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Facts
The assessee, a doctor, filed a return declaring a total income of Rs. 1,00,37,310. The Assessing Officer (AO) made several additions including bogus agricultural income, deemed dividend, disallowed interest expenses and depreciation on cars, assessing the total income at Rs. 8,57,35,928. The assessee's appeal before the CIT(A) was dismissed ex-parte due to non-appearance.
Held
The Tribunal noted that the CIT(A) passed an ex-parte order due to the assessee's non-appearance and failure to provide justifications for additions. The Tribunal felt it appropriate to impose a cost of Rs. 25,000 on the assessee.
Key Issues
Whether the ex-parte order passed by the CIT(A) due to the assessee's non-appearance is sustainable, and whether the grounds raised by the assessee should be allowed for statistical purposes after imposing a cost.
Sections Cited
250, 143(2), 142(1), 133(6), 143(3), 56, 2(22)(e), 36(1)(iii), 37
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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 31/07/2023 passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2013-14.
In this appeal, the assessee has raised the following grounds:-
Nandkumar Yadavrao Tasgaonkar. ITA no.3493/Mum/2023 “1 The Hon. CIT(A) ought to have appreciated the fact that the appellant could not represent its case due to circumstances beyond its control.
2. The Hon. CIT(A) erred in confirming the addition of agricultural income of Rs.6,99,75,000/- without appreciating the facts and circumstances of the case.
3. The Hon. CIT(A) erred in confirming the addition of deemed dividend of Rs.2,40,398/-.
4. The Hon. CIT(A) erred in confirming the disallowance of interest expenses of Rs.19,77,349/-.
5. The Hon. CIT(A) erred in confirming the disallowance of depreciation of Rs.20,99,103/-.
6. The Hon. CIT(A) erred in confirming the disallowance of interest on car loan of Rs.14,06,768/-.”
The brief facts of the case are that the assessee is a doctor having income from salary, house property, profit and gains from business or profession, capital gains, and income from other sources. For the year under consideration, the assessee filed his return of income on 30/09/2013 declaring a total income of Rs.1,00,37,310. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. From the return of income filed by the assessee, it was observed that the assessee has shown agricultural income of Rs.6,99,75,000 in his capital account. Accordingly, the assessee was asked to submit the details of agricultural income earned during the year along with details pertaining to proof of sale proceeds, proof of payment made for the expenditure incurred for agricultural production, parties to whom the agriculture produce was sold, parties from whom material purchased and details of land holding, crop production, etc. In response thereto, the assessee submitted that he is holding 24.81 hectares of agricultural land in a very fertile and water source area in Phaltan Taluka of Nandkumar Yadavrao Tasgaonkar. ITA no.3493/Mum/2023 Satara District. It was further submitted that the assessee is cultivating and producing Pomegranate in his land. During the assessment proceedings, information under section 133(6) of the Act was called for from the ICAR- National Research Centre on Pomegranate, Sholapur. The report received from ICAR-National Research Centre on Pomegranate, Sholapur was provided to the assessee and he was asked to justify the discrepancy between the production as well as the income according to the ICAR-National Research Centre on Pomegranate, Sholapur and as declared by the assessee. Further, the inspector of the charge was sent for field enquiry in respect of the agriculture income as shown by the assessee. It was observed from the photographs taken by the inspector that not a single tree of pomegranate is present on the farm and no labour was present to carry out any agricultural activity nor there was any sign of any agricultural activity taking place on the farm. Accordingly, the Assessing Officer (“AO”) vide order dated 29/03/2016 passed under section 143(3) of the Act did not agree with the contention of the assessee that he has earned agricultural income of Rs.6,99,75,000. The AO further held that there are no APMC receipts nor any kind of receipts submitted by the assessee in support of its claim of sales of agricultural produce. Further, no expenditure was incurred by the assessee for the agricultural production. Accordingly, the AO came to the conclusion that the amount of Rs.6,99,75,000 is a bogus agricultural income and added the same to the total income of the assessee under section 56 of the Act.
