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Facts
The assessee's appeal against the order of the NFAC for AY 2015-16 is under consideration. The assessee's return of income was Rs.69,91,650/-. The Assessing Officer (AO) made an adhoc addition of Rs.51,84,235/- due to alleged non-cooperation and lack of response to notices. The assessee claimed these expenses were incurred wholly and exclusively for business purposes.
Held
The Tribunal noted that the assessee was unable to participate before the lower authorities due to unavoidable circumstances, specifically the Finance Manager's illness and recovery from heart surgery. The assessee prayed for the issue to be remitted back to the AO for fresh consideration.
Key Issues
Whether the adhoc addition made by the AO and confirmed by the NFAC is justified without providing proper opportunity of hearing and sufficient reasons, considering the unavoidable circumstances faced by the assessee.
Sections Cited
250, 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”) for the assessment year 2015-16 dated 17.1.2024. The assessee has raised following grounds of appeal: 1. “The order of the learned Commissioner of Income-tax (Appeals)-National faceless Appeal Centre (NFAC), Delhi, in so far as it is against the appellant is opposed to law, equity, facts, weight of evidence, probabilities and circumstances of the case.
2. The appellant denies itself to be assessed to an income over and above the returned income of Rs.69,91,650/- on the facts and circumstances of the case.
3. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short CIT (A)), is not justified in confirming the adhoc additions of Rs. 51,84,235/- mechanically made by the learned Assessing officer which is bad in law under the facts and circumstances of the case.
M/s. Pixel Pictures Private Limited, Bangalore Page 2 of 5 4. The learned authorities below have erred in not accepting the nature of business of the appellant and has disallowed an adhoc amount of 20% of the expenses claimed during the year without providing any basis for making addition.
The learned authorities below are not justified in disallowing a sum of Rs 51,84,235/- without adducing any reasons and the provisions under which the impugned disallowance has been made from facts and circumstances of the case and hence is bad in law.
The learned authorities below erred in disallowing a sum of Rs. 51,84,235/- being 20% of all the expenses claimed, the reasons best known to him, without appreciating the fact that the expenses were incurred wholly and exclusively for the purpose of business.
The addition made is erroneous, illogical and without substance and hence the order of the learned assessing officer is bad in law, liable be set aside from the facts and circumstances of the case. 8. The order of the learned authorities below in estimating the expenses for disallowance in an arbitrary and mechanical manner without adducing any reasons is bad in law and the entire order is liable to be set aside.
The learned authorities below erred in concluding the impugned orders without providing sufficient opportunity of being heard before passing the order.
The learned AO failed to give an opportunity of being heard. The learned AO in the order has stated that the assessee has not furnished any reply to the notices issued. The appellant was unable to furnish the details as per the notice within the due date due to unavoidable circumstances as the Finance Manager was unwell and was recovering from a heart surgery.
The appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds urged above. 12. In view of the above and any other grounds that may be urged at the time of hearing of the appeal, the appellant prays that the appeals may be allowed in the interest of justice and equity.”
Facts of the case are that the assessee is assessed to tax and is borne on the records of Income Tax the Circle-3(1)(1), Bangalore. The assessee filed its return of income on 31.10.2015 Rs.69,91,650/- . The return was selected for scrutiny and after due examination, verification, enquiries and corroboration of the documents, evidences and submissions, the assessment u/s 143(3) of the Act was M/s. Pixel Pictures Private Limited, Bangalore Page 3 of 5 completed on 27.12.2017 by making additional income of 51,84,235/-. The assessee is a domestic Private Limited company and is engaged in the business of providing production house facilities to top television channels in the southern region of India. The assessee filed its return of income on 31.10.2015 declaring gross total income of Rs.69,91,650/-. The assessee case was selected for scrutiny under manual selection and notice u/s 143(2) and 142(1) of the Act were issued by the learned AO and the details called for are furnished. However, the ld. A.R. submitted that for the notices issued on 13.10.2017, 26.10.2017 and 09.12.2017 reply was not submitted due to unavoidable circumstances as the Finance Manager was unwell and was recovering from a heart surgery. He submitted that the learned authorities below erred in disallowing a sum of Rs. 51,84,235/- being 20% of all the expenses claimed, the reasons best known to him, without appreciating the fact that the expenses were incurred wholly and exclusively for the purpose of business. In view of the above, the ld. A.R. for the assessee prayed that the appeal may be allowed in the interest of justice and equity.
2.1 Before the ld. AO, the assessee was given the following opportunities: Sl.No. Notice Date of Notice Reply 1. 143(2) 19/09/2016 Assessee submitted the financials through post 2 142(1) r.w.s. 129 14/06/2017 Assessee submitted the financials through post. 3. Hearing notice through 13/10/2017 No reply E-Mail 4. Hearing notice through 26/10/2017 No reply E-Mail 5. Hearing Notice through 09/12/2017 No reply E-Mail
M/s. Pixel Pictures Private Limited, Bangalore Page 4 of 5 2.2 Further, there was no cooperation before ld. AO by the assessee. Hence, he made an addition of Rs.51,84,235/-. Against this assessee went in appeal before ld. CIT(A). Ld. CIT(A) has given the opportunities to the assessee for hearing as below:
M/s. Pixel Pictures Private Limited, Bangalore Page 5 of 5
Thus, there was no response from the assessee. Before us, ld. A.R. submitted that assessee was not able to participate before the lower authorities due to unavoidable circumstances as the Finance Manager was unwell and he was recovering from heart surgery and prayed that the entire issue in dispute may be remitted back to the file of ld. AO for fresh consideration. Considering the facts and circumstances of the case, in our opinion, it is appropriate to remit the entire issue in dispute to the file of ld. AO for fresh consideration to decide the same after giving opportunity of hearing to the assessee.