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Facts
The ADIT, CPC, Bengaluru made additions to the assessee's income, including Rs. 78,17,622/- for gratuity disallowance and Rs. 74,913/- for PF/ESI contributions, under Section 143(1) of the Income Tax Act, 1961. The assessee's appeal to the Addl/JCIT(A) was dismissed ex-parte on the grounds of non-compliance, despite the assessee arguing that the additions were debatable, already taxed, and that they were not given a proper opportunity.
Held
The Tribunal found that the Addl/JCIT(A) had not provided adequate opportunity to the assessee and dismissed the appeal in a manner inconsistent with natural justice, without addressing the merits. Therefore, the Tribunal restored the appeal to the Addl/JCIT(A) for fresh adjudication on merits, allowing the assessee a proper opportunity to present its case.
Key Issues
1. Whether the Addl/JCIT(A) erred in dismissing the appeal ex-parte without providing adequate opportunity to the assessee. 2. Whether the additions made under Section 143(1) were valid, considering their debatable nature and prior taxation.
Sections Cited
Section 250, Section 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the Addl/JCIT(A), Panaji, passed under section 250 of the Income Tax Act, 1961 on 19.03.2025, wherein the ld. Addl/JCIT(A) has dismissed the appeals of the assessee against the orders under section 143(1) passed for the A.Y. 2021-22 by the ADIT, CPC, Bengaluru on 13.11.2022. The grounds of appeal
1. 1. 1. 1. 1. 1. are as under:- “1. The Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter referred to as the "Ld. CIT(A)"] has erred on facts and in law in disposing the appeal of the appellant by passing an ex-parte order which is in gross violation of natural justice and fair play as the assessee was not provided reasonable opportunity to have its say on the merit of the additions made by the Ld. AO.
2. The Ld. CIT(A) has erred on facts and in law in not appreciating that the addition of Rs.78,17,622/-and also the addition of Rs.74,913/-do not fall under the purview of the clauses enshrined in section 143(1) of the I.T. Act, 1961 and also failed to appreciate that the additions made in the present case are in the nature of debate A.Y. 2021-22 M/s Jil Information Technology Limited and discussion which keep these additions out of the purview of section 143(1) of the I.T. Act 1961.
3. By passing the ex-parte order, the Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.78,17,622/-made by the Ld. A.O. by grossly ignoring the fact that the amount of Rs.78,17,622/-claimed as deduction by the assessee on actual payment basis stood already offered to tax in the previous years by way of adding back the same to the net profit of the respective years.
4. On the facts stated in the statement of facts, the Ld. A.O. has erred on facts and in law in confirming the addition of Rs.78,17,622/-by grossly ignoring the fact that addition of Rs.78,17,622/-in the current year leading to tax the same amount twice and hence the addition so made deserves to be deleted.
5. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.74,913/-by grossly ignoring the fact that this addition was made entirely on the basis of presumption, surmise and conjecture as there has not been any delay in making payment of employees share of contribution to EPF/ESI and hence addition of Rs.74,913/-deserves to be deleted.
6. The Ld. CIT(A) has erred on facts and in law in giving less credit of TDS Rs.91,430/- as the amount of TDS reflected and claimed by the assessee was Rs.1,48,59,832/- whereas credit of TDS allowed by the Ld. A.O. was Rs.1,47,68,402/-.
Appellant reserves its right to advance such other grounds before or at the time of hearing, which it may consider fit and appropriate, for which it craves leave to alter, amend or otherwise modify the grounds appearing hereinbefore with kind permission of the Hon'ble Bench.”
