HIBISCUS COMMUNICATIONS PVT. LTD,MUMBAI vs. ACIT 15(2)(1), MUMBAI

O R D E R

PER RAVISH SOOD, JM

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)

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.

3 Hibiscus Communications Pvt. Ltd. Vs. ACIT-15(2)(1)

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.