to do so, and to confirm, reduce, enhance, or annul an assessment. The appellate order was found deficient in this regard. In the interest of substantial justice, the Tribunal set aside the appellate order and restored the entire matter back to the AO for passing a fresh assessment order (de novo). The AO was given liberty to pass an order after considering the material placed on record if the assessee failed to cooperate. The Tribunal clarified that this decision was not a reflection on the merits of the dispute, which would be adjudicated independently by the AO. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, EMS Electricals & Engineering P Limited, is in appeal against an order passed by the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi, which upheld an assessment order passed by the Assessing Officer (AO) under section 147 read with section 144 of the Income-tax Act, 1961, for Assessment Year 2015-16. The AO initiated assessment proceedings because the assessee had not filed its regular return of income. The AO noted that the assessee had a matured 'Key Man Insurance Policy' from which a sum of Rs.86,65,466/- was due. The assessee had obtained a loan against this policy and had not paid interest on it. The AO added the received amounts as unexplained income. The assessee’s plea that it received only Rs.4,65,150/- after deducting interest was not accepted. The assessee also received Rs.8,966/- under section 194C without offering an explanation. The CIT(A) upheld the AO's best judgment assessment, noting the lack of written submissions and corroborative evidence from the assessee.

What were the issues?

1. Whether the Learned Commissioner of Income-tax (Appeals) erred in confirming the income assessed by the Assessing Officer, turning on the validity of the best judgment assessment under section 144 of the Income-tax Act, 1961, in light of procedural deficiencies. 2. Whether the Learned Commissioner of Income-tax (Appeals) erred in confirming the total expenses of Rs.16,85,764/- as a deduction from income. 3. Whether the Learned Commissioner of Income-tax (Appeals) erred in confirming the total amount of Rs.86,65,466/- received as income without allowing a deduction for interest paid on a loan borrowed against a Keyman policy. Assessee's contentions: The assessee argued that both the AO and CIT(A) passed ex-parte orders and that it was not provided with an adequate opportunity to be heard. It requested another opportunity to present its arguments and submissions, including supporting evidence, before the AO. The assessee did not object to this proposition. Revenue's contentions: The judgment records no specific contentions from the revenue's side other than their representation by the Senior Departmental Representative.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 250(6),Section 250(4),Section 251(1)(a),Section 251(1)(b),Section 194C

AI-generated summary — verify with the full judgment below

Before: SHRI SAKTIJIT DEY & SHRI PRABHASH SHANKAR

For Appellant: Ms. Dinkle Hariya,AR
For Respondent: Shri Hemanshu Joshi (Sr. DR)
Hearing: 17.07.2025Pronounced: 24.07.2025

Date of Hearing 17.07.2025 Date of Pronouncement 24.07.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the appellate order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 147 r.w.s 144 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 26.03.2022 for the Assessment Year [A.Y.] 2015-16.

A.Y. 2015-16 EMS Electricals & Engineering P Limited 2. The grounds of appeal are as under:

1. Ld. CIT(A) erred in confirming income assessed by AO.

2. Ld. CIT(A) erred in confirming total expenses of Rs. 16,85,764 as deduction from income.

3. Ld. CIT(A) erred in confirming total amount of Rs. 86,65,466 received as income without allowing deduction of interest paid on loan borrowed against Keyman policy.

3. Brief facts of the case are that in this case, regular return of income for the relevant year was not filed by the assessee. It was seen by the AO from Non-Filing Monitoring System (NMS) of Income tax Department that the assessee had taken out ‘Key Man Insurance Policy’ which was matured and sum of Rs. 86,65,466/- was due. It had obtained loan against the said policy. It had not paid interest on the said loan taken. Assessee’s plea that it had received only a sum of Rs. 4,65,150/- after deducting the interest was not considered to be as per the principle of accounting of income. Regarding amount of Rs. 8,966/- received u/s 194C, the assessee did not offer any explanation during the assessment proceedings. After due consideration of all the facts available on record, the AO added the received amounts as unexplained income of the assessee.

4.

In the subsequent appeal before the ld.CIT(A), no written submissions were furnished by the assessee. He observed that there was A.Y. 2015-16 EMS Electricals & Engineering P Limited no proper compliance and specific findings in the assessment order had not been controverted by the assessee along with corroborative evidences. The arguments advanced by the assessee in the Statement of Facts and grounds of appeal were also not supported by tangible materials. Accordingly, the appeal was decided keeping in view the facts brought on record by the AO in the assessment order and by the assessee in the grounds of appeal, statement of facts. Accordingly, action of the AO in making the best judgement assessment was found correct and upheld.

5. From the above discussion, it is evident that both the assessment and appellate orders have been passed in ex parte manner mainly on account of lack of proper compliance by the assessee during these proceedings. Moreover, the ld.CIT(A) has not decided the appeal on merits which is contrary to the mandate of section 250(6) of the Act. The same is reproduced here under for your ready reference:

(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.

5.1 A bare perusal of above provision makes it clear that the CIT(A) is bound to dispose of the appeal before him on merits. Once an appeal is preferred before him, then in disposing of the appeal, he is A.Y. 2015-16 EMS Electricals & Engineering P Limited obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as per section 250(4) of the Act. Section 251(l)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it dear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). The appellate order is therefore, deficient in this regard.

6.

During the course of hearing, the ld. AR for the assessee prayed that the ld. CIT(A) and the AO both have passed the ex-parte order and the assessee was not provided adequate opportunity of being heard. It may be provided one more opportunity to advance its arguments/submissions before the ld. AO so as to provide details in connection with the merits of his case and additional evidences etc. to support its contentions. The ld.AR did not object to this proposition.

7.

We have heard both the parties and perused the materials available on record. In the light of above observations, in the substantial A.Y. 2015-16 EMS Electricals & Engineering P Limited 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. In case of any failure on the part of the assessee, the AO would at liberty to pass order after considering the material placed on record. The assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings before the AO.

8.

Before parting, we may make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by him independently and in accordance with law.

9.

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

Order pronounced in the open court on 24.07.2025.

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