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Facts
The assessee claimed a deduction of Rs. 25,93,670/- under Section 57 for interest expenses, which the Assessing Officer disallowed, citing a lack of direct nexus between the expenditure and interest income, completing the assessment under Section 143(3). The Ld. CIT(A) subsequently dismissed the assessee's appeal ex-parte, thereby confirming the AO's order.
Held
The Tribunal found that the CIT(A) dismissed the appeal ex-parte after issuing only two notices within a short 16-day period, which was deemed an insufficient opportunity for the assessee. Without addressing the merits of the case, the Tribunal set aside the ex-parte order and remanded the matter back to the CIT(A) for fresh consideration, ensuring a reasonable opportunity of hearing for the assessee.
Key Issues
Whether the CIT(A) provided adequate opportunity of hearing before dismissing the appeal ex-parte, and the validity of disallowing interest expenses claimed under Section 57 due to a lack of established nexus with interest income.
Sections Cited
57, 57(iii), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2017-18 Rahul Arunkumar Pandit, Vs. DCIT, Circle-3, Pune. Flat No.-5, Gopadma No.39, Plot No.18, Prabhat Road, Lane No.9, Pune- 411004. PAN : ABYPP1142R Appellant Respondent Assessee by : None Revenue by : Shri Manishkumar Sinha Date of hearing : 18.09.2025 Date of pronouncement : 22.09.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 17.06.2025 passed by Ld. Addl./JCIT(A)-1, Kolkata [‘Ld. CIT(A)’] for the assessment year 2017-18.
The appellant has raised the following grounds of appeal :- “1] The Ld. JCIT(A) has erred in confirming the assessed income of the appellant at Rs. 55,36,400/-. The additions made without considering the fact of the case are illegal and unsustainable in law and the same may please be deleted. 2] The Ld. JCIT(A) has erred in dismissing the case ex-parte without waiting for appellant to furnish the submission & evidences. The Ld. JCIT(A) ought to have appreciated that the appellant could not respond to the notices, as he has changed his consultant in the past but appeal documents were not handed over by previous consultant to new consultant. 2.1] The Ld. JCIT(A) erred in dismissing contention of the appellant only on the ground that no submission was made without appreciating the facts explained in statement of facts and the evidences already furnished during the course of assessment proceedings. The matter may thus please be set aside at appropriate level as it involves verification of evidences etc. 3] The Ld. JCIT(A) erred in disallowing the deduction of Rs.25,93,670/- claimed u/s. 57 of the Act on account of interest expenditure alleging that the appellant has failed to establish the direct nexus between the interest expenditure and interest income earned. 3.1] The Ld. JCIT(A) failed to appreciate that the appellant had taken loan from HDFC bank which was in turn advance to Prarambh Realtors on which the appellant had earned interest and therefore the deduction was rightly claimed u/s. 57 in respect of interest paid. 4] The Ld. JCIT(A) erred in making disallowance of Rs. 25,93,670/-, being the deduction claimed u/s. 57 of the Act, only on the basis of presumptions and surmises without considering the genuineness of the transactions and the confirmation statement furnished during the course of assessment proceedings. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal
.”
3. Facts of the case, in brief, are that the assessee is an individual and has furnished return of income on 31.10.2017 declaring income of Rs.29,40,730/-. The assessee is a partner in the firm Pandit Javdekar Associates and apart from above is also in receipt of income from house property and income from other sources i.e. interest from the parties. The case was selected for limited scrutiny under CASS for the reason of large deduction claimed u/s 57 of the IT Act. During the year under consideration, the assessee has 57 of the IT Act of Rs.25,93,670/- and therefore the Assessing Officer asked to furnish the details of above interest expenses. After considering the reply of the assessee, the Assessing Officer came to the conclusion that the assessee failed to establish the nexus between the expenditure claimed u/s 57(iii) and the interest earned. Accordingly, the Assessing Officer was of the view that the assessee could not prove in his submission that the deduction u/s 57 claimed by him is for the purpose of earning income from other sources, hence the deduction u/s 57 of interest payment of Rs.25,93,670/- was disallowed and added back to the total income of the assessee. Vide order dated 29.12.2019 the assessment was completed u/s 143(3) of the IT Act by determining total income at Rs.55,36,400/- as against the income returned by the assessee at Rs.29,42,730/-.
4. Aggrieved with the above assessment order, the assessee preferred an appeal before the Ld. CIT(A). Since the assessee remained absent, Ld. CIT(A) dismissed the appeal filed by the assessee and consequently confirmed the order passed by the Assessing Officer.
It is the above order against which the assessee is in appeal before this Tribunal.
6. When the appeal was called for hearing, neither anybody appeared nor any application for adjournment was filed despite the service of notice. Therefore, we proceed to decide the appeal on the basis of material available on the record and also after hearing Ld. DR.
In this regard, we find that Ld. CIT(A) has dismissed the appeal for want of prosecution since on the dates of hearing provided by Ld. CIT(A), the assessee neither appeared nor any adjournment was sought. We further find that only two notices of hearing were issued by Ld. CIT(A). The first notice was issued on 29.05.2025 and opportunity of hearing was given for 06.06.2025, since the assessee remained absent another notice of hearing was issued on 09.06.2025 for filing response within five days time. It is apparent that in a time span of only 16 days, two notices were issued by Ld. CIT(A) which cannot be said to be sufficient opportunity of hearing. Considering the totality of the above facts of the case and in the interest of justice and without going into merits of the case, we deem it appropriate to set-aside the impugned ex-parte order passed by Ld. CIT(A) and remand the matter back to his file with a direction to decide the appeal afresh as per fact and law after providing reasonable opportunity of hearing to the