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Income Tax Appellate Tribunal, “G” Bench, Mumbai
Before: Shri N.K. Pradhan & Shri Ravish Sood
Appellant by: None Respondent by: Shri V. Vinod Kumar, D.R Date of Hearing: 14.10.2020 Date of Pronouncement: 16.10.2020 O R D E R
PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-20, Mumbai, dated 02.01.2017, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 26.03.2013 for A.Y. 2010-11. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. (a) The Id. Commissioner of Income Tax (Appeals) - 20, Mumbai ('the Id. CIT(A)") erred in facts and law in dismissing the appeal filed by the assessee on the ground on nonappearance, without properly serving the notices for hearing. (b) The order passed by the Ld. CIT(A) be set aside to his file for want of proper adjudication, in light of principles of natural justice.
The Id. CIT(A) erred in facts and law in confirming the action of the Id. Assessing Officer in making an addition of Rs. 2,23,51,193/- being commission income @ 2% on sales, on his own surmises and conjectures.
2 M/s Ganayaka Steel Pvt. Ltd. Vs. ITO-9(1)(4)
3. The Id. CIT(A) erred in facts and law in confirming the action of the ld. Assessing Officer in making an adhoc disallowance of Rs.35,494/- on account of alleged unexplained expenditure, on his own surmises and conjectures.
All the above grounds are independent and without prejudice to the other grounds of appeal
5. Your appellant craves leave to add, alter, amend, delete or modify any or all the grounds of appeal.”
2. Briefly stated, the assessee company had filed its return of income for A.Y. 2010-11 on 15.10.2010, declaring its total income at Rs. nil. The return of income filed by the assessee company was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
During the course of the assessment proceedings the A.O in order to verify the veracity of the sales and purchases of goods of Rs.1,11,75,59,692/- and Rs.1,11,73,31,063/-, respectively, therein issued notices under Sec. 133(6) to the concerned parties therein calling upon them to furnish certain information w.r.t their transactions with the assessee company during the year under consideration. On a perusal the replies filed by the aforementioned parties, it was observed by the A.O that neither of them had filed any supporting evidence with regard to movement of goods as regards their respective transactions with the assessee company. In the backdrop of the aforesaid facts the A.O called upon the assessee to explain as to why the sales/purchases undertaken during the year under consideration may not be considered as structured transactions, and accordingly, deemed proportionate commission received on the total sales may not be added to its total income. In reply, the assessee emphasized on the genuineness of the transactions and declined of having carried out any structured transactions. However, the A.O after deliberating on the facts available on record rejected the aforesaid claim of the assessee. Holding a conviction that the assessee company had carried out structured transactions on commission basis, the A.O worked out its commission income from providing of entries of sales amounting to Rs.1,11,75,59,692/- @ 2%, and therein, computed its commission income at Rs.2,23,51,193/-. Apart from that, the A.O observing that the assessee had 3 M/s Ganayaka Steel Pvt. Ltd. Vs. ITO-9(1)(4)
failed to reconcile the discrepancy and the closing balances of two supplier parties, therein, made an addition of Rs.8,883/-. Also, the A.O disallowed 20% out of the total expenses of Rs.1,77,471/- claimed by the assessee, for the reason, that the genuineness of the same had remained unproved. Accordingly, the disallowance of Rs.35,494/- i.e @ 20% of its total claim of expenses of Rs.1,77,471/- was made by the A.O. On the basis of his aforesaid observations the A.O assessed the total income of the assessee company at Rs.2,24,46,730/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that the assessee had adopted a casual approach and had failed to put up an appearance despite having been afforded sufficient opportunity, the CIT(A) dismissed the appeal on the ground of non-attendance by the assessee. At this stage, we may herein observe, that the CIT(A) while dismissing the appeal of the assessee had failed to advert to and therein adjudicate the appeal on merits in the backdrop of the grounds on which the additions/disallowances made by the A.O were assailed by the assessee before him.
The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that the assessee despite having been intimated about the hearing of the appeal had however failed to put up an appearance before us. In the backdrop of the aforesaid facts, we are constrained to proceed with and dispose off the appeal as per Rule 24 of the Appellate Tribunal Rules, 1963 after hearing respondent revenue and perusing the orders of the lower authorities.
We have heard the Ld. Departmental Representative (for short „D.R‟), perused the orders of the lower authorities and the material available on record. On a perusal of the order of the CIT(A), we find, that he had summarily dismissed the appeal of the assessee for non-prosecution and had failed to apply his mind to the issues which arose from the impugned order and were assailed by the assessee before him. Be that as it may, we are not impressed
4 M/s Ganayaka Steel Pvt. Ltd. Vs. ITO-9(1)(4) with the dismissal of the appeal by the CIT(A) for non-prosecution, without application of mind by him to the issues which were assailed by the assessee by preferring the appeal before him. In our considered view once an appeal is preferred before the CIT(A) then it is obligatory on his part to dispose off the same on merits. We are of a strong conviction that it is not open for the CIT(A) to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. Rather, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec. 251(2) reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. In our considered view, the CIT(A) is not vested with any power to summarily dismiss the appeal for non-prosecution. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Prem Kumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom). In the aforementioned case the Hon‟ble jurisdictional High Court had observed as under:
“8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. F u r t h e r , S e c . 2 5 0 ( 6 ) o f t h e A c t o b l i g e s t h e CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under s. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.”
5 M/s Ganayaka Steel Pvt. Ltd. Vs. ITO-9(1)(4)
We thus not being persuaded to subscribe to the dismissal of the appeal by the CIT(A) for non-prosecution, thus, set aside the same to his file with a direction to dispose off the appeal on merits. Needless to say, the CIT(A) shall afford a reasonable opportunity of being heard to the assessee in the course of the de novo appellate proceedings. The Grounds of appeal raised by the assessee are disposed off in terms of our aforesaid observations.
The appeal of the assessee is allowed for statistical purposes.
Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963, by placing the details on the notice board.