2021 (1) TMI 526 - AT - Income Tax

Denial of natural justice - Assessment of loss - CIT (A) dismissed the appeal of the assessee - whether CIT-A rejecting the appeal filed by the assessee without going through the facts? - HELD THAT - It is pertinent to note that the CIT (Appeals) has not given any categorical finding on merits of the case and also did not give sufficient opportunity of hearing to the assessee. Therefore, the CIT (Appeals) was not right in dismissing the appeal of the assessee without giving proper opportunity of hearing. Hence, we are remanding back the entire issue to the file of the CIT (Appeals) to be decided on merits. Appeal of the assessee is partly allowed, for statistical purpose.

Summary

Issues Involved:
Assessment of loss, Disallowance of expenses, Opportunity of hearing before CIT (Appeals)

Assessment of Loss:
The appeal was filed against the order passed by CIT (Appeals) for Assessment Year 2015-16. The assessee, a private limited company engaged in manufacturing, had shown a loss of ?21,19,57,021 in the return of income. However, the Assessing Officer assessed the loss at ?1,11,19,899. The CIT (A) dismissed the appeal of the assessee. The Tribunal noted that the CIT (Appeals) did not provide a categorical finding on the merits of the case and failed to give sufficient opportunity of hearing to the assessee. As a result, the Tribunal remanded the issue back to the file of the CIT (Appeals) for a decision on merits, emphasizing the importance of following the principles of natural justice and granting the assessee a proper opportunity of hearing.

Disallowance of Expenses:
The grounds of appeal raised various issues regarding the disallowance of expenses by the Assessing Officer. The AO had made disallowances for electricity expenses, total expenses, and interest on borrowed funds. The Tribunal found the AO's actions to be unjustified and against the facts. For instance, the disallowance of electricity expenses and total expenses were based on allegations that were not adequately supported. The disallowance of interest on borrowed funds was linked to an interest-free advance given by the assessee, which the Tribunal found to be inconsistent with the presence of substantial trade creditors. The Tribunal did not find the AO's justifications for these disallowances convincing.

Opportunity of Hearing before CIT (Appeals):
During the proceedings, the Authorized Representative argued that the CIT (Appeals) did not provide the assessee with an appropriate opportunity to present its case. The Departmental Representative relied on the assessment order and the CIT (Appeals) decision. The Tribunal, after considering the arguments and reviewing the records, concluded that the CIT (Appeals) had not given a proper opportunity of hearing to the assessee and had not provided a categorical finding on the case's merits. Therefore, the Tribunal remanded the issue back to the CIT (Appeals) for a decision on merits, emphasizing the importance of granting the assessee a fair opportunity of hearing in accordance with the principles of natural justice. The appeal of the assessee was partly allowed for statistical purposes.

In conclusion, the Tribunal's judgment addressed the issues related to the assessment of loss, disallowance of expenses, and the opportunity of hearing before the CIT (Appeals). The Tribunal emphasized the importance of providing a fair opportunity of hearing to the assessee and ensuring decisions are made based on merits and in accordance with the principles of natural justice.