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Income Tax Appellate Tribunal, BANGALORE BENCHES “A” BENCH: BANGALORE
Before: SHRI A.K. GARODIA & SHRI PAVAN KUMAR GADALE
ORDER
PER PAVAN KUMAR GADALE, JM.
The assessee has filed an appeal against the order of the CIT (A)-6, Bangalore, dated 17/10/2017 passed u/s 143(3) and u/s 250 of the IT Act, 1961 for the assessment year 2009-10. The assessee has raised the following grounds of appeal:
“1. The orders passed by the AO and the CIT (A) are bad in law and not in accordance with the provisions of Income Tax Act, 1961. 2. The action of the CIT (A) is disposing of the appeal exparte is bad in law.
3. The CIT (A) and the AO erred in fact and in law in disallowing expenses of Rs. 3,18,94,376/- incurred towards salaries and travelling expenses of employees with regard to development of products for sale to customers.
4. The CIT (A) and the AO erred in fact and in law in disallowing inventory written off of Rs. 4,61,97,016/- pursuant to termination of business arrangements with one of the business services. 5. The CIT (A) and the AO erred in fact and in law in disallowing a sum of Rs. 62,60,966/- incurred by the appellant as expenses for availing financial advisory services. 6. The AO erred in invoking the provisions of section 14A read with Rule 8D in respect of investments in shareholding of the subsidiary companies. More specifically; 6.1. The AO erred in invoking disallowance u/s 14A of the Act in respect of the investments by appellant in its wholly owned subsidiaries established outside India, which investments were strategic in nature and not for the purpose of earning any tax exempt income. 6.2. The AO erred in noting that investments by the appellant in its WOS outside India are not tax free investments that any dividend earned on such investments is taxable in India and hence provisions of section 14A could not have been invoked. 6.3. The AO erred in failing to appreciate that in the absence of any direct or indirect expenditure incurred by the appellant, the provisions of section 14A could not have been invoked and applied to the appellant’s case. 6.4. Without prejudice to the above grounds, the AO erred in undertaking disallowance u/s 14A without noting that interest free shareholders’ funds exceed the amount of investment in subsidiaries and hence the said disallowance is not warranted. 6.5. Without prejudice to the above grounds, the AO erred in invoking disallowance u/s 14A a sum of Rs. 23,06,410/- without appreciating that the appellant had earned dividend income of only Rs. 15,56,054/- without noting that the amount of disallowance cannot exceed the amount of exempt income.”
Before we go into the merits of the case, Ld AR submitted that the order passed by the CIT (A) is ex-parte order and whereas the assessee has submitted a letter dated 09/04/2019 mentioning the reasons for non-appearance before the Appellate Authority. We on perusal of the CIT (A) order found that the assessee was provided opportunity of hearing on 07/02/2017, 27/07/2017 & 07/09/2017 and also final opportunity was provided on 13/10/2017. But there was no appearance by the assessee or the Authorized Representative. In the course of hearing, Ld AR emphasized that the assessee is under bona fide belief that the matter is being represented by the Authorized Representative to whom the notices have been issued. Since there is no compliance, Ld AR prayed for one more opportunity be provided before the CIT (A) to substantiate the assessee’s claim with supporting evidence. Whereas the Ld DR has objected that sufficient opportunities were provided and the assessee choose not to appear for hearing and prayed for dismissal of appeal.
We have heard the rival submissions and perused the material available on record. Prima facie on perusal of the CIT (A) order, the assessee was provided an opportunity of hearing on the dates as discussed by the CIT (A) but the fact remains as mentioned by the Ld AR that the notices were issued to the Authorized Representative and the assessee-company was under bona fide belief that the matter has been represented by the Ld AR. Hence we are of the opinion that the Revenue shall not be at a loss if an opportunity is provided to the assessee. Therefore in the interest of substantial justice, we restore the disputed issue to the file of the CIT (A) who shall adjudicate afresh and pass a speaking order and it is nevertheless to mention that the assessee should be provided an adequate opportunity of hearing and the assessee shall also cooperate in submitting the information for early disposal of the appeal and the Grounds of Appeal of the assessee are allowed for statistical purposes.
In the result, assessee’s appeal is allowed for statistical purposes.
Order pronounced in the open court on 15th day of April, 2019.