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Facts
For AY 2013-14, the assessee declared an income of Rs. 2,12,60,140/-, but the AO completed assessment u/s 143(3) read with section 144 at Rs. 4,94,69,900/- with numerous additions/disallowances. The CIT(A) partly allowed relief by deleting depreciation disallowance but sustained other additions. The assessee appealed to the ITAT, primarily citing a lack of reasonable opportunity to be heard and the CIT(A)'s erroneous rejection of additional evidence under Rule 46A.
Held
The Tribunal observed that the assessee lacked effective representation before lower authorities, and the CIT(A) improperly rejected the admission of additional evidence despite the assessee not being afforded proper opportunity by the AO. In the interest of substantial justice, the Tribunal set aside the orders of the authorities below and restored the matter to the Assessing Officer for a de novo assessment, mandating a fresh opportunity for the assessee to be heard and to produce evidence.
Key Issues
Whether the CIT(A) erred by denying reasonable opportunity of being heard and not admitting additional evidence under Rule 46A; and the validity of various disallowances made by the AO and confirmed by CIT(A), including director's salary, TDS deduction, commission/brokerage, and forfeited flat booking amounts.
Sections Cited
Section 143(3), Section 144, Section 40(a)(ia), Section 37(1), Section 234A, Section 234B, Section 234D, Rule 46A, Rule 46A(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI M. BALAGANESH
O R D E R PER KUL BHARAT, JM:
This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-9, New Delhi, dated 24.08.2018, pertaining to the assessment year 2013-14. The assessee has raised following grounds of appeal:
“1. That the Ld. CIT(A) erred in law and on facts in hurriedly disposing the appeal by confirming the order of the AO without affording reasonable opportunity of being heard to the appellant company.
That the Ld. CIT(A) erred in law and on facts in not admitting new/additional evidences under Rule 46A of the Income tax Rules ("Rules") for the reason that sufficient opportunities were given to the appellant during assessment without taking cognizance of the contents of the Affidavit filed by the appellant during appellate proceedings stating that the company was unaware that the erstwhile Chartered Accountant had withdrawn his power of attorney before the AO during the course of assessment proceedings.
3. That the Ld. CIT(A) erred in law in not exercising the power vested upon him by virtue of Rule 46A (4) of the Rules in directing the production of documents in disposing of the appeal expeditiously. 4. That the Ld. CIT(A) erred in law and on facts in confirming the disallowance of Rs.60,00,000 in respect of director's salary u/s 40(a)(ia) of the Income tax Act ("the Act") for non-deposit of TDS by the appellant company before the due date of furnishing of Income tax return. In doing so the Ld. CIT(A) has mis-interpreted the provisions of section 40(a)(ia) of the Act which does not deal with disallowance of salaries for non- deduction/deposit of TDS. 5. That the Ld. CIT(A) erred in law and on facts in not appreciating that liability to deduct and deposit TDS on salary arises at the time of payment of salary and not on accrual. 6. That the Ld. CIT(A) erred in law and on facts in confirming the disallowance of Rs.46,40,000 on account of commission/brokerage due to non-production of any submission and evidence on that count. 7. That the Ld. CIT(A) erred in law and on facts in confirming the disallowance of Rs. 1.60.37.491 in respect of amount forfeited by builders of various projects where the appellant had booked flats, for non-payment of instalments due from time to time. 8. That the Ld. CIT(A) erred in misplacing reliance only on the date of communication received from the builders regarding forfeiture of the amount paid without realising that failure to pay the instalments to the builders took place during the relevant year under appeal. 9. Without prejudice to the above the disallowance should be allowed as a deduction in the subsequent assessment year i.e.. AY 2014-15.
Without further prejudice the disallowance should have been restricted to Rs.1,40,37,491 being the actual amount paid to builders against various booking of flats.
That the appellant denies its liability to be charged with interest u/s 234A, 234Band 234D respectively.” 2. Facts, in brief, are that for A.Y. 2013-14 the assessee filed its return of income declaring total income of Rs. 2,12,60,140/-. The case of the assessee was selected for scrutiny through CASS and the AO completed the assessment u/s 143(3) read with section 144 of the Income-tax Act, 1961 (the “Act”) at total income of Rs. 4,94,69,900/- by making following additions/ disallowances to the returned income:
Disallowance of payment of rent Rs. 60,000/- Disallowance u/s 40(a)(ia) of the Act Rs. 60,00,000/- Disallowance of TDS deduction Rs. 46,40,000/- Disallowance of claim of Depreciation Rs. 6,36,795/- Disallowance u/s 37(1) of the IT Act Rs. 7,79,874/- Disallowance of expense claimed in P&L A/c Rs. 1,60,37,491/- Disallowance of ROC fee Rs. 55,600/- 2.1 Aggrieved against it the assessee preferred appeal to the learned CIT(A), who partly allowed the appeal by accepting the claim of depreciation and thus deleting the disallowance of Rs. 6,36,795/-. The learned CIT(A) sustained rest of the additions/ disallowances made by the AO. Aggrieved against the sustenance of additions/ disallowances the assessee is in appeal before this Tribunal.
At the time of hearing no one attended the proceedings on behalf of the assessee. It is seen from the record that no one is attending the proceedings on behalf of the assessee since 12.05.2022. Notices sent at the address furnished by the assessee in Form no. 36 have been returned unserved with the postal remarks ‘no such person’ or ‘left without address’. No change in address, if any, has also been furnished by the assessee. Therefore, the appeal is taken up for hearing in the absence of the assessee and is being decided after hearing the learned DR and on the basis of material available on record.
Learned DR supported the orders of the authorities below.
It is noticed that before lower authorities there was no effective representation on behalf of the assessee. From the record it is also revealed that before learned CIT(A) the assessee had moved application under Rule 46A for admission of additional evidence on the ground that no proper opportunity was accorded by the AO. However, the prayer of the assessee for admission of additional evidence stood rejected by the learned CIT(A). Therefore, looking to the totality of facts of the present case and in the interest of substantial justice, we are of the considered view that the assessee should be given reasonable opportunity for making effective representation of its case before the authorities below.
Accordingly, orders of authorities below are set aside and the matter is restored to AO for de novo assessment after affording reasonable opportunity of being heard and allowing the assessee to produce evidence, if any, in support of its claim. Grounds are allowed for statistical purposes.
Appeal of the assessee is allowed for statistical purposes.
Order pronounced in open court on 10th April, 2024.