SRI ANANT PANDURANGACHARYA DAMBAL ,DAVANGERE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1(1), HUBLI

This appeal filed by the assessee is directed against the order of CIT(A), Hubballi, dated 17.08.2018 for Assessment Year 2012-13.

2.1 The assessee is an individual earning salary from M/s. Shri Ram Transport Co. Ltd. As per the details on record, the assessee had not filed his return of income for Assessment Year 2012-13 as required under section 139(1) of the Income Tax Act, 1961 (in short ‘the Act’). The Assessing Officer (AO) states in the order of assessment that as there was reason to believe that income of the assessee, chargeable to tax had escaped assessment, notice under section 148 of the Act was issued to the assessee on 10.04.2014 and in response thereto, the assessee furnished the return of income for Assessment Year 2012-13 on 20.02.2015 declaring income of Rs.1,95,540/-. The AO concluded the assessment ex-parte under section 144 r.w.s. 147 of the Act vide order dated 27.03.2015 wherein the assessee’s income was determined at Rs.12,46,540/-; in view of the following disallowances which were carried out as the assessee could not furnish evidence to establish the claims made:- i) Disallowance of claim of exemption under section 10 - Rs. 51,000/- ii) ULIP payment - Rs.10,00,000/- 2.2 Aggrieved by the ex-parte order of assessment dated 27.03.2015 for Assessment Year 2012-13, the assessee preferred an appeal before the CIT(A)- Hubballi. The CIT(A) dismissed the assessee’s appeal vide the impugned order dated 17.08.2018.

4. Grounds 1 and 4 (supra), being general in nature, no adjudication is called for thereon.

5. Ground No. 2(2.1 and 2.2) - ULIP Payment Ground No.3 - Exemption under section 10 of the Act 5.1.1 In ground No.2 (2.1 & 2.2) (supra), the assessee contends that the CIT(A) ought not to have upheld the addition of Rs.10,00,000/- in respect of ULIP of M/s. Shriram Life Insurance Co. Ltd., as the investment therein was made through regular banking channels from out of the sale proceeds of shares allotted to the assessee under the ESOP scheme by his employer M/s. Shri Ram Transport Finance Co. Ltd. It is submitted that the perquisite value of shares allotted under ESOP was even included in the total income of the assessee for Assessment Year 2011-12 and therefore there was no justification for treating the investment made in ULIP as unexplained; considering the fact that the sources of investment are evident from the bank statements produced before the authorities below. It is further contended that the CIT(A), instead of examining and adjudicating on the explanations put forth by the assessee, has brushed the same aside and proceeded to examine wholly irrelevant things like household expenditure, etc.

5.1.2 In ground No.3 (supra), the assessee contends that the CIT(A) has not examined the assessee’s claims for exemption (i) under section 10(13A) r.w.r.

2A in respect of House Rent Allowance (ii) Conveyance Allowance under section 10(14)(ii) r.w.r. 2BB(2) and (iii) Children’s Education Allowance.

5.1.3 The learned AR submitted that a perusal of the orders of the authorities below would clearly evidence that the order of assessment was passed ex-parte under section 144 r.w.s. 147 of the Act and the CIT(A) did not examine, verify or adjudicate on any of the claims put forth by the assessee on merits but merely brushed them aside, and raising irrelevant and imaginary issues, upheld the AO’s orders. It was prayed that the orders of the authorities below be set aside and the assessment be restored to the file of the AO for fresh examination and adjudication of all the issues.

5.2 Per contra, the learned DR for Revenue strongly supported the orders of the authorities below. It was submitted that the assessee had been provided with sufficient opportunities to put forth his case and failed to do so and therefore no further opportunity need be given to the assessee to explain his case.

5.3.1 I have considered the rival submissions put forward by both the assessee and Revenue. It is not disputed that order of assessment dated 27.03.2015 for Assessment Year 2012-13 was passed ex-parte under section 144 r.w. 147 of the Act due to non-compliance by the assessee to the statutory notices under section 142(1) / 143(2) on four occasions. Therefore, it is evident that the AO passed the order of assessment ex-parte without any examination / verification of the claims made by the assessee in respect of exemption claimed under section 10 of the Act and the source of investment of Rs. 10 lakhs in the ULIP of M/s. Shriram Life Insurance Company Ltd., which he proceeded to disallow. Similarly, on appeal, the CIT(A)also records that the assessee has not attended hearings before him and proceeded to uphold the disallowances made by the AO on the grounds that the assessee was unable to furnish any proof to support his claims. On the other hand, according to the assessee, it is apparent from the orders of the authorities below that the disallowances made by the AO were the result of an ex-parte assessment and almost similar is the case with the CIT(A) and the issues were not decided on merits. After having perused the orders of the authorities below, as submitted by the assessee, it is amply clear that the disallowances of the assessee’s claims (i) for exemption under section 10 of the Act of Rs.51,000/- (now contested to the extent of Rs.47,800/-) in respect of House Rent Allowance under section 10(13A) r.w.r. 2A; conveyance allowance under section 10(14)(ii) r.w.r. 2BB(2) and Children’s Education Allowance and (ii) Source of Investment of Rs.10 lakhs in ULIP of M/s. Shriram Life Insurance Co. Ltd., has not been examined on merits by the authorities below. This is, in no small measure, due to the careless attitude of the assessee, in not complying with the statutory notices issued by the authorities below affording hearings, opportunities to explain his case. However, the CIT(A) also notes in the impugned order that, inter alia, the assessee had changed jobs and had forgotten to intimate the Department of his new address(es) and due to certain personal problems he faced.

5.3.2 Be that as it may, the ultimate aim of assessment proceedings is to ensure that only the true and correct income of the assessee is brought to tax. It appears that, in the case on hand, the details and documents of assessee’s claim in respect of exemption under section 10 of the Act and explaining the source of investment of Rs.10,00,000/- in ULIP of M/s. Shriram Life Insurance Company Ltd., have not been examined / verified or adjudicated upon merits. Therefore, in the interest of substantial justice, I set aside the orders of the authorities below (i.e., the ex-parte order of assessment passed under section 144 r.w.s. 147 of the Act dated 27.03.2015 and the impugned order of CIT(A) dated 17.08.2018; both for Assessment Year 2012-13) and restore the matter of assessment for Assessment Year 2012-13 to the file of the AO for de-novo examination and adjudication. Needless to add, the AO shall afford the adequate opportunity of being heard and to file details / documents / submissions required, which shall be duly considered by the AO before adjudicating the issues. All contentions are left open to both the parties. It is accordingly ordered. Consequently, grounds 2 and 3 of assessee’s appeal are allowed for statistical purposes.

Order pronounced in the open court on this 12th day of June, 2019.