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Facts
The assessee's appeals are against orders arising from an assessment order, a penalty order u/s 270A, and a penalty order u/s 271AAC(1) for AY 2020-21. The assessment and penalty orders were passed ex-parte by the Assessing Officer and the CIT(A) due to the assessee's non-compliance with notices.
Held
The Tribunal noted that both the AO and CIT(A) passed ex-parte orders. Although the assessee provided some documents, they did not sufficiently prove the creditworthiness of loan creditors or the expenditure on intangible assets. In the interest of justice, the Tribunal decided to remand the matters back to the Assessing Officer.
Key Issues
Whether the ex-parte assessment and penalty orders passed by the revenue authorities are sustainable when the assessee claims to have provided partial documentary evidence, and whether a remand is necessary for proper adjudication.
Sections Cited
144, 144B, 270A, 271AAC(1), 68, 32, 143(2), 142(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Manjunatha, G.
Per Bench: These 3 appeals by the assessee are directed against the 3 separate orders, all dated, 09/08/2024 of the learned CIT (A)-NFAC Delhi, arising from the assessment order passed u/s 144 r.w.s. 144B, penalty order passed u/s 270A and penalty order passed u/s 271AAC(1) of the I.T. Act, 1961 respectively for the A.Y.2020-21.
In the quantum appeal, the assessee has raised the following grounds of appeal:
1. “1. The Ld CIT (A) erred both in the circumstances of the case and in law, by adding Rs.18,73,98,886 to the total income of the Appellant.
2. The Ld CIT(A) grossly erred in making an addition of an amount being Rs. 10,21,50,000f -, under section 68 of the Act, without duly appreciating the relevant facts and circumstances of the case; 3. The Ld CIT(A) was not justified in treating the amount of Rs.10,21,50,000/- as unexplained credit, despite the fact that the amount was received through banking channels from Shri M.S.R.V. Prasad, Director, in the ordinary course of business.
4. The Ld CIT (A) erred in disallowing the depreciation amount of Rs. 8,52,48,886 claimed by the appellant on the intangible Assets, without appreciating the facts and circumstances of the case; 5. Whether the Ld CIT (A) is justified in disallowing depreciation of an amount being Rs. 8,52,48,886/ -, allowable under section 32 of the Act, under the facts and circumstances of the case; 6. The Ld CIT (Appels) grossly erred not providing sufficient opportunity to submit a detailed explanation in relation to the additions made by the Ld AO.
The Assessee craves leave to delete, modify and f or rescind or before the final hearing. add to, alter, amend, modify, substitute, all or any one of the grounds of appeal on or before the final hearing”.
3. At the time of hearing, the learned AR of the assessee submitted that both the Assessing Officer as well as the learned CIT (A) passed ex-parte orders and made arbitrary addition to the total income of the assessee on account of unexplained cash credit which was nothing but loan taken from the Director as well
Page 2 of 8 as the disallowance of depreciation on intangible assets. The learned AR has submitted that the assessee has filed the ledger account as well as bank account statement in support of the claim of loan from the Director. So far as the depreciation on intangible assets, the learned AR has now produced the schedule showing the work-in-progress on development of software and submitted that the expenditure has been incurred over the years and during the year under consideration, when the assessee has recognized the intangible assets, the depreciation has been claimed. Thus, the learned AR has submitted that the additions made by the Assessing Officer ignoring the relevant facts is unjustified.
On the other hand, the learned DR has submitted that the assessee is a company and duly availing the services of the professionals and experts, therefore, non-compliance of the notices issued by the Assessing Officer is nothing but a gross negligence and non-cooperative conduct of the assessee. The Assessing Officer has given several opportunities to the assessee but there was no response or compliance to the notices issued by the Assessing Officer. The learned CIT (A) has also provided several opportunities but there was no response to the notices issued by the learned CIT (A). Thus, the learned DR has vehemently objected to the prayer of the assessee for remanding the matter to the Assessing Officer or the learned CIT (A). He has relied upon the orders of the authorities below.
