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Facts
Deepak Enterprises appealed against CIT(A) orders for AY 2014-15 confirming quantum additions and penalty. The additions included arbitrary disallowances of R&D expenses, additional sales tax, and personal expenses under section 37(1), while a penalty under section 271(1)(c) was also levied. The assessee's primary contention was the lack of opportunity of being heard during the CIT(A) proceedings.
Held
The Tribunal observed that the assessee was not given a proper opportunity to present their case. Consequently, both appeals were set aside to the file of the ld. CIT(A), with a direction to provide the assessee an adequate opportunity of being heard and pass an order as per law.
Key Issues
Whether arbitrary disallowances under section 37(1) and penalty under section 271(1)(c) are sustainable when the assessee was not given an opportunity of being heard by the CIT(A).
Sections Cited
37(1), 271(1)(c), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI CHALLA NAGENDRA PRASAD
PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These are appeals by the assessee against the respective orders of the ld. CIT (Appeals)/National Faceless Appeal Centre (NFAC) dated 12.06.2023 for the assessment year 2014-15 confirming the quantum addition and penalty sustenance by the ld. CIT (A).
Grounds of appeal taken by the assessee read as under :-
“ITA No.2263/Del/2023 (QUANTUM APPEAL)
That Ld. JCIT has erred in law as much as on the facts of the case by arbitrary disallowing 100 percent expenses incurred on account of Research & Development of Rs.7,57,500/- under section 37(1) of the Act, without giving the opportunity of being heard.
2. That Ld. JCIT has erred in law as much as on the facts of the case by arbitrary disallowing expenses of Rs.8,024/- incurred on account of additional sales tax/fee under section 37(1) of the act, without giving the opportunity of being heard to the appellant. However, the claim made by the appellant for the said expenses was bonafide. 3. That Ld. JCIT has erred in law as much as on the facts of the case by arbitrary disallowing the following expenses out of the total expenses of respective head as personal expenses under section 37(1) of the act, though there is no personal usage made out of the said expenses. S.No. Name of expenses Head Total Expenses (Rs.) Disallowed (Rs.) 1. Vehicle running & maintenance Rs. 3,21,220/- 32,122/- 2. Depreciation on vehicles Rs. 1,97,023/- 19,702/- 3. Insurance of vehicle Rs. 37,580/- 3,758/- 4. Telephone Rs. 4,89,802/- 48,980/- 5. Total Rs.10,45,625/- 1,04,562/-
It is therefore kindly prayed that the aforesaid unwarranted disallowance under section 37(1) of the act of Rs.8,70,086/- may kindly be deleted after providing an opportunity of being heard to the appellant.”
(PENALTY APPEAL) “(a) That ld. ACIT has erred in law as much as on the facts of the case by arbitrary levied the penalty under seciton271(1)(c) of the Income Tax Act. (b) That the appellant has filed an appeal against order passed under section 143(3) of the act against the addition made by the ACIT. (c) That appellant has not filed inaccurate particular of income before ld. ACIT in the course of hearing of the case.” 3. At the outset, ld. Counsel for the assessee submitted that assessee has not been given an opportunity to properly canvass the case, hence he prayed that an opportunity may be granted to the assessee. He further submitted that ld. CIT (A) has kept the order pending for six year and then passed an order without giving an opportunity. objection if the assessee is given one opportunity to canvass the appeal.
Upon careful consideration, we are of the considered view that interest of justice would be served if the appeals are set aside to the file of ld. CIT(A). Ld. CIT (A) shall give the assessee an opportunity of being heard and thereafter pass an order as per law.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on this 4th day of March, 2024.