2024 (10) TMI 931 - AT - Income Tax

Ex-parte Order of CIT(A) due to the non-appearance of/on behalf of the assessee - HELD THAT - CIT(A) merely on the basis of non-compliance with notices, dismissed the appeal filed by the assessee without adjudicating the grounds raised by the assessee on merits, as required u/s 250(6) of the Act. We find that in CIT v/s Premkumar Arjundas Luthra (HUF) 2016 (5) TMI 290 - BOMBAY HIGH COURT held that Commissioner (Appeals) cannot dismiss the appeal on account of non-prosecution of appeal by the assessee. We deem it fit and proper to set aside the impugned order and restore the matter to the file of the CIT(A) for de novo adjudication of the appeal on merits. We further direct that no order shall be passed without affording reasonable opportunity of hearing to the parties. Assessee is directed to appear before the learned CIT(A) on all the hearing dates as may be fixed without any default. As the matter is being restored to the file of the CIT(A) for adjudication on merits, the other grievances raised by the assessee in the present appeal do not call for adjudication at this stage. Grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
- Disallowance of interest paid to Infina Finance Private Limited
- Tax under section 115BBDA on Dividend received from Mutual Fund
- Non-appearance of the assessee leading to an ex-parte order by the CIT(A)

Analysis:

1. Disallowance of interest paid to Infina Finance Private Limited:
The assessee challenged the disallowance of interest paid to Infina Finance Private Limited against interest income earned from Partnership Firms. The grounds for appeal included arguments on the indirect utilization of the loan for business purposes and the deductibility of the interest paid under section 36(1)(iii) of the Income Tax Act, 1961. The Tribunal noted that the CIT(A) had passed an ex-parte order due to the non-appearance of the assessee. Citing the case of CIT v/s Premkumar Arjundas Luthra (HUF), the Tribunal held that the appeal cannot be dismissed solely based on non-prosecution by the assessee. Consequently, the Tribunal set aside the order and directed the matter to be reconsidered by the CIT(A) on merits, with a requirement to afford a reasonable opportunity of hearing to both parties.

2. Tax under section 115BBDA on Dividend received from Mutual Fund:
The appellant contested the tax imposed under section 115BBDA on Dividend received from a Mutual Fund, which was claimed as exempt under section 10(35). The discrepancy between the Assessment Order and the Computation sheet regarding the taxation of this income was highlighted. The Tribunal did not delve into this issue in detail as the appeal was being remanded to the CIT(A) for reconsideration on other grounds. However, it was noted that the tax on the said income should be deleted if it is indeed exempt under section 10(35).

3. Non-appearance of the assessee leading to an ex-parte order by the CIT(A):
The Tribunal emphasized the importance of providing a fair opportunity to the parties involved in a case. It was observed that the CIT(A) had dismissed the appeal ex-parte due to the non-compliance with notices by the assessee. Referring to legal precedent, the Tribunal held that the appeal cannot be dismissed solely on the basis of non-prosecution by the assessee. Therefore, the Tribunal set aside the CIT(A)'s order and instructed a fresh adjudication on the merits of the case, ensuring that both parties are given a reasonable opportunity to present their arguments. The appeal by the assessee was allowed for statistical purposes, and the matter was remanded to the CIT(A) for further proceedings.