2020 (1) TMI 1461 - AT - Income Tax

Exparte assessment order passed by AO u/s. 144 - computation of income - deduction on account of interest on borrowed capital claimed u/s. 24(b) - treatment to rental income from house property - TDS credit as reflecting in Form 26AS - HELD THAT - We find considerable cogency in the contention of the assessee that AO as well as Ld. CIT(A) has not given sufficient opportunity to the assessee for substantiating his claim before them. As further find force in the contention of the assessee that ground no. 4 to 7 raised in this appeal require thorough investigation and examination at the level of the Assessing Officer. Hence, in the interest of justice, I set aside the ground no. 4 to 7 to the file of the Assessing Officer for thorough investigation/examination and then decide the same afresh, in accordance with law, after giving adequate opportunity of being heard to the assessee with the direction to consider each and every evidence/document to be filed by the assessee. Assessee is at liberty to file any evidence/document before the Assessing Officer for substantiating his claim and will not seek any unnecessary adjournment. Appeal of the Assessee is allowed for statistical purposes.

Summary

Issues:
1. Validity of ex parte assessment order under section 144 of the Income Tax Act, 1961.
2. Proper service of statutory notice under section 143(2) of the Income Tax Act, 1961.
3. Demand raised by the Assessing Officer and confirmation by the Ld. CIT(A) against principles of natural justice and provisions of law.
4. Acceptance of factually wrong return by the Assessing Officer.
5. Disallowance of deduction for interest on borrowed capital claimed under section 24(b) of the Income Tax Act, 1961.
6. Treatment of rental income from house property against loss from house property declared by the appellant.
7. Non-allowance of full TDS credit as per Form 26AS.

Analysis:

1. The appellant challenged the ex parte assessment order passed by the Assessing Officer (AO) under section 144 of the Income Tax Act, 1961, contending that proper service of statutory notice under section 143(2) was not conducted. The Ld. CIT(A) upheld the AO's action. The Tribunal found merit in the appellant's argument that there was a lack of opportunity for the assessee to substantiate claims. Consequently, the Tribunal set aside the issues for thorough investigation and examination by the Assessing Officer, directing proper consideration of all evidence submitted by the assessee.

2. Another ground of appeal was the demand raised by the AO and confirmed by the Ld. CIT(A), which the appellant argued was against natural justice and legal provisions. The Tribunal acknowledged the appellant's assertion that there was insufficient opportunity to present evidence. As a result, the Tribunal remanded the matter to the Assessing Officer for a fresh decision after allowing the assessee a fair hearing and consideration of all relevant documents.

3. The issue of acceptance of a factually incorrect return by the AO and the subsequent computation of income was raised. The Tribunal agreed with the appellant's contention that there was a lack of opportunity to rectify the errors. Consequently, the Tribunal directed the Assessing Officer to re-examine the matter in light of the correct figures and evidence to be provided by the assessee.

4. The disallowance of deduction for interest on borrowed capital claimed under section 24(b) of the Income Tax Act, 1961, was also challenged. The Tribunal found that this issue required further investigation and examination at the Assessing Officer's level. Therefore, the Tribunal set aside this ground for fresh adjudication with proper opportunity for the assessee to substantiate the claim.

5. Regarding the treatment of rental income from house property, the Tribunal noted discrepancies between the income declared by the appellant and the AO's assessment. The Tribunal directed a reevaluation of this issue at the Assessing Officer's level, emphasizing the need for a thorough examination and consideration of all relevant evidence to ensure a just decision.

6. Lastly, the non-allowance of full TDS credit as per Form 26AS was raised as a ground of appeal. The Tribunal did not provide specific details on the resolution of this issue in the summary provided.