R ARUNACHALAM P C P P LTD,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5(1)(2), BENGALURU

PER SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

“1. That the order passed by the Commissioner of income- tax (Appeals), National Faceless Appeal Center ("CIT(A)", "NFAC") under section 250 of the Income Tax Act, 1961 ("the Act") is contrary to the provisions of law and liable to be quashed. 2. a. The learned CIT(A) has erred in in not providing an effective opportunity of being heard before passing an order under Section 250 of the Act. b. The learned CIT(A) has erred in serving hearing notices to the wrong email address, even though email address on income-tax portal was corrected at the time of filing an appeal before the CIT(A). c. The learned CIT(A) has erred in upholding that the Appellant is liable to pay taxes as per the provisions of Section 68 of the Act by non-consideration of affidavits and statements of witnesses in support of the appellant's claim regarding the nature of cash deposits. d. The learned CIT(A) has erred in upholding the order of Assessing Officer under section 143(3) of the Act, by not deliberating on the fact that the Assessing Officer has arbitrarily calculated the cash deposits as income for the year without verifying the details submitted by the appellant and not obtaining the explanation from the appellant. 3. a. That the learned Assessing Officer has erred in passing the assessment order without issue of show cause notice thereby taking away the right of the appellant to defend his case by producing documents and by providing an explanation. b. That the impugned assessment order is passed without affording fair and effective opportunity of being heard to the appellant. Hence the order is violative of principles of natural justice and deserves to be quashed. c. That the learned Assessing Officer has erred in treating the aggregate of cash deposits during the year in the Appellant's bank account as 'cash credits' under section 68 of the Act by disregarding the evidence provided by the appellant to substantiate their claim. d. The learned Assessing Officer failed to take into account the fact that the cash deposited into bank is out of earlier cash withdrawals and out of amount collected from the staff over a number of months towards a scheme which was introduced by the appellant company to professionally assist the long standing employees in identifying a suitable residential plot for their benefit and the same is duly reflected in the financial statements of the appellant company. e. The learned AO, while disallowing the donation, ought to have appreciated that deciding on the allowability of an expense is a long drawn process and cannot be decided only based on the nomenclature of the expenses. The learned AO ought to have appreciated that donation paid for the purpose of smooth functioning of business is allowable as held in Mysore Kirloskar Ltd. V. CIT (1987) 166 ITR 836 Kar. f. The learned AO, while disallowing the expenses under section 40A (3), failed to apply their mind, since they failed to recognize that some of the payments disallowed were not at all claimed as expenses, while other payments were not made to single person but to different persons and accounted under one head. g. The learned assessing officer erred in not affording an opportunity to the appellant to produce the certificate prescribed under first proviso to section 201(1) of the Income Tax Act 1961, so that the disallowance under section 40a(i) is not attracted.

5. The learned AO has erred in initiating penalty proceedings under section 270A and section 271AAC(1) of the Act even though there was there was no under-reporting of income alleged by the learned Assessing Officer and the income alleged u/s 68 is not sustainable. The appellant craves leave to add, alter, amend or vary any of the ground either at or before the hearing of the appeal.

4. The ld. CIT(A) issued 3 notices on different dates but none of the notices were complied. Accordingly, the ld. CIT(A) decided the issue on the basis of documents available before him and dismissed the appeal of the assessee.