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Facts
The assessee, an LLP, filed a return declaring a loss. The AO treated a loan received as deemed dividend under section 2(22)(e) and also added excess depreciation as business income. The assessee's appeal before the CIT(A) was dismissed for non-prosecution.
Held
The Tribunal, acknowledging the assessee's failure to appear before the CIT(A) due to carelessness, granted a chance for denovo consideration by setting aside the CIT(A)'s order. A cost of Rs. 10,000 was imposed.
Key Issues
Whether the CIT(A)'s order dismissing the appeal for non-prosecution should be set aside to allow denovo consideration, and if so, on what terms?
Sections Cited
143(1), 143(2), 142(1), 2(22)(e)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 30/05/2025 in respect of the A.Y. 2016-17.
The assessee is an LLP and filed their return of income on 10/10/2016 and declared a loss of Rs. 1,10,06,706/-. Thereafter the return was processed u/s. 143(1) of the Act. The case of the assessee was selected for limited scrutiny and notice u/s. 143(2) was issued on 17/07/2017. A notice u/s. 142(1) was also issued. Detailed explanations were offered by the assessee. The AO based on the audit notes on accounts to the audit report form 3 CD and also from schedule 2 of balance sheet had alleged that the assessee has received a loan of Rs. 12,90,82,742/- from Universal Carburizing Works Pvt. Ltd. as interest free unsecured loan. The AO sought for the details of the loan for which the assessee informed that only an amount of Rs. 7,38,53,148/- was received by the assessee during the year. The AO had treated the loan received from the said Universal Carburizing Works Pvt. Ltd. as deemed dividend as per section 2(22)(e) of the Act since the company as well as the assessee are having common shareholders. Even though the assessee explained that the loan was given in the normal course of business and also the company is having a substantial stake in the assessee, in order to protect the assessee’s interest, the said loan was offered. The AO relied on section 2(22)(e)(ii) of the Act and concluded that the loan amount of Rs. 3,73,28,315/- was liable to be taxed u/s. 2(22)(e) of the Act. The AO had also found that there is a difference between the closing written down value as on 31/05/2015 and the opening written down value as on 01/04/2016 of the fixed assets and treated the excess depreciation claimed as business income of the assessee. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had dismissed the appeal for non-prosecuting the appeal.
As against the said order, the present appeal has been filed by the assessee before this Tribunal.
At the time of hearing, the Ld.AR submitted that the assessee had valid explanations in respect of the additions made by the AO but unfortunately by oversight they failed to notice the hearing dates and therefore written submissions could not be filed before the Ld.CIT(A) and prayed an another opportunity to appear before the Ld.CIT(A).
The Ld.DR relied on the orders of the lower authorities.
We have heard the arguments of both sides and perused the materials available on record.
We have perused the appeal order in which the assessee had raised several grounds on merits but unfortunately, they had not responded to any of the notices issued by the Ld.CIT(A) and therefore the Ld.CIT(A), having no other option, dismissed the appeal for non-prosecution. We have also considered the reasons stated by the assessee for the non-appearance by the assessee before the Ld.CIT(A) and it is because of the carelessness of the assessee. Once the appeal has been filed, it is the duty of the assessee to follow the said appeal proceedings. In the present case, the assessee had not followed up the appeal proceedings and hence the Ld.CIT(A) had dismissed the appeal for non-prosecution.
We have also considered the principles laid down by the various High Courts as well as the Hon’ble Supreme Court in which the higher forums had granted an opportunity to represent the case before the authorities. By following the said principles, we are also inclined to grant an opportunity to the assessee to appear before the Ld.CIT(A) by setting aside the order of the Ld.CIT(A). Since the assessee had not given any plausible / accepted explanation for the non-appearance before the Ld.CIT(A), we are imposing a cost of Rs. 10,000/- for giving such concession to the assessee. The said cost of Rs. 10,000/- should be paid to the Income Tax department within a period of 2 weeks from the date of receipt of copy of this order and the receipt should be produced before the Ld.CIT(A) before commencing the appeal proceedings. If the assessee had not complied with the payment of cost, the concession granted by us would automatically gone without any further notice to this Tribunal. With the above directions, we remit this issue to the file of the Ld.CIT(A) for denovo consideration.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 12th November, 2025.