2024 (12) TMI 769 - AT - Income Tax

Disallowing the amount by CIT(A) in the order passed u/s 154 r.w.s. 250 - Disallowance of Amortization of telecom license u/s 35ABB and Depreciation on right to use of telecom spectrum u/s 32 - HELD THAT - AO failed to appreciate that the Assessee has made two different claims which were altogether different and the same are not connected to each other. Apart from the same, the Ld. CIT(A) vide order dated 11/07/2024 has given clear finding that an amount has been rightly allowed to the Assessee in the assessment order passed u/s 143(3) of the Act and no addition is called for on the said ground. Thus, we are of the opinion that the A.O. committed error in passing the order u/s 154 of the Act by making the disallowance and on the other hand, the Ld. CIT(A) has also committed error in making reference two separate appeals filed by the Assessee and ended up with not deciding the issue involved in the appeal. Accordingly, we allow the Ground No. 3 of the Assessee and delete the addition made by the A.O. u/s 154 of the Act r.w. Section 143(3) of the Act which has been confirmed by Ld. CIT(A). Additional grounds of Appeal - CIT(A) has exercised its jurisdiction beyond the scope of the Appeal by disallowing amount which is part of separate appeal proceedings altogether and not the part of the Appeal/lis pending before the Ld. CIT(A ) - It is the fact on record that as against the order of the rectification passed u/s 154 of the Act the Assessee preferred an Appeal before the Ld. CIT(A). The grievance before CIT(A) of the Assessee against the addition made u/s 154 which was the disallowance made by the A.O. pertaining to amortization of telecom license on the right to use of telecom spectrum, however, the Ld. CIT(A) travel beyond the issue pending before him by making disallowance which has already been allowed to the Assessee and which was not disturbed by the A.O. in the rectification order. Thus, the action of the Ld. CIT(A) disallowing the amount of Rs. 2,77,04,74,906/- was beyond the scope of the Appeal pending before him and the same is not sustainable in the eyes of law. Accordingly, we allow the additional grounds of Appeal of the Assessee by deleting the addition made by the Ld. CIT(A). Appeal filed by the Assessee is allowed.

Summary

Issues:
1. Opportunity of being heard not granted by CIT(A)
2. Reference of two separate appeals in the order passed by CIT(A)
3. Disallowance of deduction under section 35ABB
4. Exercising jurisdiction beyond the scope of appeal by CIT(A)

Analysis:

Issue 1: Opportunity of being heard not granted by CIT(A)
The Assessee appealed against the order of the Ld. CIT(A) for Assessment Year 2016-17, citing that no opportunity of being heard was granted, thus violating the principles of natural justice. The Appellant argued that the appeal was disposed of ex-parte without granting a fair hearing.

Issue 2: Reference of two separate appeals in the order passed by CIT(A)
The Assessee contended that the CIT(A) erred by referencing two separate appeals in the order, leading to confusion regarding which appeal was being addressed. The CIT(A) failed to clarify the issue in dispute and did not decide on the grounds of appeal filed against the order passed under section 154 read with section 143(3) of the Income-tax Act.

Issue 3: Disallowance of deduction under section 35ABB
The Assessee made two claims in the return for Assessment Year 2016-17, one for amortization of telecom license and the other for depreciation on the right to use telecom spectrum. The AO disallowed the depreciation claim but allowed an alternative relief under section 35ABB. However, a rectification order was passed alleging excess deduction under section 35ABB. The CIT(A) declared the appeal as "Allowed" without deciding on the issue, leading to the Assessee filing the present appeal.

Issue 4: Exercising jurisdiction beyond the scope of appeal by CIT(A)
The Assessee raised additional grounds of appeal, arguing that the CIT(A) exceeded its jurisdiction by disallowing an amount that was part of a separate appeal proceeding and not within the scope of the current appeal. The CIT(A) had disallowed an amount that had already been allowed to the Assessee in a previous order, which was beyond the subject matter of the current appeal.

In conclusion, the Tribunal allowed the Assessee's appeal, finding errors in both the AO's order and the CIT(A)'s decision. The Tribunal held that the AO and CIT(A) failed to recognize the separate nature of the Assessee's claims, leading to incorrect disallowances. The CIT(A) was found to have gone beyond the scope of the appeal by disallowing an amount not under consideration in the current proceedings. As a result, the Tribunal allowed the appeal and deleted the additions made by the AO and CIT(A).