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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
The appeal filed by the assessee is directed against the order dated 09.02.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2018-19.
The assessee has raised the following grounds of appeal :-
“On the facts & circumstances of the case and in law- 1. The Learned CIT(A) erred in dismissing the appeal on account of non prosecution of the appeal by the appellant. The learned CIT(A) in not disposing the appeal on merits further erred in not appreciating and considering all the issues emanating from the order of the AO passed under Section 143 (3) read with provisions of Section 144B. It is prayed that the order passed by the CITA be set aside and the appeal be restored with directions for fresh disposal by the CITA. Without prejudice to the above 2. The learned CITA erred confirming the disallowance of royalty/ service charges Rs.72,75,433/- and in confirming levy of interest Rs.2,49,177/-under Section 115P on the Dividend Distribution Tax of the Act made by the AO. The appellant craves leave to add or amend the ground of appeal”
3. Briefly stated, the facts of the case are that the assessee is a company engaged in the business of manufacture and supply of all kinds of slack adjusters, self setting automatic brake adjusters, condenser cum separator. It e-filed its return of income on 30.11.2018 declaring income at Rs.10,10,39,610/- and claiming a refund of Rs.1,26,66,620/-. The return was processed by CPC u/s 143(1) of the Income Tax Act, 1961 (the “Act”) determining total income at Rs.10,10,40,930/-. Thereafter, the case was selected for complete scrutiny under CASS for verification of-(i) claim of any other amount allowable as deduction in schedule BP; (ii) refund claim and (iii) transaction with company whose registration has been cancelled by MCA. Statutory notice(s) u/s 143(2) and 142(1) of the Act were issued to the assessee on various dates and details/documents regarding the above issues were called for, in response to which the assessee filed its written reply on 24.02.2021. During the assessment proceedings, the Ld. Assessing Officer (“AO”) found that as per the information available on data basis of the Department the assessee made payment of Rs.72,75,433/- to M/s. Victor Gaskets India Ltd. on account of royalty/service charges. The registration of M/s. Victor Gaskets India Ltd. has been cancelled by the Ministry of Corporate Affairs (MCA). M/s. Victor Gaskets India Ltd. is also a person specified u/s 40A(2)(b) of the Act. The Ld. AO asked the assessee to furnish details/justification regarding transaction with M/s. Victor Gaskets India Ltd. whose registration has been cancelled by the MCA. The assessee was also asked to furnish documentary evidence to corroborate the genuineness of its transaction with M/s. Victor Gaskets India Ltd. The assessee filed its reply to the aforesaid queries raised by the Ld. AO stating that it had not made any payment to a company whose registration has been cancelled. However, it failed to submit actual details of its transaction with M/s. Victor Gaskets India Ltd. In view of these facts, the Ld. AO computed the total income of the assessee at Rs.10,83,16,360/- including therein addition of Rs.72,75,433/- on account of disallowance of expenses incurred by the assessee vide his order dated 17.08.2021 passed u/s 143(3) r.w.s. 144B of the Act.
4. Aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) challenging the addition made by the Ld. AO as aforesaid. Despite service of notice(s) of hearing issued during the appellate proceedings there was non-compliance which resulted in ex-parte decision by the Ld.
CIT(A)/NFAC dismissing the appeal of the assessee. The Ld. CIT(A) issued three notice(s) of hearing dated 01.12.2022, 01.01.2024 and 01.02.2024 fixing the final hearing on 07.02.2024. All the notice(s) were sent by the registered mail but there was no compliance by the assessee. The Ld. CIT(A) therefore concluded that the assessee is not interested in pursuing its appeal and proceeded to pass the impugned order on account of failure on the part of the assessee in submitting the requisite details to substantiate its case.
Dissatisfied, the assessee in appeal before the Tribunal.
