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2022 (5) TMI 1132 - AT - Income TaxAd-hoc disallowance being 75% of the Security Expenses claimed for the year - HELD THAT - As following the decision of the coordinate bench of ITAT, Kolkata in assessee s own case 2016 (11) TMI 1307 - ITAT KOLKATA we find it fit to delete the addition of ad-hoc disallowance in respect of Security Expenses disallowed for a sum being 75% of the Security Expenses claimed for the year. Appeal of assessee allowed.
Issues Involved:
1. Whether the CIT(A) erred in passing an ex parte order without giving proper opportunity of being heard to the assessee. 2. Whether the CIT(A) was justified in confirming the ad-hoc disallowance of 75% of the Security Expenses claimed by the assessee. Issue-wise Detailed Analysis: 1. Ex Parte Order Without Proper Opportunity: The assessee challenged the ex parte order passed by the CIT(A) without providing a proper opportunity of being heard. The tribunal noted that the CIT(A) dismissed the appeal merely on the grounds of non-prosecution without considering the merits of the case. The tribunal highlighted the procedural requirements under Section 250 of the Income-tax Act, 1961, which mandates the CIT(A) to fix a day and place for the hearing, provide notice to the appellant, and ensure the right to be heard. The CIT(A) also has the power to adjourn hearings and is required to make inquiries or direct the AO to do so before disposing of the appeal. The tribunal emphasized that the CIT(A) must dispose of the appeal in writing, stating the points for determination, the decision thereon, and the reasons for the decision. The tribunal cited the Bombay High Court's decision in CIT Vs. Premkumar Arjundas Luthra (HUF), which clarified that once an appeal is filed, the CIT(A) is obliged to dispose of it on merits and cannot dismiss it for non-prosecution. The tribunal also referenced the Delhi Tribunal's decision in Ms. Swati Pawa Vs. DCIT, reinforcing that the CIT(A) must apply their mind to all issues arising from the impugned order and dispose of the appeal on merits, even if the appellant does not press the appeal. 2. Ad-hoc Disallowance of Security Expenses: The assessee contested the CIT(A)'s confirmation of the ad-hoc disallowance of Rs. 55,05,750, which was 75% of the Security Expenses claimed for the year. The tribunal observed that the CIT(A) failed to consider the order of the coordinate bench of ITAT, Kolkata, in the assessee's own case for AY 2007-08 and 2009-10, which had deleted similar disallowances. The tribunal noted that the CIT(A) should have taken cognizance of this precedent while disposing of the appeal. The tribunal reiterated that the CIT(A) must follow the procedure in appeal as defined under Section 250 and cannot dismiss the appeal solely on non-appearance. The tribunal found that the issue of Security Expenses was previously dealt with by the coordinate bench, which had allowed such expenses as revenue in nature, except for insurance costs that should be allocated to project costs. Based on the precedent set by the coordinate bench in the assessee's own case, the tribunal decided to delete the ad-hoc disallowance of Rs. 55,05,750, being 75% of the Security Expenses of Rs. 73,41,000 claimed for the year. Conclusion: The tribunal allowed the appeal of the assessee, setting aside the ex parte order of the CIT(A) and deleting the ad-hoc disallowance of Security Expenses. The tribunal emphasized the importance of following procedural requirements and disposing of appeals on merits, ensuring fair opportunity and consideration of relevant precedents.
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