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Facts
The assessee, an individual, filed a return declaring income of Rs. 94,38,170. The case was selected for scrutiny, and additions were made by the Assessing Officer (AO) totaling Rs. 21,81,35,360, including disallowance of expenditure u/s 40(a)(ia) and additions for unsecured loans u/s 68 and interest u/s 36(1)(iii). The CIT(A) upheld these additions ex parte.
Held
The Tribunal noted that the assessee was non-compliant during appellate proceedings but considered the contention that the assessee has a good case on merit. Adhering to the principles of natural justice, the Tribunal decided to give the assessee one more opportunity to present their case before the first appellate authority.
Key Issues
Whether the CIT(A) erred in upholding additions and disallowances without providing sufficient opportunity of hearing to the assessee, thus violating principles of natural justice.
Sections Cited
250, 40(a)(ia), 68, 36(1)(iii), 143(2), 142(1), 139(1), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
(Assessment Year: 2018-19) Jitendra Shankerlal Brahmbhatt Assistant Commissioner of Income 803, Palm Spring Centre, Link Road, Tax Central Circle 4(2) 1918, 19th Floor, Air India Building, Malad West, Mumbai – 400064. Vs. Nariman Point, Mumbai – 400021. PAN/GIR No. AABPB6748H (Assessee) : (Respondent) Assessee by : Shri. Rahul Hakkani Respondent by : Shri. Manish Saresh (CIT-DR) Date of Hearing : 12.02.2025 Date of Pronouncement : 14.02.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) 52, Mumbai (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19.
The assessee has challenged this appeal on the following grounds of appeal: - “PROPER OPPORTUNITY OF HEARING NOT GRANTED 1) The Learned CIT(A) erred in confirming additions made by the Assessing Officer without affording sufficient opportunity of hearing and thus there is violation of principles of natural justice and hence the order of Ld CIT(A) may be set-aside. ADDITION U/S 40(a)(ia) of Rs 10,81,34,955/- (A.Y. 2018-19) Jitendra Shankerlal Brahmbhatt 2) The Learned CIT(A) erred in confirming the addition made by the Assessing Officer of Rs 10,81,34,955/- u/s 40(a)(ia) being 30% of the expenditure of Rs 36,04,49,850 on which TDS was deducted but deposited late 2.1) The Learned CIT(A) erred in confirming the addition made by the Assessing Officer of Rs 10,81,34,955/- u/s 40(a)(ia) being 30% of the expenditure of Rs 36,04,49,850 on which TDS was deducted but deposited late without appreciating that as the Assessee is a builder and following project completion method no disallowance u/s 40(a)(ia) is called for and hence the addition of Rs 10,81,34,955/- may be deleted. 2.2) The Learned CIT(A) erred in confirming the addition made by the Assessing Officer of Rs 10,81,34,955/- u/s 40(a)(ia) being 30% of the expenditure of Rs 36,04,49,850 on which TDS was deducted but deposited late without appreciating that by virtue of Second proviso to Section 40(a)(in) no disallowance u/s 40(a)(ia) is called for and hence the addition of Rs 10,81,34,955/-may be deleted, 2.3) Without prejudice to above, the Learned CIT(A) failed to appreciate that the disallowance u/s 40(a)(ia) should be restricted to such percentage of the expenditure which is claimed as a cost during the year and not to the entire amount on which TDS is deducted. ADDITION OF UNSECURED LOANS U/S 68-Rs 7,60,00,000/- 3) The Learned CIT(A) erred in confirming unsecured loan u/s 68 of Rs 6,00,00,000/- received from Om Sai Enterprises without appreciating that Assessee had established the identity of lender, genuineness of the loan and creditworthiness of the lender and hence the addition u/s 68 of Rs 6,00,00,000/- may be deleted. 4) The Learned CIT(A) erred in confirming unsecured loan u/s 68 of Rs 1,50,000/- received from Rupesh Mohallal Jagtiani without appreciating that Assessee had established the identity of lender, genuineness of the loan and creditworthiness of the lender and the loan is subsequently repaid and hence the addition u/s 68 of Rs 1,50,000/- may be deleted. 5) The Learned CIT(A) erred in confirming unsecured loan u/s 68 of Rs 10,00,000/- received from Trishul Holdings Private Limited without appreciating that Assessee had established the identity of lender, genuineness of the loan and creditworthiness of the lender and the loan is subsequently repaid and hence the addition u/s 68 of Rs 10,00,000/- may be deleted. DISALLOWANCE OF INTEREST U/S 36(1)(iii) -Rs 3,94,12,231/- 6) The Learned CIT(A) erred in confirming disallowance of interest u/s 36(1)(iii) of Rs 3,94,12,231/- without appreciating that said disallowance is not supported by (A.Y. 2018-19) Jitendra Shankerlal Brahmbhatt the provisions of Section 36(1)(iii) and Assessee had sufficient interest free funds and the interest free advances were on the grounds of commercial expediency and hence, the disallowance of Rs 3,94,12,231/- may be deleted. 7]) Appellant craves leave to add, delete, amend, substitute any of the grounds of appeal
.”
3. Briefly stated the assessee is an individual and has filed his return of income dated 31.03.2019, declaring total income at Rs. 94,38,170/-. The assessee’s case was selected for scrutiny and notice u/s. 143(2) and 142(1) were duly issued and served upon the assessee. During the assessment proceedings, the ld. AO observed that during the year under consideration the assessee has made certain payments on which TDS amount of Rs. 3,15,16,718/- has been deducted and the same has not been paid on or before the due dates specified u/s. 139(1) of the Act and further it was observed that the assessee has taken a huge loan of Rs. 114,03,15,382/- which was not substantiated by the assessee as to the identity and creditworthiness of the parties and genuineness of the transaction along with disallowance of expenditure u/s. 36(1)(iii) of the Act. The ld. AO after considering the assessee’s submission passed the assessment order dated 23.06.2021, u/s. 143(3) of the Act, determining total income at Rs. 21,81,35,360/- after making various additions/disallowances.
4. Aggrieved the assessee was in appeal before the first appellate authority, who vide an ex parte order dated 23.10.2024 upheld the addition made by the ld. AO on the ground that the assessee has been non-compliant and has failed to substantiate his contentions.
5. The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).
(A.Y. 2018-19) Jitendra Shankerlal Brahmbhatt 6. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has challenged the assessment order before the ld. CIT(A) but has been non-compliant throughout the appellate authority proceeding.
The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the assessee has got a good case on merit and prayed that the one more opportunity be given to the assessee to present his case before the first appellate authority.
The learned Departmental Representative (‘ld. DR’ for short) vehemently opposed to setting aside the issue back to the file of the ld. CIT(A) for the reason that the assessee has been given several opportunities which were not availed. The ld. DR relied on the orders of the lower authorities.
On the above factual matrix of the case, we are of the considered view that the assessee may be given one more opportunity to present his case before the first appellate authority by adhering to the principles of natural justice. We, therefore, remand this issue back to the file of the ld. CIT(A) for de novo adjudication. The assessee is directed to comply with the proceedings without any undue delay on his side and needless it is to say that sufficient opportunity of hearing is to be given to the assessee.