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Facts
The assessee, an LLP, claimed deduction on interest payment on TDS and did not deduct TDS on brokerage expenses. The AO disallowed interest on TDS, treating it as a fine. The AO also disallowed brokerage expenses under section 40(a)(ia). The assessee's appeal to CIT(A) was dismissed. The assessee then filed an appeal before the ITAT.
Held
The ITAT noted that the CIT(A) dismissed the appeal without considering the assessee's adjournment application and without providing an opportunity of hearing. The tribunal restored the matter to the file of the CIT(A) for adjudication on merits, emphasizing principles of natural justice.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without considering the adjournment application and providing an opportunity of hearing; whether the disallowance of interest on TDS and brokerage expenses were justified.
Sections Cited
250, 154, 40(a)(ia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES, SMC, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & DR MITHA LAL MEENA, AM
Date of Hearing : 03/10/2024 Date of Pronouncement: 29 /10/2024 ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 27-06-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 raising therein following grounds of appeal. ‘’1. The order of the learned Commissioner of Income Tax (Appeals) under section 250 of Income Tax Act, 1961 is bad in law and against the facts of the case.
2. Learned AO has erred in passing rectification order u/s 154 without considering the reply of the assessee filed on 16.03.2022. The learned CIT(A) has erred in passing order u/s 250 dated 27.06.2024 without M/S. MANGALAM VARDHMAN DEVELOPERS LLP VS ITO, WARD 1(3), JAIPUR considering the adjournment application of the assessee filed on 19.06.2024 seeking adjournment upto 05.07.2024 for filing of submissions. Both the actions of the income tax authorities are against all the principles of natural justice and the circulars of the CBDT, for which both the orders deserves to be quashed.
The learned AO has erred in disallowing Rs. 4,81,538/- on account of 'interest on TDS" claimed by the assessee in Profit and Loss account, in most arbitrary manner.
The learned AO has also erred in disallowing Rs 1,39,500 u/s 40(a)(ia) of Income tax Act out of Brokerage Expenses paid by the assessee, in most arbitrary manner.
The additions/disallowances made by the AO are not apparent from records and on highly debatable issues, therefore, not covered by provisions of Sec. 154.
The learned AO has erred in charging interest under various sections on the above tax liability.’’ 2.1 As per the facts of the present case, the assessee is an LLP and deduction was claimed on the interest payment on TDS and also the assessee had not deducted TDS on brokerage in advertisement and marketing expenses. The scrutiny assessment was completed without any disallowance. Later, the AO issued a 154 Notice and after opportunity of being heard, had disallowed the interest on TDS payment by observing that the payment comes under fines and penalties and interest category which is not an allowable expenses.
2.2 The assessee being aggrieved by intimation passed by virtue of order under section 154 preferred appeal before the ld.CIT(A) but the appeal of the assessee was also dismissed 2.4 After having heard the counsels for both the parties, we noticed that the main arguments of the assessee is that since the year during the course of scrutiny had verified the genuineness and allowability of these expenses, therefore, invocation of section 154 is invalid as there is no mistake apparent from the record. It was also submitted that ld. CIT (A) had erred in passing the impugned order without considering the adjournment application of the assessee filed on 19th June 24 for seeking adjournment up to 5th of July 24 for filing the submissions but ld. CIT(A) without providing an opportunity of hearing had dismissed the appeal of the assessee 2.5 After having gone through the records, we noticed that assessee had filed an application for seeking adjournment but without considering the same ld. CIT(A) has decided the appeal of the assessee and dismissed the same. Be that as it may, we are of the view that the lis between the parties is to be adjudicated on merits and we feel that one more chance may be given to the assessee to contest his appeal on merits before ld. CIT(A). Therefore, considering the principles of natural justice, we restore the matter to the file of ld. CIT(A) for adjudicating the same afresh on merits, needless to say by providing fair opportunity of hearing to the assessee. At the same time, we also direct the assessee that he shall not seek M/S. MANGALAM VARDHMAN DEVELOPERS LLP VS ITO, WARD 1(3), JAIPUR adjournments on unnecessary or frivolous grounds and remain cooperative during the course of proceedings and therefore the appeal of the assessee is allowed for statistical purposes.
2.6 Before parting, we may make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by AO independently in accordance with law. 3.0 In the result, the appeal of the assessee is allowed for statistical purposes, with no orders as to cost.