2021 (4) TMI 864 - AT - Income Tax

Ex-parte order passed by CIT-A - Treatment of loans received a bogus income on account of being held as unexplained income falling under scope of Section 68 - HELD THAT - The perusal of CIT(A) order reveals that CIT(A) has passed an ex parte order without deciding the issue on merits. Sub Section (6) of Section 250 of I. T. Act mandate the CIT(A) to state the points in dispute and thereafter assign the reasons in support of his conclusion. We are of the view that by dismissing the appeal without considering the issue on merits, Learned CIT(A) has failed to follow the mandate required in Sub Section (6) of Section 250 of the Act. Further it is also a well settled principle of natural justice that sufficient opportunity of hearing should be offered to the parties and no parties should be condemned unheard. In view of these facts, we set aside the impugned order of CIT(A) dated 16.03.2018 and restore the issue to the file of CIT(A) for re-adjudication of the issues after granting sufficient opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Treatment of loans received as 'bogus income' under Section 68
2. Disallowance of interest paid on unsecured loans
3. Disallowance of proportionate interest based on a specific judgment

Analysis:
1. The appeal was against the Commissioner of Income Tax (Appeals) order for Assessment Year 2014-15. The Assessee, engaged in trading of shares, declared a total loss in the return of income. The Assessing Officer (AO) issued notices under sections 143(2) and 142(1) of the Income Tax Act, 1961, and determined the assessed income at a different amount. The Assessee then appealed to the CIT(A) who dismissed the appeal. The Assessee raised grounds related to the treatment of loans as 'bogus income' under Section 68.

2. The Assessee also challenged the disallowance of interest paid on unsecured loans. The CIT(A) upheld the decision of the AO regarding this disallowance. Additionally, there was a dispute regarding the disallowance of proportionate interest on unsecured loans based on a specific judgment. The Assessee contended that the CIT(A) erred in upholding the decision of the AO in this regard.

3. The case proceeded ex parte as there was no appearance on behalf of the Assessee during the hearing. The Learned DR supported the lower authorities' orders. However, the ITAT Delhi found that the CIT(A) had passed an ex parte order without deciding the issues on merits, contrary to the requirements of the IT Act. The ITAT Delhi set aside the CIT(A) order and directed a re-adjudication of the issues after granting the Assessee sufficient opportunity of hearing. The Assessee was also instructed to provide the necessary details. Consequently, the ITAT Delhi allowed the appeal of the Assessee for statistical purposes without adjudicating on the merits of the grounds raised.

In conclusion, the ITAT Delhi's judgment focused on procedural fairness and the requirement of providing adequate opportunity for the Assessee to present their case. The decision highlighted the importance of following the principles of natural justice and ensuring a thorough examination of the issues before reaching a conclusion.