VENKATA SUBBA REDDY METTUPALLI,SECUNDERABAD vs. ITO., WARD-15(2), HYDERABAD

प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals),

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Venkata Subba Reddy Mettupalli

National Faceless Appeal Center (NFAC), Delhi, dated 22.05.2023, which in turn arises from the order passed by the Assessing
Officer (for short “A.O.”) u/s 144 of the Income Tax Act, 1961 (for short “the Act”) dated 30.11.2019 for A.Y. 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1 The learned Commissioner of Income-tax (Appeals) order is erroneous in facts and law.
2. The order of the learned Commissioner of Income-tax (Appeals)erred in confirming the action of the assessing officer ex-party without giving further opportunity
3. The CIT (Appeals) erred in upholding the assessment order without properly considering the facts and circumstances of the case and further erred in confirming the action of the assessing officer without giving proper opportunity, is ex-party, Illegal, and arbitrary, and violative of the principles of natural justice.
4. The learned Commissioner of Income-tax (Appeals) erred in confirming the order of the assessing officer in Disallowing expenditure of increase In Salary Rs. 11,17,500/-, Godown rent Rs. 1,37,700/- and unloading Charges Rs. 5,63,000/-.
5. The very approach of the learned Commissioner of Income-tax
(Appeals) /NFEAC in passing an order u/s 250 of the Income tax act without providing a proper opportunity to the appellant for making submissions, is illegal arbitrary, and perverse, highhanded is contrary to the provisions law, therefore the order passed by the Learned
Commissioner of Income Tax(appeals)NFAC is illegal ex-facie and violative of principals of natural justice.
6. The CIT (Appeals) erred in upholding the levy of interest under sections 234A of Rs.39,460/-, 234B of Rs.2,26,664/- and 234C of Rs.
11,484/- of the IT Act.”

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Venkata Subba Reddy Mettupalli

A.O. both for the year under consideration and that for the immediately preceding year F.Y. 2015-16, it was observed by him that the sales of the assessee had increased from Rs.7.4 crores to Rs.7.9 crores. However, the A.O. observed that the assessee had, in his Profit and Loss account during the subject year, debited salaries of Rs.40,02,000/- as against Rs.28,84,500/- claimed in the immediately preceding year i.e. F.Y. 2015-16. Observing, that the assessee had failed to substantiate the increase in the salary expenditure, the A.O. disallowed the same to the extent of Rs.11,17,500/- (Rs.40,02,000/- - Rs.28,84,500/-) i.e. the difference in the increase in salaries as in comparison to the preceding year. Apart from that, the A.O. observed that though the assessee, during the subject year, had debited an amount of Rs.4,59,000/- in his Profit and Loss account as “Godown Rent”, but no deduction of tax at source on the said payment was discernible from the record. Accordingly, the A.O disallowed u/s 40(a)(ia) the ground rent of Rs. 1,37,700/- (30% of Rs. 4,59,000/-
). Apart from that, the A.O. observed that the assessee had in his
Profit and Loss account debited “Unloading Charges” of 5
Venkata Subba Reddy Mettupalli

Rs.5,63,000/-. As the assessee had failed to lead any evidence/material to substantiate his aforesaid claim of expenditure, therefore, the A.O. disallowed the same.
5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). As the assessee, despite the sufficient opportunity, failed to participate in the proceedings before the CIT(A), therefore, the latter was constrained to dispose of the appeal on an ex parte basis. The CIT(A), after deliberating on the view taken by the A.O.
found no infirmity and upheld the additions/disallowance made by the A.O., and thus, dismissed the appeal.
6. The assessee, being aggrieved with the order of CIT(A) has carried the matter in appeal before us.
7. Shri T. Chaitanya Kumar, Advocate, the learned Authorized
Representative (for short “LD.AR”) of the assessee, at the threshold of hearing of the appeal, submitted that the A.O. had grossly erred in law and on facts of the case in disallowing the assessee’s claim for deduction of expenses which, having been incurred in the normal course of his business were allowable u/s 37 of the Act.
The ld.AR submitted that the assessee is engaged in the business

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Venkata Subba Reddy Mettupalli of running BPCL Gas Agency and the subject expenses were incurred by him in the normal course of his business activities.
The ld. AR submitted that as the assessee had failed to substantiate his claim for deduction of the subject expenses before the lower authorities, therefore, the matter, in all fairness, be restored to the file of A.O. with a direction to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee.
8. Per contra, Ms. Vishnu Priya, the learned senior Departmental
Representative (for short “Ld. DR”) relied upon the orders of lower authorities. The Ld. DR submitted that as the assessee despite having been afforded sufficient opportunities, had failed to participate in the proceedings before the A.O and CIT(A), therefore, in the absence of any supporting material/evidence they were constrained to make the subject additions/disallowance
9. We have heard the learned Authorized Representatives of both parties and perused the material available on record.
10. We are of the view that as the assessee had failed to participate in the proceedings before the A.O., therefore, he was constrained

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Venkata Subba Reddy Mettupalli to frame the assessment to the best of his judgment u/s 144 of the Act. Although the assessee ought to have remained vigilant and participated in the proceedings before the lower authorities, but at the same time, we find substance in the Ld. AR’s claim that as the subject expenses were incurred in the normal course of the assessee’s business of running a BPCL gas agency, therefore, they were entitled for deduction u/s 37 of the Act. We are prima facie of the view that as the assessee is engaged in the business of running a Gas Agency, therefore, incurring of the subject expenses viz. salaries, godown rent and unloading charges could safely be related to the said line of business. Also, we are unable to concur with the manner in which the assessee’s claim for deduction of salaries of Rs.11,17,500/- has been disallowed by the A.O. i.e. by disallowing the increase in salaries as in comparison to that claimed in the preceding year. Considering the totality of the facts involved in the case before us, we are of the firm conviction that the matter, in all fairness, to deduce the true income of the assessee, requires to be restored to the file of the A.O. We thus, in terms of our aforesaid deliberations, set aside the matter to the file

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Venkata Subba Reddy Mettupalli of A.O. for re-adjudicating the aforesaid additions/disallowances made by him while framing the assessment. Needless to say, the A.O. shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee.
11. Resultantly, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 10th June, 2025. (श्री मिुसूदन सावडिया)
(MADHUSUDAN SAWDIA)
लेखा सदस्य/ACCOUNTANT MEMBER (श्री रवीश सूद)
(RAVISH SOOD)
न्यायिक सदस्य/JUDICIAL MEMBER
Hyderabad, dated 10.06.2025. *TYNM/sps

आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:-

आदेशधिुसधर / BY ORDER