We have considered the rival submission as well as the relevant material available on record. The assessment order was passed ex-parte u/s 144 r.w.s. 144B of the Act when there was no response on behalf of the assessee to the various notices issued by the Assessing Officer. The details of the notices are given in para 2 of the assessment order as under: “2. In this case. assessee E-filed Return of Income on 26.12.2020 for A.Y. 2020-21 declaring total loss at Rs. (-)7,96,19,418/-. The case of assessee was thereafter selected for scrutiny under CASS for reason as mentioned above, notice under section 143(21, dated 29.06.2021 was duly issued and served. Subsequent thereto, statutory notices under section 142(1) were issued calling for details, submissions and explanations on the issue for which the case was selected for scrutiny. The notices issued are as under:
The Assessing Officer has also recorded the facts regarding the reply dated 7/3/2022 filed by the assessee in para 3.1 to 3.3 as under: “3.1 The Assessee vide reply dated A7.A3.2022 submitted that assessee is in the business of software development, training, consultancy, manpower, human resource placements, back office processing, business process outsourcing, economic value added services, product engineering, product development, product design, operations support, industrial design, geographical information systems, insurance claim processing, and to establish and run engineering centers, development centers, design centers, call centers, data and information processing centers, consultancy services center and computer training centers and to offer such other services such as translation, medical transcription, medical billing operations, legal transcriptions and other I.T enabled services and training of individuals, companies, business organizations and any other types of customers in the aforesaid fields. 3.2 The assessee has submitted list of Sundry Creditors liabilities, Statement of intangible assets, working of depreciation, Fixed asset Chart and computation of income and has not submitted any supporting documentary evidences in support of its claim. 3.3 The assessee was given further opportunities to file the details with supporting documentary evidences vide notice u/s 142(1) issued in its case. 142(1, notices was issued dated 19.A7.2A22 fixing the compliance date to submit the details in supporting on or before 28.07.2022. The assessee did not comply to this notice and therefore, further opportunity was given vide notice u/s 142(1) dated 03.08.2022 fixing the compliance date to submit the details in supporting on or before 10.08.2022”.
7. Thus, it is clear that except the list of sundry creditors, statement on intangible assets, working of depreciation, the assessee has not filed any supporting documentary evidence in respect of the loan claimed to have been taken from the Director of Rs.10,21,50,000/- as well as the depreciation claimed on Page 5 of 8 intangible assets. Accordingly, the Assessing Officer has made the addition on account of unexplained cash credit u/s 68 of the Act as well as disallowed the depreciating on intangible assets.
The learned CIT (A) has also passed the impugned order ex-parte when there was no response to the various notices issued to the assessee, the details of which are given in para 5 of the impugned order as under:
6. Thus, it is clear that the assessee has not produced any documentary evidence in support of the claims of the loans
Page 6 of 8 from the Director as well as the claim of depreciation on intangible assets either before the Assessing Officer or before the learned CIT (A). Even before the Tribunal, the assessee has produced only the ledger and bank account statement of the assessee which does not prove the creditworthiness of the loan creditors as well as the expenditure incurred in respect of acquiring/developing the intangible assets. Since both the orders of the authorities below were passed ex-parte, therefore, in the facts and circumstances of the case and in the interest of justice, we are taking a lenient view to remand the matter to the record of the Assessing Officer for proper verification and examination of the relevant supporting evidences to be filed by the assessee in support of the claim of the loan from the Director as well as depreciation on intangible assets. Accordingly, the impugned order of the learned CIT (A) is set aside and the matter in quantum appeal is remanded to the record of the Assessing Officer for fresh adjudication after giving one more opportunity to the assessee to produce all the relevant supporting evidences.
7. In the appeals against the penalty orders passed u/s 270A and 271AAC(1) of the I.T. Act, 1961, the orders of the Assessing Officer as well as the learned CIT (A) are also passed ex- parte. Since the matter in quantum appeal has been remanded to the record of the Assessing Officer, therefore, to give one more opportunity to the assessee to present its case in the penalty proceedings, the matters in both the appeals are also remanded to the record of the Assessing Officer for fresh adjudication as per
Page 7 of 8 the outcome of the remand proceedings in quantum. Accordingly, the impugned orders of the learned CIT (A) are set aside and matters are remanded to the record of the Assessing Officer for fresh adjudication after granting one more opportunity of hearing to the assessee.