2020 (10) TMI 365 - HC - Income Tax

Denial of natural justice - ex-parte order - Disallowance of deduction u/s 14A - through notice A.O called for certain records from the appellant but he did not respond - change in the jurisdiction and succeeding A.O issued two more notices under section 124 - Commissioner (Appeals) has maintained the assessment under section 14A but scaled down the expenditure under other heads - tribunal has found that the appellate authority has acted in haste and allowed the deduction without any material and remanded the matter to the primary authority for reconsideration - appellant contends that the appellant did not receive the first notice and received only the notices issued by the A.O after the change of jurisdiction hence no opportunity of being heard given - whether the appellant would be prejudiced if the matter had to be heard afresh by the A.O? HELD THAT - Initial assessment proceedings before the AO were ex parte, for the appellant had not chosen to respondent to the statutory notices. Then, the appellant has approached the Commissioner (Appeals), who secured a remand report from the Assessing Officer. Finally, the appellate authority has confirmed the AO s disallowance under Section 14A of the IT Act but deleted the additions. On the Department s appeal, the Income Tax Appellate Tribunal has observed that the appellate authority has displayed haste in deleting the additions without the assessee even agreeing to produce the complete books of account and the supporting evidence. Then, the Tribunal has concluded that it will the interest of justice if the issue is remitted to the file of the AO. The appellant was, thus, given one more opportunity to agitate the issue before the AO and justify its contentions. We, therefore, reckon that the impugned order of the Tribunal has caused no prejudice to the appellant; nor has it suffered from any legal infirmity for us to interfere. No substantial question of law

Summary

Issues:
1. Failure to respond to notices under section 143(2) and (4) of the Income Tax Act.
2. Alleged lack of opportunity for the appellant to defend itself before the Assessment Officer.
3. Disagreement between the appellant and the Income Tax Appellate Tribunal regarding the production of records.
4. Appeal against the Tribunal's order remanding the matter to the primary authority.
5. Question of prejudice to the appellant and the justification of the remand.

Analysis:

1. The appellant failed to respond to notices issued under section 143(2) and (4) of the Income Tax Act, leading to ex parte assessment proceedings before the Assessment Officer. The subsequent appeal before the Commissioner (Appeals) resulted in a remand report being secured from the AO, ultimately confirming the disallowance under Section 14A of the IT Act but deleting certain additions.

2. The appellant raised concerns about the lack of opportunity to defend itself before the AO, claiming that despite appearing with all records and written submissions on the scheduled date of hearing, it was informed that the order had been passed the previous day. The appellant argued that the appellate authority was satisfied with its arguments and remanded the matter to the AO for further consideration.

3. Disagreement arose between the appellant and the Income Tax Appellate Tribunal regarding the production of records. The Tribunal found that the appellate authority had acted hastily in allowing deductions without complete material evidence. The appellant contested this observation, claiming that it had produced sufficient record extracts before the appellate authority.

4. The appellant challenged the Tribunal's order remanding the matter to the primary authority for reconsideration. The appellant's senior counsel argued against the remand, citing potential harassment and the need to go through remedial hierarchies again if the AO's order turned out negative. The appellant sought the restoration of the appellate authority's order.

5. The court considered the arguments presented by both parties and concluded that the impugned order of the Tribunal did not cause prejudice to the appellant. The court found no legal infirmity to warrant interference and declined to entertain the appeal, thereby upholding the Tribunal's decision to remand the matter to the AO for further consideration. The Tax Appeal was dismissed, and the impugned order remained intact.