Loading judgment…
Facts
The assessee is in appeal against the order of the CIT(A) which dismissed the appeal for want of prosecution, instead of deciding on merits. The AO had made additions to the income based on the Review Unit's suggestions without following proper procedure.
Held
The Tribunal held that the CIT(A) ought to have decided the issues on merit. It was also found that the AO did not follow the correct procedure while making ad-hoc disallowances.
Key Issues
Whether the dismissal of appeal by CIT(A) for want of prosecution is justified and whether additions made by AO without following proper procedure are valid.
Sections Cited
271C, 1941, 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
the order of the Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 01.12.2023 passed for assessment year 2018-19.
It emerges out from the record that appeal of the assessee was dismissed by the CIT(A) for want of prosecution instead of deciding it on merit. A perusal of the assessment A.Y. 2018-19 2 order would reveal that ld. AO has passed an assessment order without any coherence with the procedure or the detail on the record. The relevant part of the assessment order reads as under :
ASSESSMENT ORDER
The case was selected for complete scrutiny assessment under the E- assessment Scheme,2019 on the following issues :- 2. On the basis of material available on record, the explanation filed by the assessee on the issue is accepted and hence no addition is made. 3. The assessment of income is done as per computation sheet and sum payable is determined as per demand notice.
As per direction of Review Unit, the following other expenses are added back to the assessee's total income .
1. The expenses under head "Diwali Expenses" for Rs.76,040/- is not admissible expenses as this expenses is not related to the business of the assessee. Thus, the total expenses towards Diwali Expenses amounting to Rs.760.40/- is disallowed and added back to the income of the assessee.
2. The expenses under head" Pooja expenses" for Rs. 1,48,612/- is not admissible expenses as this expenses is not related to the business of the assessee. Thus total expenses towards pooja expenses amounting to Rs 1,48,612/- is disallowed and added back to the income of the assessee.
3. The expenses under Head "Rent Godown" for Rs 6,72,000/- is not admissible as the TDS is not deducted as required u/s194l of the Act. Thus, 30% of the total expenses towards godown Rent is disallowed of Rs.2,01 ,600/-and added back to the Income of the assessee.
The penalty provision u/s 271C of the act is initiated on the assessee for non-deduction of TDS for expenses under Head Rent Godown u/s 1941 of the Act. Yours faithfully, Additional / Joint I Deputy I Assistant Commissioner of Income Tax income-tax Officer, National e-Assessment Centre, Delhi.”
ITA No.96/CHD/2024 A.Y. 2018-19 3
A perusal of the above order would reveal that AO after verification of the record accepted the calculations made by the assessee. However, the Review Unit has made certain additions. It is pertinent to note that job of the Review Unit was to review the assessment made by the AO and if any changes are required, then such suggestion is to be remitted back to the AO. The AO thereafter confront the assessee and made the assessment but no such procedure has been followed by the AO while making these adhoc disallowances out of Diwali Expenses, Pooja Expenses & Rent Godown.
There is no justification to make these additions.
4. The ld. CIT(A) ought to have perused the details available on the record and thereafter decided these issues on merit as contemplated in sub-section (6) of Section 250 of the Income Tax Act but no such procedure was adhered to.
Before us, assessee has submitted the complete details and also apprised as to how these expenses were incurred for the purpose of business and no disallowance ought to have been made. We are of the view that correct procedure has not been followed by the AO while making unnecessary A.Y. 2018-19 4 additions to the income of the assessee. Accordingly, we allow this appeal and delete the additions.
In the result, appeal of the assessee is allowed.
Order pronounced on 18.03.2025.