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Facts
The assessee, TNY Holidays Pvt. Ltd., a travel agent, filed its ITR for AY 2016-17. The AO completed an ex-parte assessment under Section 144 due to non-compliance, making additions for undisclosed commission income of Rs. 51,960/- and disallowing Rs. 1,83,82,496/- from Travel & Tour Expenses. The CIT(A) summarily dismissed the assessee's appeal without considering the merits or the remand report where the AO had admitted partial relief.
Held
The ITAT held that the CIT(A) erred by summarily dismissing the appeal without adjudicating on merits, considering the assessee's submissions, or the AO's remand report. It emphasized that the CIT(A) is duty-bound under Section 250(6) to pass a speaking order addressing all grounds and points for determination. Consequently, the ITAT set aside the CIT(A)'s order and remitted the matter back for fresh adjudication on merits, with directions to consider all relevant submissions and the remand report after providing a proper hearing.
Key Issues
Whether the CIT(A) can summarily dismiss an appeal without adjudicating on merits, considering the assessee's submissions, or the AO's remand report, thereby violating the statutory obligations under Section 250(6) of the Income Tax Act.
Sections Cited
Section 142(1), Section 144, Section 234A, Section 139(1), Section 250(6), Section 250(4), Section 250(5), Section 251(1)(a), Section 251(1)(b), Section 251(2)
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Income Tax Appellate Tribunal, DELHI BENCH ‘H’: NEW DELHI
Before: SHRI KUL BHARAT & SHRI AVDHESH KUMAR MISHRA
Appellant by Ms. Lalita Krishnamurthy, CA Respondent by Sh. Amit Katoch, Sr. DR Date of Hearing 18/09/2024 Date of Pronouncement 23/10/2024 ORDER
PER AVDHESH KUMAR MISHRA, AM
This appeal for the Assessment Year (hereinafter, the ‘AY’) 2016-17 filed by the assessee is directed against the order dated 30.04.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [hereinafter, the ‘CIT(A)’].
Following grounds are raised in this appeal: -
“1. Ld. CIT(A) has erred in sustaining the additions / disallowances without considering the remand report of the AO dated 17.02.2020 and the written submission of the appellant company dated 23.04.2024.
That as the Id. CIT(A) had failed to consider the material on record at the time of passing of the impugned order the sustaining of the arbitrary addition of Rs.51,960/- and the estimated disallowance of Rs.1,83,82,496/- was unjust, unwarranted and unsustainable on various facts and legal grounds.
That the Id. CIT(A) had wrongly held that no logical explanation was given by the appellant company on the issues which were the subject matter of appeal consequently sustaining of the estimated disallowance of Rs.1,83,82,496/ on account of "tour and travel" falling under the head "income from business or profession" was unjust, unwarranted and not tenable on facts and in law. 4. That the ld. CIT(A) had wrongly held that no logical explanation was given by the appellant company on the issues which were the subject matter of appeal consequently sustaining of the arbitrary addition of Rs.51,960/- on account of undisclosed income falling under the head "income from business or profession" was unjust, unwarranted and not tenable on facts and in law. 5. The above grounds are independent and without prejudice to one another. 6. Your appellant craves leave to add, alter, amend or withdraw any of the grounds ofappeal at the time of hearing. 7. That the Ld. CIT(A) erred in not deleting the interest levied u/s 234A of the IT Act. The appellant has filed its return of income u/s 139(1) of the IT Act in time on 12.10.2016. However, the Ld. AO has levied the interest u/s 234 of Rs. 12,35,196/-.” 2.1 In nutshell, the appellant/assessee has challenged the impugned appellate order of the CIT(A) upholding the findings of the AO without considering the remand report called by him wherein the Assessing Officer (hereinafter, the ‘AO’) had found that the disallowance out of Travel & Tour Expenses were justified to a large extent.
The relevant facts giving rise to this appeal, in brief, are that the appellant/assessee, engaged in the business of Supporting and Auxiliary Transport Activities, travel agent, etc., filed its Income Tax Return (hereinafter,the ‘ITR’) on 12.10.2016 disclosing income of Rs.55,46,440/-. The case was picked up for limited scrutiny, under CASS on the reasoning that there is mismatch in sales turnover reported in the audit report in ITR and there are large expenses claimed in the P&L Account. It is evident from the assessment order that the appellant/assessee did not comply to the statutory notices issued under section 142(1) of the Income Tax Act, 1961 (hereinafter, the ‘Act’). Therefore, the Assessing Officer (hereinafter, the ‘AO’) completed the assessment, ex-parte, under section 144 of the Act, wherein the addition of undisclosed commission income of Rs.51,960/- and disallowance of Rs.1,83,82,496/- out of Travel & Tour Expenses was made on the reasoning that the rise in expenses under the head ‘Travel & Tour’ was not in proportionate to that of the turnover (expenses under the head Travel & Tour had gone up @ 99%; whereas the turnover has increased @ 80.6% only). Accordingly, the assessment was completed at income of Rs. 2,39,80,900/-. Aggrieved, the appellant /assessee filed appeal before the Ld. CIT(A) who also dismissed the appeal holding as under:-
“5. Decision: I have carefully considered the submission put forth and the documents furnished by the appellant, perused the facts of the case and brought other material on record, it is observed that the appellant has not replied nor submitted any replies. Therefore, on the basis of old submissions I hold the following No logical explanation has been given by the appellant for the No.1, 2 and 3. So, I have no reasons to interfere with this addition. Hence, these grounds are dismissed. Balance grounds are consequential in nature. Therefore, it is not adjudicated upon. 5.1. In view of the above, the appeal of the appellant is dismissed.”
