2018 (6) TMI 1644 - AT - Income Tax

Ex parte order of CIT(A) - CIT(A) confirmed the order of AO without deciding the same on merit. - Disallowance of interest on interest free advance - HELD THAT - The principle of audi alteram partem is the basic concept of natural justice. The expression audi alteram partem implies that a person must be given an opportunity to defend himself. This principle is the sine qua non of every civilized society. The right to notice, right to present case and evidence, right to rebut adverse evidence, right to cross-examination, right to legal representation, the disclosure of evidence to the party, report of inquiry to be shown to the other party and reasoned decisions or speaking orders. We took this guidance for the right of hearing, from the ratio as is laid down by the Hon'ble Supreme Court in the case of Maneka Gandhi v. Union of India 1978 (1) TMI 161 - SUPREME COURT wherein laid down that rule of fair hearing is necessary before passing any order. We find that it is pre-decision hearing standard of the norm of the rule of audi alteram partem. We find that in this instant case, the assessee was not given a proper hearing. Therefore, we are of the view that the assessee must be given one more opportunity of hearing and to represent his case. We also note that the assessee claimed not to have filed the copy of confirmation in respect of the loan obtained during the year before the AO at the time of assessment proceedings. Therefore, in exercise of the power conferred under Rule 28 of Tribunal Rules, we restore this appeal to the file of AO for reconsideration all grounds of appeal after allowing the proper opportunity of being heard by law. We are sending this appeal to the AO for fresh adjudication to avoid the multiplicity of the appeal. Nevertheless, to mention that the assessee will cooperate in the appeal proceedings and his failure will entail confirmation of the impugned addition made by the AO. The assessee will file necessary evidence on which he wants to rely upon at the time of the hearing. This ground of assessee s appeal stands allowed for statistical purpose.

Summary

Issues Involved:
1. Disallowance of interest on purchases of capital assets
2. Disallowance of interest on interest-free advance
3. Addition of a specific amount
4. Proper opportunity of being heard before confirming orders

Analysis:

Issue 1: Disallowance of interest on purchases of capital assets
The appeal was filed against the Commissioner of Income Tax(Appeals) confirming the disallowance of interest on purchases of capital assets. The appellant argued that the interest had already been capitalized and no further disallowance was necessary. Additionally, they highlighted the availability of interest-free funds with the company, citing specific amounts and advances. The appellant emphasized that borrowed money was not used for non-business purposes. The Appellate Tribunal noted the appellant's contentions and directed the Assessing Officer to reconsider the disallowance after providing a proper opportunity for a hearing.

Issue 2: Disallowance of interest on interest-free advance
The appellant contested the disallowance of interest on interest-free advances, presenting arguments regarding the availability of funds and the absence of borrowed money being used for non-business purposes. The Tribunal observed the lack of proper hearing and adherence to natural justice principles in the initial proceedings. Consequently, the Tribunal decided to send the appeal back to the Assessing Officer for fresh adjudication, emphasizing the importance of providing a fair opportunity for the appellant to present their case.

Issue 3: Addition of a specific amount
Regarding the addition of a specific amount, the Tribunal acknowledged the need for a proper hearing and opportunity for the appellant to address the issue. The Tribunal decided to restore the appeal to the Assessing Officer for reconsideration, ensuring that the appellant could present necessary evidence and arguments during the hearing process.

Issue 4: Proper opportunity of being heard before confirming orders
The Tribunal highlighted the importance of the principle of audi alteram partem, emphasizing the right to a fair hearing and the opportunity to defend oneself. Citing legal precedents, the Tribunal stressed the necessity of providing a proper opportunity for the appellant to be heard before making decisions. The Tribunal, therefore, decided to grant the appellant another opportunity for a hearing to ensure procedural fairness and compliance with natural justice principles.

In conclusion, the Appellate Tribunal directed the Assessing Officer to reconsider all grounds of appeal after providing the appellant with a proper opportunity to be heard. The appeal was treated as allowed for statistical purposes, with the Tribunal emphasizing the appellant's cooperation in the proceedings and the need for presenting relevant evidence during the hearing process.