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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI B.R.BASKARAN (AM) & SHRI RAM LAL NEGI (JM)
This appeal has been preferred by the assessee against order dated 07/11/2014 passed by the Ld. CIT(Appeals)-26 Mumbai for the Asst. Year 2011-12, whereby the Ld. CIT(A) dismissed the appeal filed by the assessee against assessment order dated 06/02/2014 passed by the A.O u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
The assessee has challenged the impugned order on the following effective ground of appeal:-
I. Natural Justice - Ex- Parte Order
1.1. The learned CIT(A) erred in passing an ex parte order without considering an application for adjournment vide letter dtd. 03/11/2014, which was filed on 03/11/2014 explaining the reasons of ill health of the Chartered Accountant, therefore the ex parte order passed by the CIT(A) may be set-a-side.
1.2. The learned CIT(A) failed to appreciate that when an application for adjournment was filed and it was informed that "New Notice will be issued" for this matter. However without issuing any further notice for hearing, an ex-parte order was passed, hence the order of CIT(A) may be set-aside.
II. Disallowance of Compensation paid of Rs. 43,37,500/-
2.1. The learned CIT(A) erred in confirming the disallowance of Rs. 43,37,500/- being compensation paid by the Assessee Firm for cancellation of booking of flats, without appreciating that it is a prevailing practice to pay the compensation to the investor buyers in the same line of business of developers and construction to maintain business expediency, hence disallowance of compensation may be deleted.
2.2. The learned CIT(A) failed to appreciate that, the assessee has filed the details of payment of compensation to various investors with supporting evidence and correspondence, hence the disallowance of compensation of Rs. 43,37,500/- may be directed to be deleted.
At the outset, the Ld. Counsel for the assessee submitted that the impugned order is bad in law, as the same has been passed in violation of principle of natural justice. The assessee was not afforded reasonable opportunity of being heard despite the written request made for adjournment well in time before the date of hearing on the ground of the Chartered Accountant concerned. Hence the order is liable to be set aside.
On the other hand the Ld. Departmental Representative (DR) submitted that since the assessee did not appear, despite sufficient opportunity time to present its case, now the assessee is estopped from raising the plea that the Ld. CIT (A) has wrongly passed the ex parte order without allowing the application for adjournment.
We have heard the rival submissions and also gone through the material placed before us. The only issue involved in this appeal is whether the CIT(A) has erred in confirming the disallowance of Rs. 43,37,500/-which was paid by the assessee as compensation for cancellation of booking of flats? We notice that the Ld. CIT(A) has dismissed the appeal filed by the assessee by endorsing the findings of the A.O. The Ld. CIT(A) has not mentioned that the assessee was given sufficient time to present his case and despite this, the assessee did not appear before him. The Ld. CIT(A) has also not recorded the reasons for rejection of application dated 03.11.2014 submitted by the assessee for adjournment. The aforesaid facts suggest that the assessee was not given a reasonable opportunity of being heard and the order was passed in violation of one of the principles of natural justice and fair play. We are therefore, of the considered view that the assessee should get an opportunity to argue his case before the first appellate authority. Hence, we allow the first ground of appeal of the assessee in the interest of justice and without deciding the appeal on merit, send the appeal back to the Ld. CIT(A) for adjudicating the same afresh after giving a reasonable opportunity of being heard to the appellant/assessee. The appeal is disposed of accordingly.
In the result appeal filed by the assessee for A.Y. 2011-12 is partly allowed.