PLANT LIPIDS (P) LTD,KOLENCHERY vs. DCIT, CORPORATE CIRCLE-2(1), KOCHI

Brief facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing and export of spices, oleoresins, essential oils and generation of power using windmill. The return of income for AY 2016-17 was filed by the appellant on

Against the said return of income, the assessment was completed by the DCIT, Corporate Circe-2(1), Kochi (hereinafter called "the AO") after making disallowance of Rs. 30,03,953/- u/s. 14A of the Act. Subsequently the AO formed and opinion that income got escaped assessment to tax, for the reason that for the purpose of computing the disallowance under section 14A r.w. rule 8D of I.T. Rules the average value of investment was wrongly adopted at Rs. 26,70,05,428/- as against the correct average value of investment of Rs. 88,47,00,242/-. Accordingly, issued a notice u/s. 148 of the Act on 24.06.2021. In response to the said notice the appellant filed return of income on 04.08.2022. Against the said return of income, the assessment was completed by the at a total income of Rs. 92,53,14,208/-. While doing so, the AO enhanced the disallowance u/s. 14A by Rs. 99,54,251/-.

Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order dismissed the appeal exparte.

Being aggrieved, the appellant is in appeal before us in the present appeal.

When the appeal was called nobody appeared on behalf of the assessee despite due service of notice of hearing. Therefore, we proceeded to dispose of the appeal after hearing the learned Sr. DR. Plant Lipids (P) Ltd.

The learned Sr. DR submits that the order was passed by the CIT(A) exparte but dealt with the merits. Therefore, there no need of any interference in the order.

We have heard the rival contentions of both the parties and perused the material available on record. The issue in the present appeal relates to the disallowance u/s. 14A of the Act. The appellant challenged the addition contending that no borrowed funds have been used for the purpose of making investments which yielded exempt income and also contended that for the purpose of computing the disallowance only the value of investment which yielded exempt income alone should be considered. Further, on a reading of the order of the CIT(A), it appears that the CIT(A) had not dealt with the grounds raised by the appellant. As contemplated u/s. 250(6) of the Act the CIT(A) is required to frame points of determination followed by a detailed discussion thereupon before passing the order. It is the settled position of law that the CIT(A), even while disposing of the appeal exparte, is duty bound to dispose of the appeal on merits. Reliance in this regard can be placed on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Premkumar Arjundas Luthra 279 CTR 614. Therefore, in the light of the above legal position we are of the considered view that the matter requires to be remanded to the file of the CIT(A) with the direction to dispose of the appeal de novo on merits after affording reasonable opportunity of hearing to the assessee.