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Facts
The assessee filed an appeal against the ex-parte order of the CIT(A) which upheld the Assessing Officer's (AO) disallowances. The AO had disallowed depreciation on trademarks, technical know-how, management fees, and a portion of advertisement expenses. The CIT(A) dismissed the appeal ex-parte due to the assessee's non-compliance with notices, citing technical issues on the portal as the reason for non-response.
Held
The Tribunal, considering the principles of natural justice, observed that the CIT(A) passed the order ex-parte without a proper hearing, despite the assessee claiming technical difficulties. Therefore, the Tribunal set aside the CIT(A)'s order and remitted the issues back for adjudication.
Key Issues
Whether the CIT(A) erred in passing an ex-parte order without affording adequate opportunity of hearing, and whether the assessee's non-appearance was due to technical glitches.
Sections Cited
32, 37, 143(3), 144AB, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH
Before: SHRI PAVAN KUMAR GADALE, JUDICIALMEMBER & SMT. RENU JAUHRI
सुनवाई क� तार�ख/Date of Hearing 19.08.2024 घोषणा क� तार�ख/Date of Pronouncement 22.08.2024 ORDER PER PAVAN KUMAR GADALE, JM:
The appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi / CIT(A) passed u/sec 143(3) r.w.s144AB and 250 of the Act. The assessee has raised the following grounds of appeal:
The Ld. Commissioner of Income-tax (Appeal), NFAC, erred in upholding the action of the Ld. AO, NEAC in disallowing Depreciation on Trademarks of Rs. 2,79,60,213/- under section 32 of the Income-tax Act, 1961 'the Act').
(A.Y.: 2020-21) Virbac Animal Health Ind Pvt Ltd, Mumbai 2. The Ld. Commissioner of Income-tax (Appeal), NFAC, erred in upholding the action of the Ld. AO, NEAC in disallowing Depreciation on Technical Know How of Rs. 62,26,770/- under section 32 of the Act.
The Ld. Commissioner of Income-tax (Appeal), NFAC, erred in upholding the action of the Ld. AO, NEAC in disallowing Management Fees of Rs. 7,06,07,925/- paid by the Appellant to Virbac Asia Pacific Company Limited, Thailand under section 37 of the Act.
The Ld. Commissioner of Income-tax (Appeal), NFAC, erred in upholding the action of the Ld. AO, NEAC in disallowing 25 percent of Advertisement and Sales Promotion Expenses and Physician samples on ad hoc basis amounting to Rs. 4,99,96,750/- under section 37 of the Act.
The Ld. CIT(A) has erred in passing the impugned order dated 29.02.2024, in an ex-parte manner on the ground that the Appellant was unable to respond to notices issued, however, the fact is that the Appellant was facing technical issues on the portal and was unable to file reply.
The Appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing..
2. The brief facts of the case are that, the assesse company is engaged in the business of marketing of animal health products by purchasing from various manufacturers in India and distributing the same with the help of its field force spread all over India and Nepal. The assessee has filed the return of income for the A.Y 2020-21 on 12.02.2021 disclosing a total income of Rs. 193,40,84,500/-. Subsequently the case was selected for scrutiny under CASS and the Assessing Officer (AO) has (A.Y.: 2020-21) Virbac Animal Health Ind Pvt Ltd, Mumbai issued notice u/sec 143(2) and u/sec142(1) of the Act calling for the details and information referred at Para 2 of the assessment order.The AO on perusal of the information and facts has dealt on the various claims made by the assesse in the audited profit & Loss account and the provisions of DTAA between India and Thailand. Finally the AO has disallowed(i) depreciation claim to the extent of Rs. 3,41,86,983/- (ii) Management fee payments aggregating to Rs.7,06,07,925/- and (iii) disallowed 25% of Advertising expenses which works out to Rs.4,99,96,750/- and assessed the total income of Rs. 2,08,88,76,158/- and passed the order u/sec 143(3) r.w.s 144B of the Act dated 29.09.2022.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, statement of facts and findings of the AO and has issued notices of hearing and since there was no compliance by the assessee to notices.. Therefore the CIT(A) considering the information on record has confirmed the action of the A.O and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon'ble Tribunal.
4. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the action of the Assessing officer overlooking the information of the assessment proceedings. Further the assessee has a good case on merits and shall substantiate with the material evidences (A.Y.: 2020-21) Virbac Animal Health Ind Pvt Ltd, Mumbai and prayed for an opportunity to explain before the lower authorities. Per Contra, the Ld. DR supported the order of the CIT(A).
We heard the rival submissions and perused the material on record. Prima-facie the CIT(A) has passed the order considering the fact that there is no compliance nor appearance in spite of providing adequate opportunity of hearing and the notices were issued. Therefore, the CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and dismissed the appeal ex-parte confirming the action of the assessing officer. The CIT(A) has issued the notices of hearing on 19.08.2023, 02.12.2023, 14.12.2023, 26.12.2023, 04.01.2024, 15.01.2024, 01.02.2024 and 20.02.2024 referred at Page 31 Para 4 of the order but there was no proper response and thus the Ld.CIT(A) came to a conclusion that the assessee is not interested and decided the appeal based on the information available on record. Whereas the assessee has raised grounds of appeal challenging the additions made by the A.O and there could be various reasons for non appearance which cannot be overruled. Therefore, considering the facts, circumstances and principles of natural justice, we shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, we set aside the order of the CIT(A) and remit the entire disputed issues to the file of the CIT(A) to adjudicate afresh and the assessee (A.Y.: 2020-21) Virbac Animal Health Ind Pvt Ltd, Mumbai should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of the Appeal. Accordingly, we allow the grounds of appeal of the assessee for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 22.08.2024 Sd/- Sd/- /- Sd/- (RENU JAUHRI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 22/08/2024 KRK