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Facts
The assessee's case was selected for scrutiny, and the Assessing Officer disallowed expenses under Section 14A read with Rule 8D against exempt income. The CIT(A) dismissed the assessee's appeal ex-parte, as the notices sent to an email ID associated with an ex-Finance Manager were not received by the assessee, leading to non-appearance.
Held
The Tribunal condoned the 156-day delay in filing the appeal, accepting the assessee's reason for non-receipt of notices. It found that the CIT(A) had dismissed the appeal ex-parte without adjudicating the merits. Therefore, the Tribunal set aside the ex-parte order and remitted the case back to the CIT(A) for a fresh decision on merits after providing the assessee an opportunity of being heard.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal ex-parte due to non-receipt of notices, and whether the disallowance under Section 14A read with Rule 8D was correctly applied.
Sections Cited
14A, 8D
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Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN
Before: SHRI INTURI RAMA RAO & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 31/08/2023 in respect of the A.Y. 2018-19.
Page 2 of 4 ITA No. 296/Coch/2024
The assessee filed an application to condone the delay in which the assessee submitted that the email ID given in form 35 belongs to the Finance Manager who has left the service of the company on the change of management and therefore the notices sent by the Ld.CIT(A) to the said email ID was not received by the assessee and therefore the order of the Ld.CIT(A) was also not known to the assessee and therefore the said delay of 156 days has been occurred.
We have heard the submissions and the reasoning given by the assessee for the above said delay of 156 days by comparing the email ID mentioned in form 35 and form 36 and satisfied ourselves that the reasoning given by the assessee seems to be a reasonable one and in order to render justice, we are condoning the said delay of 156 days in filing the appeal and taken up the main appeal for hearing.
The brief facts of the case are that the assessee filed their return of income on 06/10/2018 and thereafter their case was selected for complete scrutiny under CASS. The assessee also filed response to the various notices issued by the AO and the AO not satisfied with the explanations had come to the conclusion that the assessee was not eligible to claim the expenditure in respect of the exempt income earned by them and therefore estimated the said expenses u/s. 14A of the Act r.w.Rule 8D of the Rules. As against the said order, the assessee filed an appeal before the Ld.CIT(A) and contended that the issue was covered by the latest decision of the Hon’ble Supreme Court reported in 130 taxmann.com 178 in the case of South Indian Bank Ltd. vs. CIT. The Ld.CIT(A) had dismissed the appeal on the ground that the assessee had not appeared to various hearing notices issued to their email ID. As against the order, the assessee is in appeal before this Tribunal.
At the time of hearing, the Ld.AR brought to our notice that the email ID mentioned in form 35 relates to the ex-Finance Manager who was in Page 3 of 4 service till the management of the company was changed and therefore the various hearing notices sent to the said email ID was not forwarded to the assessee by the then Finance Manager for taking appropriate action and therefore the assessee was not able to respond to the said notices and prayed to set aside the ex-parte order of the Ld.CIT(A).
The Ld.DR submitted that the Ld.CIT(A) had passed the ex-parte order since the assessee had not responded to the four notices issued by the Ld.CIT(A) to the email ID mentioned in form 35 and therefore prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
The assessment order was made u/s. 14A of the Act for the reason that the assessee had earned exempt income and therefore proportionate expenditure has to be disallowed u/s. 14A of the Act r.w.rule 8D of the Rules. The Ld.AR demonstrated before us that the view of the AO is not correct in view of the judgment of the Hon’ble Supreme Court cited supra. We have perused the order of the Ld.CIT(A) in which the Ld.CIT(A) had not adjudicated the issue on merits but decided the appeal ex-parte for the non- appearance of the assessee. In such circumstances, we are not in a position to discuss the issue on merits. We cannot also completely disagree with the argument advanced by the Ld.AR which requires a detailed verification. In such circumstances, we are of the view that one more opportunity should be granted to the assessee for making out their case before the Ld.CIT(A) otherwise great prejudice would be caused to the assessee. We therefore set aside the ex-parte order of the Ld.CIT(A) and remit the same to the file of the Ld.CIT(A) to decide the issue on merits and in accordance with law after hearing the assessee in person.
Page 4 of 4 ITA No. 296/Coch/2024
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 11th March, 2025.