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Income Tax Appellate Tribunal, “H” Bench, Mumbai
Before: Shri Pramod Kumar & Shri Ravish Sood
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)-24, Mumbai, dated 30.11.2018, 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 07.12.2016. The assessee has assailed the impugned order on the following grounds of appeal before us: “The appellant objects to the order passed by the Commissioner of Income Tax (Appeals) - 24, [CIT(A)], Mumbai on the following grounds:
1. The learned CIT(A) erred in dismissing appeal by passing an ex-parte order.
2. The learned CIT(A) erred in not directing the Assessing officer to delete the disallowance of INR 9,02,748 made under Section 40(a)(1a) of the Income tax Act.
3. The learned CIT(A) erred in not directing the Assessing officer to delete the ad-hoc disallowance of INR 5,00,000 made towards business expenses.
4. The appellant reserves the right to add, alter or amend to the above grounds of appeal.”
2 Hibiscus Communications Pvt. Ltd. Vs. ACIT-15(2)(1)
Briefly stated, the assessee company which is engaged in the business of promotion and advertisement of company products and research and marketing products and glow sign boards had e-filed its return of income for A.Y. 2014-15 on 28.11.2014, declaring its total income at Rs.45,22,220/-. The return of income filed by the assessee 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 made the following disallowances to the returned income of the assessee:
Sr. No. Particulars Amount 1. Disallowance under Sec. 40(a)(ia) of event management Rs.9,02,748/- expenses: 2. Adhoc disallowance of expenses Rs.5,00,000/- (out of total expenses of Rs.84,81,219/-)
On the basis of the aforesaid disallowances the A.O assessed the income of the assessee under the normal provisions at Rs.59,24,970/-. The „book profit‟ of the assessee under Sec.115JB was worked out at Rs.45,17,471/-.
3. Aggrieved, the assessee assailed the assessment order before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee upheld the disallowance made by the A.O and dismissed the appeal on the basis of an ex-parte order.
The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee at the very outset of the hearing submitted that the CIT(A) had disposed off the appeal by way of an ex-parte order. It was averred by the ld. A.R that the CIT(A) had not afforded sufficient opportunity of being heard to the assessee and had proceeded with and disposed off the appeal by way of an ex-parte order. It was submitted by the ld. A.R that the matter in all fairness may be restored to the file of the CIT(A) for fresh adjudication after affording an opportunity of being heard to the assessee.
Per contra, the ld. Departmental Representative (for short „D.R‟) did not object to the aforesaid contentions advanced by the counsel for the assessee.
3 Hibiscus Communications Pvt. Ltd. Vs. ACIT-15(2)(1)
We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the CIT(A) had disposed off the appeal by way of an ex-parte order, for the reason, that the assessee despite having been put to notice about the hearing of the appeal had failed to comply with the same. 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 had been assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed off by the CIT(A). In our considered view once an appeal is preferred before the CIT(A), it is obligatory on his part to dispose off the appeal 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. As per the mandate of law, 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 , Se c . 2 5 0 ( 6 ) o f t h e Ac t o b l i g es th 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 4 Hibiscus Communications Pvt. Ltd. Vs. ACIT-15(2)(1) 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.