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Facts
For AY 2016-17, the assessee's books of account were rejected under Section 145(3) of the Income-tax Act, 1961, and an ad-hoc disallowance of 1/3rd of expenses was made by the AO under Section 143(3). The CIT(A), in disposing of the appeal, erroneously addressed an issue (employees' contribution to PF and ESI) that was not a ground of appeal, failing to adjudicate the main dispute regarding the ad-hoc disallowance.
Held
The Tribunal observed that the CIT(A) did not adjudicate the actual issue in dispute regarding the ad-hoc disallowance of expenses. Consequently, the appeal is restored to the file of the CIT(A) for de novo adjudication in accordance with law, allowing the grounds raised by the assessee for statistical purposes.
Key Issues
Whether the CIT(A) erred in not adjudicating the substantive grounds of appeal concerning the ad-hoc disallowance of expenses and in addressing an issue not raised by the assessee.
Sections Cited
143(3), 145(3), Income-tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI ANUBHAV SHARMA
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2016-17, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. ITBA/NFAC/S/250/2023- 24/1054741192(1) dated 31.07.2023 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 12.12.2018 by the Assessing Officer, ACIT, Circle-5(1)(1), GB Nagar (hereinafter referred to as „ld. AO‟).
The assessee has raised the following grounds of appeal :-
“1. On the facts and circumstances of the case the order passed by the learned Commissioner Income Tax (Appeals). Income Tax Department ((CIT(A). ITD) is bad, both in the eye of law and on the facts 2. On the facts and circumstances of the case, the order passed by the learned Commissioner Income Tax (Appeals), Income Tax Department ((CIT(A), ITD) is perverse and invalid and has been passed without application of mind.
Industrial Security and Management Services
On the facts and circumstances of the case, the learned CIT(A), ITD has erred both on facts and in law in passing the order without providing reasonable opportunity of being heard to the assessee in clear violation of the principle of natural justice 4. On the facts and circumstances of the case, the learned CIT(A), IID has erred both on facts and in law in passing the order in dismissing the appeal of the assessee without adjudicating the grounds raised
by the assessee
5. On the facts and circumstances of the case, the learned CIT(A), ITD has erred both on facts and in law in passing the order in dismissing the appeal of the assessee without adjudicating the issue of adhoc disallowance of Rs. 7,96,74,124/- in respect of 1/3 of total of direct and indirect expenses claimed by the assessee.
6. On the facts and circumstances of the case, the learned CIT(A), ITD has erred both on facts and in law in dismissing the appeal of the assessee despite the fact that the disallowance has been made by the AO in an arbitrary manner on an adhoc estimation basis without bringing any adverse matenal on record and the same is unsustainable.
7. The appellant craves leave to add, amend or alter any of the grounds of appeal.”
3. The assessee has filed its return of income in the capacity of a partnership firm for AY 2016-17 on 13.10.2016 declaring taxable income of Rs. 71,68,480/-. During the course of assessment proceedings, it was observed that the assessee had not produced the books of account and accordingly book results were rejected by the ld AO u/s 145(3) of the Act and disallowance @ 1/3rd of expenses were made by the ld AO and assessment completed u/s 143(3) of the Act on 12.12.2018. The assessee preferred an appeal before the ld CIT(A). The ld CIT(A) National Faceless Appeal Centre (NFAC) disposed of the appeal vide order dated 31.07.2023 by addressing the issue in respect of addition made on account of employees contribution to PF and ESI, which was not at all ground before National Faceless Appeal Centre (NFAC).
Aggrieved by this order, the assessee is in appeal before us.
Since the ld CIT(A) had not adjudicated the issue in dispute before him, we deem it fit and appropriate to restore this appeal to the file of the ld CIT(A)
Industrial Security and Management Services for de novo adjudication in accordance with law. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.