Further, during the assessment proceedings, it was observed from the balance sheet that the assessee has taken an unsecured loan amounting to Nandkumar Yadavrao Tasgaonkar. ITA no.3493/Mum/2023 Rs.47,68,948 from Four Aces Entertainment Pvt. Ltd. in which it is holding 10% of shareholding. Accordingly, the assessee was asked to show cause as to why the provisions of section 2(22)(e) of the Act be not applied and the unsecured loan received be not treated as a deemed dividend. It was also observed from the balance sheet of Four Aces Entertainment Pvt. Ltd. that the company has a cumulative profit of Rs.2,40,398. Accordingly, an amount of Rs.2,40,398 was treated as assessee’s deemed dividend income from Four Aces Entertainment Pvt. Ltd. under section 2(22)(e) of the Act.
During the assessment proceedings from the profit and loss account, it was observed that the assessee has incurred an interest expenditure of Rs.58,38,405. Accordingly, the assessee was asked to explain and prove the purpose and utilisation of the loan amount and show cause as to why the said expenditure be not disallowed proportionate to the extent the loans taken were towards making interest-free advances. After considering the submissions of the assessee, it was noted that an amount of Rs.2,09,77,496 was taken as a loan by the assessee which was said to be utilised for the purpose of business. It was further observed from the Fixed Assets Schedule that the total assets are Rs.70,05,629. Accordingly, the interest expenditure of Rs.29,95,983 incurred on the said was allowed proportionately to the extent of Rs.10,18,634, and the remaining Rs. 19,77,349 was disallowed for not been incurred for the purpose of business under section 36(1)(iii) of the Act.
During the assessment proceedings, it was also noted that the assessee has claimed depreciation on cards on the basis that they have been used for the purpose of the profession. However, the AO noted that the assessee hardly Page | 4
Nandkumar Yadavrao Tasgaonkar. ITA no.3493/Mum/2023 has any staff who can use the vehicles for any professional purpose as the assessee advanced salary of Rs.3,50,392 and professional fees of Rs.2,25,000 only. Accordingly, the AO came to the conclusion that the cars owned by the assessee were used only for personal purposes and disallowed the depreciation amounting to Rs.20,99,103 under section 37 of the Act and added the same to the total income of the assessee.
Further, the AO also disallowed the interest on car loan amounting to Rs.14,06,768 under section 37 of the Act as the cars were not used wholly and exclusively for the purpose of profession. Accordingly, after making the aforesaid additions, the AO assessed the total income of the assessee at Rs.8,57,35,928/-.
In the appeal before the learned CIT(A), despite various notices being issued, no reply/submission was filed on behalf of the assessee. Accordingly, vide impugned ex–parte order dated 31/07/2023, the learned CIT(A) dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us.
We have considered the rival submissions and perused the material available on record. In the present case, the learned CIT(A) has passed the order ex-parte due to the non-appearance of/on behalf of the assessee. It is evident from the record that the learned CIT(A) issued notices on 28/12/2020, 22/02/2021, 08/07/2021, 16/11/2022, 08/12/2022, 14/03/2023, and 24/07/2023, however, on each date adjournment was sought on behalf of the assessee and no effort was made to furnish any satisfactory explanation along
Nandkumar Yadavrao Tasgaonkar. ITA no.3493/Mum/2023 with documentary evidence in respect of the additions made by the AO. Now in appeal before us, the assessee is duly represented by the learned Authorised Representative (“learned AR”) and wishes to pursue the litigation against the additions made by the AO. However, the assessee could neither produce any material on record nor show any reasonable and sufficient cause to justify the non-compliance of the notices issued by the learned CIT(A).
We are of the view that without any reasonable and sufficient cause and due to the non-compliant behavior of the assessee, the energy and time of the Income Tax Authority have been wasted which could have been used for justice delivery in other cases. We further find that no finding has been rendered by the learned CIT(A) on the merits of the appeal in the impugned order. In the circumstances, we feel it appropriate to impose a cost of Rs.25,000/-, which the assessee shall pay to the Prime Minister's National Relief Fund within 30 days from the date of receipt of this order. Subject to the payment of the cost by the assessee, the order of the learned CIT(A) is set aside and the matter is restored to the file of the learned CIT(A) for deciding afresh on merits after taking into consideration submissions of the assessee. Needless to mention no order shall be passed without affording reasonable opportunity of hearing to the parties. Further, the assessee is directed to appear before the learned CIT(A) on all the dates of hearing as may be fixed without any default. As a result, grounds raised by the assessee are allowed for statistical purposes.
Nandkumar Yadavrao Tasgaonkar. ITA no.3493/Mum/2023
In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 08/05/2024