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Facts
India Gateway Terminal Pvt. Ltd. challenged disallowances made by the AO under Section 195 (for management fees without TDS), Section 40(a)(ia) (for non-remittance of TDS), and Section 14A (for expenditure related to exempt income) for AYs 2007-08 & 2009-10. The assessee contended there was no TDS liability without a Permanent Establishment and Section 14A disallowance should be limited to exempt income. The CIT(A) dismissed the assessee's appeals ex parte.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeals *in limine* for non-prosecution, as the CIT(A) is obligated to dispose of appeals on merits even ex parte. Citing judicial precedent, the Tribunal remanded the matter back to the CIT(A) to decide the appeals *de novo* on merits after providing the assessee a reasonable opportunity of hearing.
Key Issues
Whether the CIT(A) can dismiss an appeal ex parte *in limine* without deciding on merits; and the correctness of disallowances made under Section 195, Section 40(a)(ia), and Section 14A of the Income Tax Act.
Sections Cited
143(1), 195, 40(a)(ia), 14A
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the assessee are directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 19.05.2023 for Assessment Years (AYs) 2007-08 & 2009-10.
Brief facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act. It is engaged in the business of operating and developing the Rajeev & 546/Coch/2023 India Gateway Terminal Pvt. Ltd. Gandhi Container Terminal at Cochin Port. The return of income for AY 2009-10 was filed on 30.09.2009 declaring loss of Rs. 7,83,77,100/-. Against the said return of income, the assessment was completed by the ACIT, Circle 1(2), Kochi (hereinafter called "the AO") vide order dated 14.11.2011 passed u/s. 143(1) of the Income Tax Act, 1961 (the Act) at a total loss of Rs. 4,47,28,321/-. While doing so, the AO made disallowance or the management fees payable to M/s. Dubai Port World of Rs. 2,93,59,617/- on the ground that the appellant had failed to deduct tax at source under the provisions of section 195 of the Act. The AO also disallowed the claim for deduction u/s. 40(a)(ia) of the Act in the year of payment of tax deduction at source of Rs. 31,315/- on the ground that the appellant had failed to remit the TDS amount in respect of the above sum. The AO also made a disallowance of Rs. 42,58,027/- u/s. 14A of the Act.
Being aggrieved, an appeal was filed before the CIT(A), challenging the above additions made on the ground that in respect of payment of Rs. 2,93,59,617/- there was no liability to deduction tax at source in the absence of a permanent establishment. As regard to the disallowance u/s. 14A it was contended that no expenditure was incurred in relation to earning of exempt income. Further it is pleaded that the disallowance, if any, warranted should be restricted to extent of exempt income. The CIT(A) dismissed the appeals exparte.
We have heard the rival contentions of both the parties and perused the material available on record. We find that the learned CIT(A) dismissed the appeals in limine for non prosecution. 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 appeals de novo on merits after affording reasonable opportunity of hearing to the assessee.
In the result, the appeals filed by the assessee are allowed for statistical purposes Order pronounced in the open court on 11th February, 2025.
Sd/- Sd/- (PRAKASH CHAND YADAV) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 11th February, 2025 n.p.