2020 (4) TMI 777 - AT - Income Tax

Condonation of delay - contention of the assessee is that the delay occurred due to negligence of the advocate - HELD THAT - Delay deserves to be condoned as for the mistake of advocate, the justice should not be deprived of. Accordingly, we condone the delay subject of cost of ₹ 10,000/- to be deposited in the account of Central Government. CIT-A not affording reasonable opportunity of being heard while adjudicating the appeal in an exparte manner - pendency of application for transfer of case records to Mumbai being reasonable and sufficient cause for nonattendance - HELD THAT - Commissioner of Income tax(A) did not afford reasonable opportunity and pass the order in an ex-parte manner. CIT(A) did not consider the facts and circumstances of the case viz. closure of Bhopal office and pendency of application for transfer of case records to Mumbai being reasonable and sufficient cause for nonattendance. CIT(A) did not consider the fact that business was closed due to losses and audited balance sheet and profit loss account were placed on record along with certain details and relevant records such as purchase bills, stock registers showing quantitative details, bills and vouchers etc. could not be produced because they were shifted to Mumbai due to closure of office at Bhopal as there being no proper communication from the counsel of the assessee, such records could not be produced. In view of these facts and in the interest of justice, the present matter deserves to be reconsidered at the level of the Ld. CIT(A) who will afford reasonable opportunity of being heard to the assessee and the assessee is also directed to cooperate with the Ld. CIT(A) by filing the relevant evidences and written submissions in support of the claim. Accordingly, we set aside the order of the Ld. CIT(A) and the grounds raised in the assessee s appeal are allowed for statistical purposes only.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Reasonable opportunity of being heard.
3. Application of Gross Profit (GP) rate.
4. Adhoc disallowance of various expenses.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was delayed by 2 years, 10 months, and 17 days. The assessee argued that the delay was due to the gross negligence and improper handling by their advocate. An affidavit was submitted to support this claim. The assessee's counsel cited various case laws to argue for a lenient view on condoning the delay. The Revenue opposed this, citing the need to explain each day's delay. The Tribunal found the advocate's negligence as a reasonable cause and condoned the delay, subject to a cost of ?10,000 to be deposited in the account of the Central Government.

2. Reasonable Opportunity of Being Heard:
The assessee contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in not affording a reasonable opportunity of being heard and adjudicated the appeal in an ex-parte manner. The closure of the Bhopal office and the pending application for transfer of case records to Mumbai were cited as reasons for nonattendance. The Tribunal found that the CIT(A) did not provide a reasonable opportunity and passed the order ex-parte. Therefore, the matter was remanded back to the CIT(A) for reconsideration, directing the CIT(A) to afford a reasonable opportunity of being heard to the assessee.

3. Application of Gross Profit (GP) Rate:
The CIT(A) applied a GP rate of 41%, based on the previous years' GP rates of 37.96% and 41.98%, rejecting the assessee's declared GP rate of 33.18%. The assessee argued that the fall in GP was due to increased direct expenses and the cost of materials, and that relevant records could not be produced due to the closure of the Bhopal office. The Tribunal found that the CIT(A) did not consider these facts and circumstances and directed the CIT(A) to reconsider the matter, allowing the assessee to present relevant evidence.

4. Adhoc Disallowance of Various Expenses:
The CIT(A) confirmed an adhoc disallowance of 10% of various expenses, ignoring the normal increment in salary, petrol, conveyance, and traveling expenses. The assessee argued that these expenses were mainly related to the marketing team and were inevitable due to the nature of the business. The Tribunal found that the CIT(A) did not appreciate the nature of the business and the increase in index cost. The matter was remanded back to the CIT(A) for reconsideration, with directions to afford a reasonable opportunity to the assessee to present relevant evidence.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding the matter back to the CIT(A) for reconsideration on all grounds, with directions to afford a reasonable opportunity of being heard to the assessee and to consider the relevant evidence and written submissions in support of the claims. The order was pronounced in the open court on 20.02.2020.