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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed an appeal against the order of the CIT(A)-48 passed u/s 143(3) and 250. The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming an expense of Rs. 22,415/- u/s 37(1) paid to BMC towards demolition charges 2 Twinkle Enviro Tech Pvt Ltd., Mumbai. On the facts and circumstances of the case, and in a) Law, the CIT (Appeals) erred in confirming the disallowance of Rs. 72,68,18,635/- u/s 40(a)(ia) towards the non- availing compensation incurred by the assessee. Without prejudice to the Ground No. 2, the AO erred in b) disallowing the entire amount of expense u/s 40(a)(ia) towards non-availing compensation which should be restricted to only 30% of the expense incurred during the year. c) Without prejudice to ground 2 and 3, If the non- availing compensation are treated as interest on loan, the amount of income received from the corresponding parties, treated as sale and offered to tax under the head income from business/profession may be treated as loan and reduced from the sales amount offered to tax for the year. 3. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the disallowance of Rs. 1,23,09,680/- u/s 14A.
2. The brief facts of the case are that the assessee company is engaged in the business of selling of holiday hours/ plans to its members. The assessee has filed the return of income for the A.Y 2015-16 on 15.07.2016 with a total income of Rs. Nil and carry forward of current year loss of Rs.7,07,92,140/- and the return of income was processed u/s 143(1) of the Act. Subsequently the case was selected for scrutiny under the CASS and notice u/s 143(2) and 142(1) of the Act along with questionnaire are issued.In Twinkle Enviro Tech Pvt Ltd., Mumbai. compliance, the Ld. AR of the assessee appeared from time to time and submitted the details. The Assessing officer(A.O.) on perusal of the material information and the nature of the business has dealt on the disputed issue that the assessee has debited to the profit and loss account expenses towards cost facilities procured and non availing compensation and no TDS was deducted and apply the provisions of Sec. 40(a)(ia) of the Act. In compliance, the Ld. AR of the assessee filed the submissions on 07.12.2017 supporting non deduction of TDS. Whereas, The AO was not satisfied with the explanations referred at page 2 to 4 of the A.O order and the final findings of the AO are at page 4 Para 3.2 of the order, which is read as under:
3.2. The submission of the assessee has been perused but the same is not acceptable. During the year, assessee has debited non availing compensation amounting to Rs. 72,68,18,635/-. It was found that the assessee is accepting the money from its clients and paying them interest in the garb of benefits and facilities of stay in hotel or discount of the facilities in the form of cash. These facilities provided by the assessee squarely falls within the ambit of definition of Sec. 2(28A) provided in the statute. Needless to say once such payment / expenditure falls within the parameters of section 2(28A), this fact automatically invites the application of provisions of section 40(a)(ia) To put it differently and clearly once the expenditure in this form is classified as the interest Twinkle Enviro Tech Pvt Ltd., Mumbai. the provisions of section 194A invites application of provisions of section 40(a)(ia) in the form of disallowance of such a claim of expenses. Since the assessee had failed to deduct TDS stipulated u/s. 194A, the interest in the guises of non availing compensation of Rs. 72,68,18,635/- paid by the assessee to its clients is disallowed by invoking the provisions of section 40(a)(ia). Accordingly, a sum of Rs. 72,68,18,635/- is disallowed and added to the total income of the assessee. Penalty proceedings u/s. 271 (1 )(c) are initiated for furnishing inaccurate particulars of income.
Similarly the A.O has made disallowance u/s 14A of the Act applying the Rule 8D(2) and determined the total income of Rs. 66,83,58,588/- and passed order u/s 143(3) of the Act dated 26.12.2017.
Aggrieved by the order, the assessee has filed the appeal before the CIT(A). Whereas the CIT(A) considered the grounds of appeal and findings of the A.O and issued notices to the assessee. Since there was no compliance or any information was filed. The CIT(A) has passed a ex parte order up holding the additions of the A.O. and dismissed the appeal. Aggrieved by the CIT(A)order the assessee has filed an appeal before the Hon’ble Tribunal.
5. At the time of hearing, none appeared on behalf of the assessee and the Ld.DR submitted that the Twinkle Enviro Tech Pvt Ltd., Mumbai. Ld.CIT(A) has passed an ex parte confirming the action of the Assessing officer.
We have heard the Ld.DR submissions and perused the material on record. Prima-facie the CIT(A) has passed the ex-parte order considering the fact that there is no appearance nor any submissions are filed by the assessee in spite of providing adequate opportunity of hearing. Therefore, the CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and relied on judicial decisions and dismissed the appeal ex-parte confirming the action of the assessing officer. We on perusal of the order found that the Ld.CIT(A) has issued the notices of hearing referred at page 2 of the order, but there was no response and thus the Ld.CIT(A) came to a conclusion that the assessee is not inclined to prosecute the appeal.
We find that, the assessee has raised grounds of appeal challenging the additions by the A.O. and there could be various reasons for non appearance which cannot be overruled. We considering the principles of natural justice shall provide one more opportunity of Twinkle Enviro Tech Pvt Ltd., Mumbai. hearing to the assessee to substantiate the case along with evidences and information. Accordingly, we set aside the order of the CIT(A) and remit the entire disputed issues to the file of the CIT(A) to adjudicate afresh on merits and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal and allow the grounds of appeal of the assessee statistical purposes.