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Facts
The assessee filed an appeal against an appellate order that dismissed their appeal for non-prosecution. The original assessment order and penalty order were also passed ex-parte due to the assessee's inability to respond during the COVID-19 period. The assessee contended that the delay was due to the ill health of their director.
Held
The Tribunal condoned the delay in filing the appeal, noting sufficient cause due to the director's ill health during the COVID-19 period. The Tribunal found that the CIT(A) lacked the power to dismiss the appeal for non-prosecution and that the AO's orders were ex-parte. The matter was restored to the AO for a decision on merits, with directions to verify commission expenses and allow the assessee an opportunity to present evidence.
Key Issues
Whether the dismissal of the appeal for non-prosecution by the lower authorities was justified, especially considering the COVID-19 pandemic, and whether the disallowance of commission expenses needs verification on merits.
Sections Cited
270A, 143(2), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President 1.
Swastik Properties & Developers (the assessee/appellant) for the assessment year 2018-19 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 25.9.2024 wherein the appeal filed by the assessee against the penalty order dated 28.1.2022 passed u/s. 270A of the Income-tax Act, 1961 [the Act] by the ITO, National Faceless Assessment Centre, Delhi was dismissed on account of non- prosecution. is filed by the assessee appellant for the AY 2018-19 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] against assessment order.
The brief facts of the case show that assessee filed its return of income for AY 2017-18 on 31.10.2018 at a total income of Rs.2,63,052 which was picked up for scrutiny by issue of notice u/s. 143(2) of the Act on 28.9.2019. The return resulted into assessment order passed u/s. 143(3) of the Act on 22.3.2021 wherein the commission paid of Rs.51,93,324/- and income tax debited to P&L account of Rs.67,848/- was disallowed.
Before the AO, the assessee could not represent its case due to COVID-19 and assessee was unable to respond to the notices issued by the AO. The above order was passed. The assessee challenged it before the ld. CIT(A) as per Form 35 on 4.3.2022. The record shows that during the appellate proceedings the assessee was issued notices, however, there was no response from the assessee and therefore the addition on the merits of the case the appeal of the assessee was not decided, but dismissed in limine, against which assessee is in appeal.
As the addition got confirmed, penalty u/s. 270A was also levied, which resulted into similar fate.
There is delay of 147 days in filing of the appeal. Assessee has furnished a petition for condonation of delay stating that the Director of the assessee company was unwell for a long time and therefore it could not file the appeal in time. The delay was purely intentional nor deliberate and therefore there is a sufficient cause for delay in filing of the appeal which may be condoned.
The Ld DR vehemently objected to the condonation of delay petition stating that there is no sufficient cause shown by the assessee.
We have carefully considered the rival contentions and perused the reasons shown to us. As the delay in filing of appeal is due to ill health of the director of the company who was looking after the tax affairs of the assessee, we find that delay is for sufficient cause and hence, we condone the same.
On the merit, the ld. AR reiterated that the AO has passed the order without considering the entire documentary evidence in respect of which the amount of commission paid of Rs.68,87,584, the AO has allowed part of the commission but has disallowed part of the commission. The AO has disallowed out of total commission payment of Rs.68,87,584, only a sum of Rs.51,93,324/-. In fact, he allowed commission for 3 months and disallow the commission for next nine months of the year. Therefore for the same financial year, part of the commission expenses has been allowed and part of the commission has been disallowed by the AO, based on the same evidences. It was submitted that the commission expenses incurred by the assessee is for the purpose of business and therefore should have been allowed. It was submitted that the appeal of the assessee was dismissed for non- prosecution and not on the merits of the case.
The ld. DR vehemently supported the order of the ld. lower authorities and submitted that the assessee did not furnish any documentary evidence, there is no infirmity in the order of the ld. lower authorities.
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that before the AO the assessee could not furnish the details only because of the reason that it was COVID period and assessee was unable to comply with the information asked for. We find that there is sufficient cause where the assessee was prevented from making proper submission before the AO. The ld. CIT(A) also dismissed the appeal of the assessee for quantum as well as for penalty for non-prosecution. In view of the above facts as the period before the AO was COVID period, for that reason the assessee could not furnish necessary details and the ld. CIT(A) has dismissed the appeal for non-prosecution. The ld CIT (A) does not have any power to dismiss the appeal of the assessee for non- prosecution. Further, it would not serve any purpose if the appeals were restored to the file of the ld CIT (A) as the orders before the ld AO were also exparte. It was also stated that part of the commission expenses are disallowed for the reason that documentary evidence with respect to the same could not be furnished. However, it is claimed before us that in part of commission expense is allowed and part of the order commission expenses are disallowed, though the nature and details of the expenses are same. Therefore this needs verification.
With respect to the addition of disallowance of the income tax expenses debited to P&L account, allegedly the AO is directed to verify whether the assessee in its own computation of total income has disallowed the above sum or not. If the assessee has not disallowed any sum, the disallowance made by the AO is in order, otherwise it will result into double disallowance. The AO is directed to verify and decide it in accordance with law.
Hence, we restore both the appeals to the file of the ld. AO to decide the issue on merits of the addition and thereafter penalty u/s. 270A of the Act after granting the assessee an opportunity of hearing. The assessee is also directed to prove the genuineness of commission expenses before the AO within 90 days from the date of receipt of the order with proper evidences. The ld AO may decide the allowability of the same in accordance with law.
Accordingly, both the appeals are allowed for statistical purposes with the above directions.
Pronounced in the open court on this 19th day of August, 2025.