Loading judgment…
Facts
The assessee filed an ITR for AY 2017-18, claiming a deduction of Rs. 33,18,229/- under section 57 for interest expense against income from other sources. The Assessing Officer disallowed this deduction due to a lack of documentary evidence, completing the assessment hastily with insufficient time provided to the assessee. The CIT(A) dismissed the assessee's appeal for non-compliance, without adjudicating the matter on merits, which the assessee attributed to non-receipt of hearing notices.
Held
The Tribunal observed significant procedural anomalies at both assessment and first appellate stages, leading to the case not being decided on merits. To ensure a fair adjudication and prevent further litigation, the Tribunal set aside the CIT(A)'s order and remanded the entire matter back to the Assessing Officer for fresh consideration on merits, with proper examination and verification of supporting documents.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without a decision on merits due to alleged non-receipt of notices, and whether the disallowance of interest expense u/s 57 was valid when the assessment was completed without adequate opportunity to the assessee.
Sections Cited
57, 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH & SHRI RAHUL CHAUDHARY,
O R D E R Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the order of ld. CIT(A) NFAC of the Income Tax Act, 1961 for A.Y. 2017-18. The assessee has raised the following grounds before us: “1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal in utter violation of the principles of natural justice without appreciating the fact that the Appellant did not receive notices of hearing
2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance without appreciating the fact that the Assessing Officer had completed the assessment on presumption without any material in his possession
3. On the facts and circumstances of the case and in law, the learned CIT(A) ought to have remanded the matter back to the file of the Assessing Officer for verification after accepting the fact that the assessment was completed in haste due to time barring date.
4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal without adjudicating the same on merits.
P a g e | Anuradha Jayadev Thackeray Vs. ACIT, Circle 23(1) 5. On the facts and circumstances of the case and in law, the learned CIT(A) erred in disallowing interest expense of Rs. 33,18,229/- u/s. 57 of the Income tax Act, 1961 ("the Act") without appreciating the fact that the same was paid for earning the income 6. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating the fact that the Appellant had vide reply dated 02.11.2019 and 17 11.2019 provided all the details as called for by the learned Assessing Officer. The learned CIT(A) has wrongly dismissed the appeal by recording that the Appellant has failed to respond to any of the notices during the assessment proceedings The Appellant craves leave to add, amend or alter all or any of the ground of appeal before or at the time of hearing.”
2. Fact in brief is that return of income declaring total income of Rs.43,23,010/- was filed on 26.03.2018. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 09.08.2018. The assessing officer finalised the assessment on 21.12.2019 after making disallowance of Rs.33,18,229/- u/s 57 of the Act. The assessee has claimed deduction of Rs.33,18,229/- u/s 57 of the Act against the income earned from other sources of Rs.75,10,037/- . The assessing officer has disallowed the claim of deduction on the ground that during the course of assessment assessee has not submitted any relevant documentary evidences to substantiate the claim of deduction u/s 57 of the Act.
3. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee without adjudicating on merit on the ground that assessee had not made compliance to the notices of hearing issued by the ld. CIT(A).
4. Before us the ld. Counsel submitted that at the time of assessment the assessing officer has not given sufficient time period to the assessee to produce the required document. He submitted that assessing officer has issued show cause notice on 12.12.2019 and asked to make compliance within a period of 3 days on 16.12.2019 and passed the assessment order on 21.12.2019. He further submitted that during the P a g e | Anuradha Jayadev Thackeray Vs. ACIT, Circle 23(1) course of appellate proceedings before the ld. CIT(A) the assessee has not received any notice issued by the CIT(A) NFAC.
5. Heard both the sides and perused the material on record. During the course of appellate proceedings before the ld. CIT(A) the appeal of the assessee was dismissed on the reason that assessee has failed to make compliance before the ld. CIT(A). In this regard, the assessee submitted that no notice has been received on the email referred in the Form No. 35 of the appeal filed by the assessee before the ld. CIT(A). During the course of assessment the deduction claimed by the assessee u/s 57 amounting Rs.33,18,229/- was disallowed and added back to the total income of the assessee on the ground that relevant supporting documentary evidences was not furnished by the assessee.
6. Looking to the above facts and circumstances it is evident that the case of the assessee both at the level of assessing officer and CIT(A) the case of the assessee was not decided on merit because of the various anomalies observed at the time of assessment proceedings and appellate proceedings as discussed supra in this order. Under the circumstances in order to decide the issue on merit it is required to consider and examine the relevant document and supporting evidences which the assessee could not produce because of the circumstances as discussed supra in this order. Normally whenever any irregularity krept in the proceedings then after removing the irregularity proceedings is to be initiated from that stage but by remitting the issue to the ld. first appellate authority we would be multiplying the litigation because the ld. CIT(A) would call for remand report from the AO and proceeding would commence on two stages in order to avoid that situation we would deem it proper to set aside the order to the file of assessing officer for deciding afresh on merit after examination and verification of the relevant supporting document to be produced by the assessee in the set aside proceeding. It is needless to say that observation made by us will