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Facts
The assessee filed its return for AY 2016-17 at Nil, which was processed under Section 143(1) and later selected for scrutiny. The Assessing Officer made various additions, including CSR expenditure and expenses under Section 37, totaling significant disallowances. The Ld. CIT(A) sustained these additions by passing an ex-parte order against the assessee.
Held
The Tribunal found that the assessee was not afforded adequate opportunities by the lower authorities and their submissions/evidences were not considered by the Ld. CIT(A). It held that the appellate authority has a legal obligation to adjudicate issues through a speaking order, and non-consideration of the assessee's explanation leads to a miscarriage of justice. The Tribunal set aside the impugned order and remanded the matter to the Ld. CIT(A) for a fresh decision after providing the assessee an adequate opportunity of being heard.
Key Issues
Whether the Ld. CIT(A) erred in passing an ex-parte order without providing adequate opportunity of hearing and considering the assessee's submissions and evidences, and whether the impugned additions sustained are valid when determined ex-parte, in violation of principles of natural justice.
Sections Cited
143(1), 37, 143(2)
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI NIKHIL CHOUDHARY
PER KUL BHARAT, VICE PRESIDENT.:
This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi dated 02.08.2024 pertaining to the assessment year 2016-17. The assessee has raised the following grounds of appeal: -
“1. National Faceless Appeal Centre (NFAC) hereinafter referred to as Ld. CIT(A) has erred in law and on facts, in holding that the appellant remained non- compliant, to various notices issued during the course of appellate proceedings, and in deciding the appeal ex-parte; 2. the appellant had made due and full compliance to all the notices/requisitions, as issued to it, during the appellate proceedings and submitted various documentary evidences to substantiate its claim (in support of income disclosed in the return of income and the Ld. CIT(A) had wrongly, rather illegally, held ‘that the appellant was not interested in prosecuting the appeal. 3. even if it were so, although denied by the appellant, the Ld CIT(A) was duty- bound to dispose of the appeal, through a speaking order on merits, as full information was available on his e-portal (as had been uploaded by the appellant) during the course of appellate proceedings; 4. Owing to infirmities in the matter of adjudication of appeal on various grounds (taken by the appellant) on merits thereof, the appellant order dated 02.08.2024 is wholly vitiated and various disallowances, as had come to be sustained by the ld First Appellate Authority, as per particulars given below: - SI Items of additions/disallowance (Rs.) No 1 Disallowance of CSR Expenditure 20,52,783 Disallowance of expenses under section 37 2 3,61,967 Disallowance of Foreign Travel Expenses 3 13,06,595 Page 2 of 4 Disallowance out of Miscellaneous expenses 4 11,76,244 Disallowance of Fee and Charges paid on sale of REC 5 1,94,595 are wrongful; 5. the Ld CIT(A), while deciding the appeal himself, has failed to appreciate that jurisdictional notice under section 143(2) had not been served (on the appellant) in accordance with the provisions of law and accordingly, the regular assessment order dated 25.12.2018 itself was null and void; (6) the Ld. CIT(A), inter-alia, has failed to appreciate that (i) the books of account and other records had been maintained by the appellant company, in regular course of business, and on day-to-day basis; (ii) such books of account had been found to be correct and complete, even in regular assessment proceedings, as the same had not been rejected on any ground whatsoevers; and (iii) accordingly no adhoc disallowances could have been made/sustained by the authorities below. 7 the order appealed against, is contrary to the facts, law and principles of natural justice.”
The facts in brief are that the assessee filed his return of income at Nil on 15.10.2016. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred as “the Act”). Thereafter, the case was selected for complete scrutiny. The Assessing Officer, while framing assessment made various additions in the income of the assessee i.e. out of disallowance of CSR expenditure of Rs.20,52,783/-, disallowance of expenditure claimed u/s 37 of the Act of Rs.3,61,967/-, disallowance of Director’s Foreign Travelling Expenses of Rs.13,06,595/-, disallowance of Miscellaneous Expenses of Rs.11,76,244/- and also disallowance of Fee & Charges of Rs.1,94,595/-. Hence, the Assessing Officer computed income at Rs.12,94,17,582/- and after allowing unabsorbed depreciation for the assessment year 2008-09 and assessment year 2009-10 assessed income at Nil and book profit at Rs.2,48,39,790/-. Aggrieved by this, the assessee preferred appeal before the Ld. CIT(A), who sustained the additions by passing exparte order against the assessee. Now the assessee is in appeal before this Tribunal.
At the outset, the Ld. Counsel for the assessee contended that both the lower authorities have passed exparte order against Page 3 of 4 the assessee. The assessee was not afforded adequate opportunities by the authorities below for representing its case effectively. Therefore, he prayed that the matter may be remanded back. The authorities below may be directed to pass the order by giving adequate opportunity for the assessee of being heard.
On the other hand, the Ld. Departmental Representative (DR) opposed the submissions and contended that the assessee was not vigilant about his case; therefore, the assessee cannot be given benefit of its own negligence. Hence, appeal deserves to be dismissed.
Heard, the Ld. Representatives of the parties and perused the material available on record. It is the grievance of the assessee that the material placed before the lower authorities was not considered and without considering the same, the impugned additions have been made by the lower authorities. Ld. Counsel for the assessee has stated that the authorities below failed to consider the evidences filed by the assessee during the course of appellate proceedings. He also contended that the books of account and other records has been duly maintained by the assessee company in its regular course of business, same has been found to be correct and complete since the accounts has not been rejected. In the present case, the grievance of the assessee is two-fold one that it was not afforded adequate opportunity and two the submission and other evidences placed before the lower authorities were not considered. Ld. Counsel has drawn our attention towards the submissions made before Ld. CIT(A). Looking to the same, we find that the submissions and evidences escaped the attention of Ld. CIT(A). It is well settled law that the appellate authority is under legal obligation for adverting and adjudicating the issues by way of speaking order. Non Page 4 of 4 consideration of explanation offered by the assessee cause miscarriage of justice and even otherwise, it is against the principles of natural justice. We, therefore, set aside the impugned order and restore the grounds to the file of the Ld. CIT(A) to decide it afresh by way of speaking order, after giving adequate opportunity of hearing to the assessee. Grounds raised in this appeal are allowed for statistical purpose.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 06/05/2025.