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Facts
The assessee filed its return of income for AY 2020-21 declaring Nil total income after claiming a deduction of Rs.36,85,964. The Assessing Officer (AO) noted that the assessee received interest income of Rs.60,15,133 from various banks, which was not attributable to business income but was income from other sources. The AO denied the deduction claimed under Section 80P(2)(a)(i). The assessee's appeal before the CIT(Appeals) was dismissed ex-parte for non-compliance with notices.
Held
The Tribunal noted that the assessee claimed that notices were not served by the First Appellate Authority (FAA), leading to an ex-parte order. Considering the submissions and in the interest of justice, the Tribunal decided to remit the matter back to the CIT(Appeals) for a fresh consideration on merits after providing the assessee an opportunity of being heard.
Key Issues
Whether the deduction under Section 80P(2)(a)(i) for interest income from banks is allowable, and whether the ex-parte order by the FAA warrants remittal to the appellate authority for fresh consideration.
Sections Cited
80P(2)(a)(i), 80P(2)(d), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
Per Laxmi Prasad Sahu, Accountant Member
This appeal is filed by the assessee against the order dated 21.2.2024 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2020-21.
Briefly stated the facts of the case are that assessee filed return of income on 29.12.2020 declaring Nil total income. It has shown Rs.36,85,964 under profits & gains of business or profession and claimed the same as deduction under Chapter VIA of the Act. The case was selected for scrutiny and statutory notices were issued to the assessee against which there was no compliance from the assessee. A show cause notice dated 13.03.2022 was issued proposing to disallow deduction and the assessee filed its written submissions with documents. The AO noted that the assessee received interest income as follows:-
Sl. Interest received from Amount of interest No. (In Rs.) 1. DCC Bank (S/A) 1,05,723 2. KVG Bank (S/A) 69,691 3. DCC Bank (F/D) 56,06,699 4. BDCC Bank (RFD) 2,33,020 Total 60,15,133
The interest amounts were credited to P&L account and the net profit earned by assessee is Rs.36,85,894 on which assessee has claimed deduction u/s. 80P(2)(a)(i) of the Act. The AO observed that interest income received from various banks is not attributable to business income and it is income from other sources and cost for earning such income has already been debited to P&L account. The AO also noted that assessee has received interest of Rs.56,06,699 from DCC Bank as FD interest and interest of Rs.1,05,723, Rs.69,691 and Rs.2,33,020 as interest from banks which is income out of surplus funds and it is not the business income of the assessee and it is income from other sources. Accordingly, deduction u/s. 80P(2)(a)(i) of the Act of Rs.36,85,964 was denied. The AO noted that the assessee had not claimed deduction u/s. 80P(2)(d) of the Act which cannot be allowed to the assessee.
The assessee filed appeal before the First Appellate Authority (FAA). The FAA issued various notices on different dates on 15.12.2023, 28.12.2023, 5.1.2024 and 29.1.2024, but the assessee did not submit any reply. Accordingy the CIT(Appeals) on the basis of material on record dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the ITAT.
The learned AR submitted that the appeal could not be persuaded during the appellate proceedings because such notice were not received by the assessee. During the course of assessment proceedings the assessee responded notices issued by the AO and AO has not accepted the submissions of the assessee. The ld. AR also argued on the merits of the case. She further submitted that in the interest of justice and equity, the learned AR submits that the matter may be restored to the files of the CIT(A) for fresh consideration on merits and undertook that the assessee will comply the notices .
The learned Departmental Representative supported the order of the A.O. and the CIT(A).
We have heard rival submissions and perused the material on record. We note that the assessment was completed u/s. 143(3). However, during the appellate proceedings the first appellate authority issued various notices on different dates. As per submission of the assessee, the notices were not served to the assessee. The First Appellate Authority passed ex parte order without going into merits. Considering the submissions of the ld. AR and in the interest of justice, we remit the matter to the file of CIT(Appeals) for fresh consideration and decision as per law after giving opportunity of hearing to the assessee. The assessee shall produce all the documents in support of its case and not seek unnecessary adjournment for early disposal of the case. In case of further default by the assessee, no leniency will be granted.
In the result, the appeal by the assessee is allowed for statistical purposes.