The ld. AR submitted that there was no intentional non-compliance of notice(s) issued by the Ld. CIT(A). He placed a sworn affidavit on record stating the reasons of failure to comply with the notice(s). The relevant part of which is reproduced below :
“On the backdrop of the aforesaid facts it is stated that- On September 2, 2022, SAF-HOLLAND SE announced that it controlled a total of approximately 96.14% of the outstanding Haldex AB Sweden shares following the successful completion of its offer to acquire the shares. In order to acquire all shares, that were not tendered in the offer, SAF-HOLLAND SE ("SAF-HOLLAND") completed the acquisition of all of the outstanding shares in the Swedish company Haldex AB ("Haldex") and SAF Holland now holds 100 percent of the shares. The shares were transferred to SAF-HOLLAND SE on March 1, 2023. The acquisition of 100% shares of Haldex AB resulted in corporate restructuring globally including Haldex India (assessee). Both SAF Holland and Haldex AB started working together to combine their business operations viz. manufacture and sale of axle and suspension systems, telematics and Electronic Breaking System control into one intelligent Business unit. As part of the integration of Haldex and the implementation of a Global ERP system for the group, SAF-HOLLAND decided to create a Global Process Organization responsible to define, maintain and improve standard business processes. The Global Process Organization was the link between the functional business organization and the End-to-End business processes in order to create the required alignment between the functions to secure a smooth and efficient process execution towards customer delivery and satisfaction. Creating stronger business ownership, achieving cost reduction by reducing complexity and improving efficiency, facilitating decision making and clarifying roles and responsibilities were the core activities for the organization. Having added Haldex to SAF Holland group of companies in 2022, it was decided to do away with disparate IT systems and decided on a common ERP system for the entire SAF- HOLLAND Group.
As a part of IT system overhaul initiatives Haldex India also underwent significant policy and procedural changes e.g. lease laptops/desktops, Profiling of laptop/desktop users, IT training, Al System like use of Chat GPT and implementation of e mail and Network security best practices. The whole gamut of theses activities continued in the Financial Year 2023- 24. Due to such flurry of vital changes in the IT network and IT systems consequent to change in ownership and corporate restructuring, the employees of the company came to miss the said two notices which were posted on the portal account in January and February 2024. It is submitted that the assessee company being a corporate entity has to necessarily act only through human agency. If the filing of submissions came to be inadvertently overlooked by the concerned persons working under such aforesaid overwhelming circumstances it would amount to a reasonable cause so far as the assessee company is concerned. On the backdrop of the aforesaid facts and circumstances it is manifest that there was just and sufficient cause for the non prosecution of appeal before the learned CIT A (NAFAC) due to an inadvertent error and there was no negligence or deliberate inaction on the part of the assessee company. In the circumstances it is submitted that assessee's appeal before the Honourable Income Tax Appellate Tribunal is eminently eligible for disposal on merits and may please be disposed on merits.”
6.1 The Ld. AR, therefore, urged that the matter may be sent back to the file of Ld. CIT(A) for adjudication afresh on merits.
The Ld. DR had no objection thereto.
We have heard the Ld. Representatives of the parties and perused the records. We observe that the notice(s) of hearing were issued through electronic mode via e-mail/ITBA portal on 01.12.2022, 01.01.2024 and 01.02.2024. The Ld. CIT(A)/NFAC vide ex-parte dated 09.02.2024 dismissed the appeal of the assessee on limine for non-prosecution of the appeal. The order of Ld. CIT(A)/NFAC is silent on the merits of the case and the issue(s) raised by the assessee before him. In our opinion the assessee had a reasonable cause for non-compliance of notice(s) owing to the corporate restructuring of the group and consequent changes in the IT system of the assessee company. On the facts and in the circumstances of the case and in the interest of justice and fair play, we are of the opinion that the matter deserves to be sent back to the file of Ld. CIT(A)/NFAC to decide the appeal afresh on merits. The assessee shall co-operate fully during the appellate proceedings. Accordingly, we set aside the impugned order of the Ld. CIT(A)/NFAC and direct him to decide the appeal de-novo by passing a speaking order on merits of the case after allowing reasonable opportunity of being heard to the parties. We order accordingly.
In the result, the appeal of assessee is allowed for statistical purpose.
Order pronounced in the open court on 20th September, 2024.