The facts of the case are that the amount of Rs. 78,17,622/- was added back to the income of the assessee on account of disallowance of gratuity claim and another sum of R. 74,913/- was added back on account of disallowance of employees’ contribution to PF/ESI. Aggrieved by this order, the assessee filed an appeal before the NFAC which was subsequently migrated to the Addl/JCIT(A), Panaji. Before the ld. JCIT(A), it was submitted that the ADIT, CPC had erred in law and in facts in making the addition of Rs. 78,17,622/- by ignoring the law that, while passing an order under section 143(1), no addition could be made to the returned income of an assessee on an issue which was of a debatable nature and which required further verification and examination. He had further erred in making the addition of Rs. 78,17,622/- by ignoring the fact that the provision of gratuity of Rs. 45,88,650/- made during the A.Y. 2021-22 M/s Jil Information Technology Limited current year had been added back to the current year’s income and tax had been paid thereon and the amount of Rs. 78,17,622/- claimed by the assessee during the year under consideration, had been added back to the income of the previous year and tax had been paid on the same in the year in which the provision were made. The assessee submitted that this practice had been followed by the assessee on a regular basis and there had not been any deviation in the method. So, the same had been followed in the current year also. The assessee further submitted that the tax auditor had issued a certificate to the effect that a sum of Rs. 78,17,622/- had actually been paid to the employees towards their gratuity and a copy of a certificate was submitted to the ld. Addl/JCIT(A) for his consideration. The assessee also pointed out that the AO had committed an error in disallowing Rs. 74,913/- on account of PF contribution. It was submitted that there had not been any delay in making the payment of employees’ contribution to their EPF and ESI and even the tax auditor had not given any such finding suggesting the addition of this amount on account of belated payment. Therefore, the addition was deserving of being quashed. Finally, the assessee submitted that the AO had failed to allow full credit for tax deducted at source which were supported by the online 26AS statement and a short credit of Rs. 91,430/- had been allowed. Accordingly, it was prayed that since the AO had not given proper opportunity for the assessee to explain the facts, the ld. Addl / JCIT(A) may kindly delete the addition.
However, the ld. Addl / JCIT(A) recorded the fact that he had issued two notices to the assessee on 30.12.2024 for compliance on 3.01.2025 and again on 6.03.2025 for compliance on 11.03.2025 and both these notices had not been complied with. The ld. Addl/JCIT(A) therefore, held that the assessee was not interested in pursuing the appeal and therefore, it was liable to be dismissed. Though he stated that he was adjudicating the issue on merits / facts and the basis of materials available on A.Y. 2021-22 M/s Jil Information Technology Limited record, he thereafter proceeded to dismiss the appeal in limine without recording any finding on merits as such.
The assessee is aggrieved of this order of the ld. Addl/JCIT(A) and has therefore, come before us. Sh. B.P. Yadav, Advocate (hereinafter referred to as the AR) invited our attention to page 4 of the order of the Addl/JCIT(A) and pointed out that the extremely short time given between the issue of the notice and the date for compliance would in itself show that adequate opportunity was not provided to the assessee to represent its case. Furthermore, he argued that the ld. Addl/JCIT(A) had finalized the appeal after the issue of only two notices and while he had mentioned that he was deciding the issue on merits, in fact had not considered any of the arguments of the assessee. He, therefore, prayed that the matter may be kindly be restored to the file of the ld. Addl / JCIT(A) so that the assessee may be able to present its case before him.
On the other hand, Shri. R.R.N. Shukla, ld. CIT DR (hereinafter referred to as the DR) pointed out that as the assessee had filed the appeal, it was for the assessee to remain vigilant to the notices issued two notices to the assessee which had not been complied with. Therefore, in the absence of any material, the Addl/JCIT(A) could not but have passed the order that he had. However, he had no objection to the matter being sent back to the Addl/JCIT(A) for adjudicating on merits, if the Tribunal in its wisdom thought the same to be necessary.
We have duly considered the facts and circumstances of the case. It is self- evident from the extremely short time period given for the compliance to the notices that the assessee was not afforded due opportunity to present its case by the ld. Addl/JCIT(A). The ld. Addl/JCIT(A) also did not address any of the issues raised by the assessee on its merits, even though the assessee had not withdrawn the appeal. In our opinion, even if the Addl/JCIT(A) was inclined to pass an ex parte order, which he