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Facts
The assessee company, engaged in manufacturing wheelchairs and hospital bags, filed its return of income. The AO disallowed a portion of commission expenditure and additions were made for trade creditors due to lack of supporting documents. The appeal before the CIT(A) was dismissed for non-cooperation.
Held
The Tribunal noted that the assessee had submitted substantial details before the CIT(A) that were not available to the AO. The CIT(A) dismissed the appeal for non-cooperation despite these submissions and an affidavit explaining non-receipt of notices.
Key Issues
Whether the CIT(A) erred in dismissing the appeal for non-cooperation without considering the merits, especially when the assessee provided additional evidence before the CIT(A) and explained non-receipt of notices?
Sections Cited
143(3), 144B, 133(6), 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY
Per Prashant Maharishi, Vice President
This appeal is filed by Ostrich Mobility Instruments Pvt. Ltd. (the assessee/appellant) for the assessment year 2021-22 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 18.2.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 143(3) of the Income
Tax Act, 1961 [the Act] by the National Faceless Assessment Centre, Delhi [ld. AO] , was dismissed.
The reason for dismissal of the appeal is that the ld. CIT(A) granted 7 opportunities to the assessee, which were not availed and therefore appeal of the assessee was dismissed for non-cooperation and non- prosecution. The assessee is aggrieved with the same and is in appeal before us.
Briefly stated the facts of the case show that assessee is a company engaged into the business of manufacturing of electrical wheel chairs, hospital bags, filed its return of income at Rs.1,98,99,900 on 10.3.20222. The return was picked up for scrutiny. The ld. AO issued several notices and also a show cause notice against which some reply was submitted. The AO asked the assessee to furnish the details of expenses, but no bills or vouchers or supporting documents were furnished. The AO issued notices u/s. 133(6) to several parties. The AO examined the claim of commission expenditure of Rs.79,46,738 and asked the assessee to furnish copy of agreement, confirmation, bank statement etc. The assessee submitted details of bank statement and tax deduction at source [TDS] on commission payments. The ld. AO found that in the absence of any copy of agreement, confirmation of the parties, 10% of the commission expenditure was disallowed amounting to Rs.7,94,674. With respect to the trade creditors of Rs.3,65,68,050 the assessee was asked to produce the details of the parties along with agreement, etc. The ld. AO found that the assessee
has failed to submit copies of agreement and income tax return of the parties and therefore Rs.17,81,788 was added back u/s 69C of the Act. Further the ld. AO asked the details of expenditure of Rs.35,18,518 and issued a show cause notice as to why 10% thereof should not be disallowed. Accordingly assessment order was passed u/s. 143(3) r.w.s. 144B of the Act on 29.12.2022 determining total income of assessee at Rs.2,28,28,214. The total addition/ disallowance of Rs.29,28,314 was made.
Aggrieved by the assessment order, the assessee preferred appeal before the ld. CIT(A) wherein for receipt of notices the assessee gave one email-id of harsha@ostrichmobility.com. The ld. CIT(A) issued 7 notices which remained uncomplied with and hence passed appellate order on 18.2.2025 holding that assessee is not interested in pursuing the appeal and further decided on the merits. Against this dismissal of the appeal, the assessee is in appeal before us.
The ld. AR filed a paperbook containing 303 pages. It was submitted that before the AO vide letter dated 14.12.2022 assessee has filed complete details of commission, sundry creditors, office expenses and other miscellaneous expenses. Further in response to show cause notice dated 12.12.2022, assessee submitted details of sundry creditors and copy of bank statement evidencing payment of commission. But these details were not considered in proper perspective resulting into adhoc disallowance of expenditure and commission expenses. With respect to the submission before the ld. CIT(A), he submitted that along
with Form 35 assessee submitted proof of payment of commission, balance confirmation letters from sundry creditors and proof of expenditure incurred by the assessee on 29.1.2023. With respect to non-appearance before the CIT(A), an affidavit was submitted of the Director of the company stating that except notice dated 1.3.2023 which is enablement of communication window, assessee did not receive any other notices and therefore the company was not aware of the notices issued to it and therefore assessee could not comply with the notices. Even otherwise, it was submitted that assessee has also submitted complete details before the CIT(A) which was not there before the ld. AO and therefore if these details are considered, the addition would be deleted. The ld. further referred to Paperbook showing that the complete details are furnished before the ld. CIT(A) also which are not considered at all. Therefore the order passed by the CIT(A) dismissing the appeal without considering on merits is not proper.
The ld. DR vehemently supported the orders of ld. lower authorities and submitted that before the CIT(A) assessee did not submit any information and also did not respond to any of the notices and therefore the appeal of the assessee was properly dismissed.
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that the ld. CIT(A) has issued 7 notices to the assessee at the same email-id which was mentioned in Form 35. However, the Director of the assessee company
has submitted an affidavit that it is not received in the emails, except the email communicating the enablement of window and therefore assessee could not furnish the details for respond to the various notices issued by the CIT(A). Before us, paperbook filed by the assessee shows that along with Form 35 assessee has submitted proof of payment of commission, confirmation letters from sundry creditors and proof of expenses incurred by the assessee. These details are furnished at pages 173 to 303 of the PB. Admittedly these details were not available before the AO which resulted into adhoc disallowance of 10% of the commission expenditure as well as 10% of the total expenditure. The addition on account of sundry creditors was made for the reason that assessee did not file confirmation of some of the parties. These confirmations are filed before the CIT(A) which are available at page 193 – 205 of PB. Even otherwise, the ld. AO has made adhoc disallowance of 10% of commission expenditure and other expenditure. Therefore if these details submitted by the assessee before the ld. CIT(A) which was not verified by the ld. CIT(A), are examined, then the genuineness of the other expenditure as well as commission expenditure can be ascertained. Further the parties whose confirmation was not available before the AO, was made available before the ld. CIT(A), if those are verified, the correct income of the assessee can be determined.
In view of the above facts, we restore the whole issue back to the file of the ld. Assessing Officer with a direction to the assessee to substantiate all the details required by the AO within 90 days from the date of receipt of this order. The ld. AO may examine the same and if found in accordance with law, the respective additions may be deleted. If there are certain infirmities according to the AO, then reasonable opportunity of hearing may be granted.
Thus, ground No.1 of the appeal is allowed with the above directions and other grounds on merits of the case are restored back to the file of the ld. AO.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Pronounced in the open court on this 28th day of July, 2025.