The Ld. Authorized Representative (hereinafter ‘AR’) with the help of the reply of the appellant/assessee extracted on page-3 of the impugned order, submitted that the Ld. CIT(A) did not take cognizance of the remand report of the AO and considered the reply of the appellant/assessee and decided the appeal summarily as mentioned above. It was categorically submitted that the AO, in the remand report, had admitted categorical relief of Rs.1,74,29,982/-. The relevant portion of the submission of the appellant extracted on page-3 of the impugned order reads as under:-
“2. Disallowance of Expenses of Rs. 1,83,82,496 The Ld. AO has estimated the total expenses under the head Tour and Travel on the basis of increase in turnover of the assessee company and disallowed the expenses amounting to Rs. 1,83,82,496. However the Ld. AO has in his remand report allowed the expenses of Rs 1,74,29,982 out of the expenses disallowed of Rs. 1,83,82,496 and has retained the disallowances of Rs. 9,52,514. The Ld. AO has stated in remand report that complete details/documents of following persons / entities were not submitted hence addition of Rs. 9,52,514/- should be retained. 4 The total number of parties is around 200 approx. and data was voluminous because of which ledger account of major big parties were only submitted before Ld. Assessing officer for remand report. The ledger accounts of small parties were not submitted. The copy of the ledger account of those parties which were not submitted to the Ld. AO before issuing of remand report and for whom addition of Rs. 9,52,514 is proposed in remand report is enclosed…………………………………”
The Ld. AR, placing emphasis on the Paper Book containing various documents, details filed before the AO and the CIT(A) during the assessment and appellate proceedings, submitted that none of these authorities took pain to consider the details and documents filed before them and decide the case on merit.
The Ld. DR placed reliance on the order of lower Authorities.
We have heard both the parties and have perused the material placed on record. We find that the Ld. CIT(A) has summarily dismissed the appeal. The Ld. CIT(A) has not adjudicated the case on merits and has not taken pain to consider the submission of the appellant/assessee and remand report of the AO. Moreover, he has not decided each ground of appeal after discussing the issues in detail and his reasons for agreeing with the assessment order. As per provisions of section 250(6) of the Act, the CIT (A) is obliged to dispose of the appeal in writing after stating the points for determination and to then pass an order on each of the points which has arisen for consideration. The CIT(A) is further obliged to state the reason for his/her decision on each such points for determination. The CIT(A) is duty-bound to dispose of the appeal through a speaking order on merits, on all the points for determination including each ground of appeal. Moreover, it is evident from the perusal of section 251(1)(a), 251(1)(b) and Explanation of section 251(2) of the Act that the CIT(A) is required to apply his/her mind to all the issues which arise from the impugned order before him/her, whether or not these issues have been raised by the assessee before him/her.
8. Section 251(1)(a) of the Act provides that while disposing of an appeal against assessment order, the CIT(A) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1)(b) of the Act provides that in disposing of an appeal against an order imposing a penalty, the CIT(A) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty. On cumulative consideration of the provisions of section 250(6) of the Act read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) of the Act and Explanation of section 251(2)of the Act, it is concluded that the CIT is not empowered to dismiss the appeal in such a way without stating reasons for so. The CIT(A) is obliged to dispose of the appeal on merits. In this regard, it is worth mentioning the finding of the Coordinate Bench in the case of MARC Laboratories Ltd. in 2733, 2730, 2734 & 2735/DEL/2022 wherein it has been held as under: 6
“5. We straightway refer to Section 250(6) of the Act which enjoins that the CIT(A) shall state the points for determination before it and the decision shall be rendered on such points along with reasons for the decision. Thus, it is incumbent upon the CIT(A) to deal with the grounds on merits even in ex parte order. In view of Section 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non-prosecution. This view is also taken by the Hon'ble Bombay High Court in case of CIT vs. Premkumar Arjundas Luthra HUF, (2017) 291 CTR 614 (Bom.). A bare glance of the order of the CIT(A) shows that CIT(A) has not addressed itself on various points placed for its determination at all and dismissed the appeal of assessee for default in non-appearance. Needless to say, the CIT(A) plays role of both adjudicating authority as well as appellate authority. Thus, the CIT(A) could not have shunned the appeal for non- compliance without addressing the issue on merits.
In the totality of the circumstances, we consider it just and expedient to restore the matter back to the CIT(A) in the larger interest of justice with a view to enable the assessee to avail proper opportunity for disposal of appeal by the CIT(A) on various points. The assessee is cautioned to extend full co-operation to the CIT(A) without any demur, failing which, the CIT(A) shall be at liberty to conclude the appellate proceedings in accordance with law. Hence, the order of the CIT(A) appealed against, is set aside and all the issues raised in the impugned appeal are restored back to the file of the CIT(A) for fresh adjudication in accordance with law after giving reasonable opportunity of hearing to the assessee.” 9. Without offering any comment on merit of the case, we deem it fit to set aside the impugned order and remit the matter back to the file of the CIT(A) for deciding the appeal on merit, in accordance with law, after providing adequate opportunity of being heard to the appellant/assessee and the AO. Further, the Ld. CIT(A) is directed to consider the submission of the appellant/assessee and the remand report of the AO and give categorical findings thereon in the appellate order. The appellant/assessee, no doubt, shall cooperate in the fresh appellate proceedings before the Ld. CIT(A).
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in open Court on 23rd October, 2024