2023 (4) TMI 294 - AT - Income Tax

Ex-parte order passed by CIT(A), NFAC - Deduction u/s. 57 denied - interest paid to Bank on overdraft facility - HELD THAT - As contention of the ld. DR is correct that by and large the conduct of the assessee was of utmost recklessness and approach towards the proceedings has also been very casual. All the same, assessee should be given an opportunity to explain and demonstrate with evidence as to how the impugned amount is deductable u/s. 57 - restore the file to the office of the AO to decide the issue afresh after giving adequate opportunity to the assessee to explain and substantiate his case. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues involved:
The issues involved in this case are related to the assessment of income u/s 44AD of the Income Tax Act, 1961, and the deduction claimed u/s 57 of the Act for interest paid to a bank on overdraft facility.

Assessment under section 44AD:
The assessee, engaged in Civil Contract work, filed a return of income declaring total income and agricultural income. The case was selected for limited scrutiny, questioning the deduction claimed u/s 57 of the Act for interest paid to a bank. The Assessing Officer proceeded ex-parte as the assessee failed to respond adequately. Consequently, the assessment was completed adding the disputed amount to the income.

Challenge before NFAC:
The assessee challenged the addition before the National Faceless Appeal Centre (NFAC) after being granted adjournments and multiple notices. However, the assessee failed to provide any response or supporting documents, leading to the dismissal of the appeal by NFAC in an ex-parte manner.

Grounds of appeal before ITAT:
The assessee approached the Appellate Tribunal challenging the NFAC's order on various grounds, including the ex-parte nature of the proceedings, the addition of the disputed amount to the income, and the treatment of interest expenses as business expenditure u/s 44AD.

Tribunal's decision:
The Authorized Representative requested an opportunity for the assessee to present their case before the Assessing Officer, promising cooperation. The Tribunal acknowledged the reckless conduct of the assessee but decided to give another chance for explanation and evidence regarding the deductibility of the disputed amount u/s 57 of the Act. The file was restored to the Assessing Officer for a fresh decision, with a caution against non-cooperation. The appeal was allowed for statistical purposes.

This summary provides a detailed overview of the legal judgment, highlighting the key issues, challenges, grounds of appeal, and the decision rendered by the Appellate Tribunal in a structured manner.