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Facts
The assessee company filed its return for AY 2018-19. The AO disallowed commission payments of Rs. 31,72,065/- to three parties for non-filing of their ITRs. The CIT(A) dismissed the appeal treating it as infructuous as it was filed against an intimation under Section 143(1) instead of the assessment order under Section 143(3).
Held
The Tribunal found that the appeal was indeed filed against the order under Section 143(3) and not Section 143(1) as concluded by the CIT(A). Therefore, the CIT(A)'s decision to dismiss the appeal as infructuous was baseless. The matter was restored to the CIT(A) for re-examination after providing the assessee with an opportunity to be heard.
Key Issues
Whether the CIT(A) erred in dismissing the appeal as infructuous, and whether the appeal was validly filed against the Section 143(3) order, not Section 143(1) intimation.
Sections Cited
250, 143(1), 143(3), 143(1A), 143(2), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of CIT(A)-9, Mumbai dated 24.05.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2018-19. The assessee has raised the following grounds of appeal:-
1 That the worthy CIT (A) erred in law & facts in treating the appeal before him to be against order under section 143(1) where actually appeal was filed against order under section 143(3) passed on 25/05/2021. 2 That CIT (A) erred in law in not giving to the Assessee an opportunity of being heard before deciding the appeals.
3 That the worthy CIT(A) erred in law in treating the appeals as infructuous and dismissing the same when actually she should have upheld the appeal & quash the intimation under section 143(1) as being against law.
4 That the worthy CIT (A) erred in law in not deciding the appeals on merits, she should be directed to do so.
5 That the Assessing Officer erred in disallowing commission of Rs. 31,72,065/- paid to three parties (without any proof or evidence), since these payments were genuine and, connected with the business of the Assessee & paid to genuine parties.
6 That the order is erroneous since it has been passed by an officer not authorised to do so under the act.
7 That the Assessee reserves the right to add, alter or amend the grounds of appeal given above.”
The brief facts of the case are that the assessee company filed its return of income on 29.09.2018 declaring total income at Rs. 1,15,07,420/-. The return of the assessee was processed u/s. 143(1A) vide intimation dated 01.10.2019 at a figure of Rs. 1, 21, 55,910/-. Thereafter the case of the assessee was selected for scrutiny for A.Y. 2018-19 under Limited Category with one reason being and the same was intimated to the assessee vide notice u/s. 143(2) of the Act dated 28.09.2019 with the following issue:
S. No. Issues i. Verification of Genuineness of Expenses The company engaged in manufacturing of HDPE pipe, Sprinkler Sets, Drip Irrigation system, PVC Pipe and accessories and installation of Water supply project in the entire India. The company was having 13 Branches across India for sale and supply of material. The main manufacturing unit was at Manda in Jaipur district at Manda Industrial area and a unit was situated at Chennai, Tamilnadu.
Assessee further stated that, more than 400 employees were working in the company in PAN India, the market of the goods were mainly rural market. Turnover of the company was Rs. 91.42 Crore.
In the assessment proceeding, the AO observed that a large payment was made under head commission to the following parties but they had not filed return of income for the year under consideration as under:-
Name PAN No. Amount TDS rate TDS Mode of deducted transfer Murugan Karthi DLKPK4646A Rs. 8,80,038/- 5% Rs. 44,002 Bank Kumar (ANNAMALAI TRADERS) Pattan AYLPR9457P Rs. 9,58,005/- 5% Rs. 47,900/- Bank Ramasamy (Murugu Farming System) Maragadam BMOPM0869C Rs. 11,82,972/- 5% Rs. 59,148/- Bank (Ramanaa Agency) Total Amount Rs. 30,21,015/- TDS DEDUCTED Rs. 1,51,050/- TOTAL = Rs. 31,72,065/- Based on the fact that persons mentioned above have not filed their ITRs matter was referred to designated verification unit for physical verification. As per report received from the designated verification unit the verification of the above payment could not be completed by the DVU. Ultimately, the gross amount mentioned in the table was added back to the total income of the assessee.
The assessee being aggrieved with this order of the AO preferred an appeal before the ld. CIT (A)/ADDL/JCIT (A)-9 Mumbai. The Ld. ADDL. /JCIT (A)-9, Mumbai dismissed the appeal of the assessee. The assessee being again aggrieved with this order of ADDL/JCIT (A)-9 Mumbai preferred the present appeal before us. We have gone through the order of the AO, order of the ADDL/JCIT (A)-9 Mumbai and submissions of the assessee along with grounds taken before us. It is observed that order of the ADDL/JCIT(A)-9 Mumbai was passed ex-parte as ADDL/JCIT(A)-9 Mumbai found that none appeared for the assessee and she further observed as under:-
“3. DEFECTIVE/INFRUCTOUS APPEAL: 3.1. Briefly stated, the appellant, a Company, filed its return of income for A.Y. 2018-19 on 29/09/2018 declaring total income of Rs. 115,07,420/-. The AO, CPC while processing the return of income however, determined income at Rs. 121, 55,910/-. Aggrieved, appeal was filed. From a perusal of the Form No. 35 filed it was seen that though the appeal was stated to have been filed against the intimation u/s. 143(1) of the Act, from the information available on ITBA Portal the date mentioned pertained to order u/s. 143(3) of the Act dated 25/05/2021. The statement of facts, the grounds of appeal all pertained to the order u/s. 143(3) of the Act. 3.2. as per the information available in the ITBA, the return was processed by the AO, CPC on 01/10/2019. Further, the appellant's case for A.Y. 2018-19 was selected for scrutiny and notice u/s. 143(2) was issued on 28/09/2019 and assessment was completed u/s. 143(3) on 25/05/2021. Hence, the intimation was issued after the issuance of notice u/s. 143(2) of the Act. Since the appeal was infructuous, notice u/s. 250 of the Act was issued to the appellant. Since the appeal filed was infructuous/ defective, notice was accordingly issued. The appellant has been seeking adjournments right from the date of issue of first notice. When an adjournment is granted as requested, it remains non-compliant. Considering the principles of natural justice, when one more opportunity is granted, a letter is filed by CA Ravindra Badaya seeking adjournment stating that the AR is out of town. However, the appellant has not filed any Authority Letter authorising the CA mentioned. It thus appears that the appellant has no interest in pursuing/prosecuting the appeal and the maxim "Vigilantibus, non dormientibus, Jura subveniunt (Law assists those who are vigilant and not those who sleep over their rights)" is squarely applicable in this case. 3.3. I have very carefully gone through the facts of the case, the information available on record. The prominent question that arises from the current factual matrix involved in this appeal is whether the intimation u/s 143(1) of the Act survives when the subsequent order u/s 143(3) of the Act has been passed.”
5. To verify above observations, we have gone through the Form No. 35 filed by the assessee before the Ld. ADDL/JCIT (A)-9 Mumbai and found that the observation above made by the Ld. ADDL/JCIT (A)-9 Mumbai is baseless and assessee actually filed the appeal against the order passed u/s. 143(3) r.w.s 144B of the Act. In the light of this observation, we deem it fit to restore the matter back to the file of the Ld. ADDL/JCIT (A)-9 Mumbai with the direction to re- examined the matter after giving extra opportunity of being heard to the assessee. The assessee is directed to cooperate and complied with the notices received from the office of the Ld. ADDL/JCIT (A)-9 Mumbai without fail and seeking any adjournment.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 28th day of January 2025.