2024 (9) TMI 1440 - AT - Income Tax

Validity of Order Of NFAC, Delhi - Assessment based on non-consideration of Form 10 - Lack of reasoning for additions by AO - Failure to conduct specific inquiry by NFAC - Dismissal of appeal without adjudication on merits by NFAC - HELD THAT - In the present case, when the detailed written submissions have been filed by the assessee before the NFAC, which has been simply reproduced and held that the assessment order does not need any interference, hence, the entire appeal has been dismissed without even uttering a word into the merits of the case. Such kind of order has to be held perverse, bereft of any findings and bad in law. Since the NFAC has not adjudicated the issue on merits, we are of the considered view that the matter has to be remanded back to the file of the NFAC for denovo adjudication as per law while complying with the principles of natural justice. The NFAC should also call for a report from the AO regarding Form No. 10 filed by the assessee and if on the basis of Form No.10 and consideration thereof, as whatsoever submissions have been made by assessee, the NFAC finds there is merit in the matter, accordingly, the matter should be disposed off as per law at the same time, the assessee is also directed to comply with the hearing notices as and when called for through submitting relevant documents/evidences before the NFAC. The grounds of appeal raised by the assessee are allowed for statistical purposes.

Summary

Issues:
Assessment based on non-consideration of Form 10 | Lack of reasoning for additions by Assessing Officer | Failure to conduct specific inquiry by NFAC | Dismissal of appeal without adjudication on merits by NFAC

Assessment based on non-consideration of Form 10:
The appeal before the Appellate Tribunal ITAT Ranchi emanated from an order by NFAC, Delhi, related to the assessment year 2016-2017. The Assessee, a registered charitable trust, was required to spend 85% of their total receipts. The Assessing Officer had made additions to the trust's income, including amounts related to inter-unit transactions and the purchase of fixed assets. The Assessee had submitted Form 10 to demonstrate the balance amount to be spent and the proposed spending plan for the next five years. However, the Assessing Officer did not consider Form 10 while framing the assessment order, leading to the Assessee's contention that the additions would not have been made if Form 10 had been considered.

Lack of reasoning for additions by Assessing Officer:
The Assessing Officer added amounts to the Assessee's income without providing reasoning for the inter-unit transactions and the fixed asset purchase. The Assessee claimed that the land purchase was made from accumulated funds as per the Income Tax Act, supported by Form 10. The failure to consider Form 10 and relevant documents by the Assessing Officer was highlighted as jeopardizing the rights of the registered trust. The Assessee argued that all documents should have been considered by the Assessing Officer before making additions.

Failure to conduct specific inquiry by NFAC:
The NFAC, in its order, merely reproduced the Assessee's submissions without conducting a specific inquiry or providing independent reasoning. The NFAC dismissed the appeal without examining the facts or submissions in detail, stating that there was no material to warrant interference with the Assessing Officer's order. The lack of examination or enquiry into the genuineness of the submissions raised concerns about the NFAC's decision-making process.

Dismissal of appeal without adjudication on merits by NFAC:
The NFAC's order lacked adjudication on the merits of the case, as it did not delve into the issues raised by the Assessee in their written submissions. The NFAC's failure to conduct an independent inquiry and provide a speaking order was highlighted as contrary to the requirements under the law. Citing judicial pronouncements, the Appellate Tribunal emphasized the need for the NFAC to adjudicate matters on merits, call for reports from the Assessing Officer if necessary, and pass speaking orders to ensure a fair and reasoned decision.

In conclusion, the Appellate Tribunal found that the NFAC's dismissal of the appeal without adjudicating on the merits was improper. The matter was remanded back to the NFAC for a fresh adjudication, emphasizing compliance with natural justice principles. The NFAC was directed to consider Form 10, call for a report from the Assessing Officer, and make a decision based on the merits of the case. The Assessee was instructed to comply with hearing notices and submit relevant documents. The appeal was allowed for statistical purposes, and the Assessee's appeal was allowed in the result.