M/S VIJAI AUTO SALES & SERVICES (P) LTD.,,BANGALORE vs. DCIT, BANGALORE

PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER :

2.1 The assessee company filed its return of income for the asst. year 2008-09 on 30/9/2008 declaring total income of Rs.18,16,074/-. The case was taken up for scrutiny and the assessment was completed u/s 143(3) of the Income-tax Act, 1961 (Hereinafter referred to as ‘the Act’) vide order dated 30/12/2010; wherein the income of the assessee was determined at Rs.76,87,238/- as against the returned income of Rs.18,16,070/- in view of the following additions/disallowances thereto:- i) Unexplained cash credits - Rs.17,90,000/- ii) Disallowance u/s 40(a)(i) - Rs.32,49,846/- iii) Disallowance u/s 40(a)(i) - Rs.6,74,763/- iv) Other additions/disallowances - Rs.1,56,565/- 2.2 Aggrieved by the order of assessment for asst. year 2008-09 dated 30/12/2010, the assessee preferred an appeal before the CIT(A)- III, B’lore. The learned CIT(A) fixed the appeal for hearing on various dates i.e 16/11/2011, 7/12/2011, 3/1/,2012, 19/1/2012, 30/11/2012, 26/2/2013, 25/3/2013 and 27/5/2013 to which the assessee failed to respond/attend the scheduled hearings. In this, factual view of the matter, the learned CIT(A) recorded that the non- compliance by the assessee to the notices fixing hearing of the appeal on the aforesaid dates establishes that the assessee is not interest in pursuing the appeal and proceeded to dismiss the appeal ex-parte by order dated 31/5/2013.

i) The order of the authorities below so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the appellant’s case. ii) The order passed by the learned CIT(A) is not justified in law in passing an order without affording the appellant a reasonable opportunity of hearing which is in grave violation of principles of natural justice and not adjudicating the issue on merits of the matter and consequently the order passed by the learned CIT(A) requires to be set aside on the facts and circumstances of the case. iii) The Appellant denies itself liable to be assessed over and the income returned by it of Rs.18,16,070/- under the facts and circumstances of the case. iv) Without prejudice the learned authorities below are not justified in law in making an addition of Rs.17,90,000/- as unexplained cash credits under the provisions of sec. 68 of the Act under the facts and circumstances of the case. v) Without prejudice the learned authorities are not justified in law in making a disallowance under the provisions of sec. 40[a][ia] of the Act amounting to Rs.6,74,763/- being expenditure incurred towards labour charges by the appellant under the facts and circumstances of the case. vi) Without prejudice the learned authorities are not justified in law in making a disallowance under the provisions of sec. 40[a][ia] of the Act amounting to Rs.32,49,840/- being the interest expenditure incurred and debited by the appellant under the facts and circumstances of the case. vii) Without prejudice to the right to seek waiver of interest as per the parity of reasoning of the decision of the Hon’ble Apex Court in the case of Karanvir Singh, reported in 349 ITR 692, the appellant denies itself liable to be charged interest u/s 234B and 234C of the Act under the facts and circumstances of the case. Further the levy of interest u/s 234B & 234C of the Act is bad in law as the period, rate, quantum and method of calculation adopted on which interest is levied are not discernible from the order under the facts and circumstances of the case. viii) The appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal urged above. ix) For the above and other grounds to be urged during the hearing of the appeal the appellant prays that the appeal be allowed in the interest of equity and justice.”

4.1 In ground No.2 the assessee contends that the impugned order passed by the learned CIT(A) was in grave violation of the principles of natural justice as the same was passed ex-pare without affording the assessee adequate opportunity of hearing and in not adjudicating the grounds raised on merits.

4.2 In the course of appeal proceedings, the learned AR of the assessee in addition to the grounds raised, has filed on Affidavit dated 9/9/2015 sworn to by the Managing Director of the assessee company Shri V Sridhar listing out the facts and circumstances of the case and the reasons for non compliance with the notices issued by the learned CIT(A) fixing the hearing in the case on the dates listed out para 5 of the impugned order. In short, the assessee’s affidavit submits that the address given in Form No.35 filed before the CIT(A) i.e No.677, Bilekahalli, Banerghatta Road, Bangalore-560 076 was the premises from where the assessee company was operating its business activity. It was submitted that the aforesaid office was closed since the company underwent grave financial crisis as it was unable to pay back monies to its creditors. It is submitted that it was in these circumstances, the assessee could not receive the notices for hearing sent by the learned CIT(A) and appear before him and it came to know of the impugned order only when the same was passed onto it by their auditors. It is submitted that it was due to the fact of change of address from No.677, Bilekahalli, Banerghatta Road, Bangalore-560 076 to the one given in Form No. 36 i.e No.12-A, 4th Floor, Narang Chambers, N.R Road, Bangalroe- 560 002, in the midst of its grave financial crisis, that the assessee did not receive the notices sent and, therefore, could not attend the hearings before the learned CIT(A) in appeal proceedings. It was pleaded that since the above factual matrix clearly established that the assessee’s failure to appear before the learned CIT(A) on the dates of hearing (Supra) was neither intentional, nor willful or deliberate, the impugned order of the learned CIT(A) be set aside and the learned CIT(A) be directed to decide the appeal afresh on the merits of the grounds raised before him.

4.2. We have heard both the learned AR for the assessee and the learned DR for revenue in the matter. We find from the record placed before us that the learned CIT(A) had fixed the hearings in the case on at least 8 occasions as listed out at para 5 of the impugned order and to which there was admittedly no response or compliance thereto from the assessee. It is apparently in these circumstances that the learned CIT(A) was constrained to dismiss the assessee’s case ex- parte. On a perusal of the affidavit dated 9/9/2015 sworn to by the assessee and filed before us by the learned AR, it appears that the assessee’s lack of response and non appearance to the scheduled appellate hearings before the learned CITL(A) was due to the fact that the assessee had shifted from its earlier place of business operations at No.677, Bilekahalli, Bannerghatta Road, Bangalore-560 076 which was the given address in the Form No.35/appeal filed before the learned CIT(A). In these factual circumstances, we are of the considered view that the failure on the part of the assessee to comply with the notices of hearing issued by the learned CIT(A) was neither intentional or deliberate. Further, the learned CIT(A) in the impugned order has also determined the assessee’s appeal ex-parte without adjudicating on the merits of the grounds raised by the assessee. The intention of the Act being that the true and correct income of the assessee be brought to tax, require that the various issues raised by the assessee before the learned CIT(A) ought to be disposed off on merits; which we find has not been done in the case on hand. We, therefore, in the interest of justice and equity set aside the impugned ex-parte order of the learned CIT(A) and restore the matter back to his file with the direction to hear the appeal afresh and decide the issues raised in the grounds of appeal on merits after affording the assessee adequate opportunity of being heard and to file details/submissions in this regard. It is ordered accordingly.

Consequently, ground NO.2 raised by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 18th Sept, 2015.