2017 (4) TMI 1431 - AT - Income Tax

Disposing off the appeal ex-parte - HELD THAT - In the absence of appeal being decided by CIT(A) on merit, the order of Ld.CIT(A) was bad in law and was liable to be set aside. As relying on decisions of the Co-ordinate Benches of ITAT, Delhi in the cases of Gaurav Goel vs ITO, Ward-1(2) 2012 (4) TMI 755 - ITAT DELHI and M/s Haryana Liquor Company vs ACIT 2012 (7) TMI 339 - ITAT, DELHI the matter should be set aside to the file of Ld. CIT(A) for fresh order on merit. We set aside the order of CIT(A) and restore the matter to the file of Ld. CIT(A) with the direction to the CIT(A) to pass a denovo order on merits.

Summary

Issues:
Appeal against CIT(A) order - Ex-parte dismissal, Disallowance under section 14A, Allocation of expenses post-survey.

Ex-parte Dismissal:
The assessee appealed against the CIT(A) order dismissing the appeal ex-parte without considering written submissions and Paper Book filed by the assessee. The ITAT referred to previous cases and held that the CIT(A) must decide the appeal on merits even in ex-parte situations. Citing the case of Gaurav Goel vs ITO, the ITAT emphasized that the first appellate authority must pass a speaking order even in ex-parte cases. As the CIT(A) failed to decide the appeal on merits, the ITAT set aside the CIT(A) order and directed a fresh decision on merit after providing due opportunity to both parties.

Disallowance under Section 14A:
The ITAT addressed the disallowance of ?1,61,310 under section 14A of the Income Tax Act. The CIT(A) confirmed the disallowance, stating that the assessee's own funds exceeded borrowed funds, thus no interest disallowance should be made. However, the ITAT noted that the CIT(A) erred in confirming the disallowance without proper consideration. The ITAT directed the CIT(A) to re-decide the matter on merit, emphasizing the need for a speaking order in accordance with the law.

Allocation of Expenses Post-Survey:
Regarding the disallowance of ?45,37,865 on account of expenses allocation post-survey, the ITAT found that the CIT(A) confirmed the addition without proper discussion on merits. Referring to precedents, the ITAT emphasized the necessity of a reasoned order by the CIT(A) as per the provisions of the Income Tax Act. The ITAT set aside the CIT(A) order and instructed a fresh decision on merit, ensuring a speaking order with proper consideration of all relevant aspects.

In conclusion, the ITAT partially allowed the assessee's appeal for statistical purposes, setting aside the CIT(A) order and remanding the matter back to the CIT(A) for a fresh decision on merit. The ITAT emphasized the importance of passing speaking orders and providing due opportunity to both parties in such cases.