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TMI Blog2022 (11) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... A.R. of the assessee. Therefore, once the assessee has requested for adjournment of hearing on the ground of illness of the A.R. and proof of illness was also filed then the CIT(A) ought to have granted one more opportunity of hearing to the assessee. Matter restored before the CIT(A) for fresh adjudication. - Appeal of the assessee is allowed for statistical purpose. - ITA No. 24/ALLD/2022 - - - Dated:- 11-10-2022 - SHRI.VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI. RAMIT KOCHAR , ACCOUNTANT MEMBER Appellant by : Sh. S. K. Jaiswal , CA Respondent by : Sh. A. K. Singh , Sr. DR ORDER VIJAY PAL RAO , JUDICIAL MEMBER This appeal by the assessee is directed against the order dated 24.06.2022 of CIT(A) (National Faceless Appeal Centre, Delhi) for the assessment year 2017-18. The assessee has raised the following grounds : - 1. BECAUSE the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in holding that no response or submission received in compliance to notice dated 02.06.2022 fixed for compliance on 09.06.2022 and dismissing the appeal ex parte. 2. BECAUSE the appellant has sought a short adjournment on the ground of illn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njustified and liable to be deleted. He has referred to the partnership deed at page No. 17 to 30 of the paper book and submitted that as per Clause 7 of the partnership deed, it was left to the partners as per their mutual understanding for payment of interest @ 12% or such rate as may be permitted by the Income Tax Act under section 40(b) of the Act be credited in their capital account. The learned AR has submitted that in pursuant to the Clause 7 of the partnership deed, there was no further mutual understanding or supplementary deed executed by the partners for providing the interest on the capital account of the partners. The learned AR has further submitted that even as per the provisions of section 28(v), there is no question of notional interest to be calculated and liable to be taxed in the hand of the partners. Thus, the learned AR has submitted that when the partnership firm has neither made any provision for interest on partners' capital nor paid any interest to the partners, the addition made by the AO and confirmed by the CIT(A) is liable to be deleted. He has referred to the order of the CIT(A) and submitted that the CIT(A) has passed the ex parte order without c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed any deduction on account of any interest to the partners on capital balance. Therefore, even as per section 28(v) until and unless any interest has been allowed to be deducted under section 40(b), the same cannot be assessed as income in the hand of the partners. The learned AR has thus contended that when the partnership firm has neither paid any interest nor claimed any deduction on account of interest to partners and the said fact has not been disputed by the A.O. while passing the scrutiny assessment then the addition made by the A.O. on account of notional interest is unsustainable and liable to be deleted. 4. On the other hand, the learned DR has submitted that the documents at Serial No. 3 to 5 were not produced before the authorities below and the assessee has filed these documents first time in the proceedings before the Tribunal. He has referred to the assessment order and submitted that the assessee itself, vide its reply dated 15.12.2019 submitted that as per partnership deed dated 05.06.2015 firm may pay interest @ not exceeding 12% on capital if mutually agreed by the partners. The learned DR has submitted that the assessee has not produced any mutual agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest @ 12% on the capital introduced by the assessee company of Rs. 6,19,28,475/- in M/s. Shree Infratech which amounts to Rs. 74,31,417/- is being added in the business income of the assessee company. (Addition: Rs. 74,31,417/-). 7. The A.O. has referred to the reply filed by the assessee dated 15.12.2019 but only a limited extract was reproduced in the assessment order whereas the reply dated 15.12.2019 is running in 7 pages and placed at page No. 9 to 16 of the paper book. The relevant part of the reply on this issue is in para 6 of letter dated 15.12.2019 as under:- As regards interest on capital invested in M/s. Shree Infratech it is respectfully submitted that M/s. Shree Infratech has not paid any interest to its partners on their capital contribution. As per Clause 7 of the partnership deed executed on 05.06.2015, it is provided that the firm may pay interest @ not exceeding 12% on capital account, if mutually agreed by partners. Meaning thereby interest on the capital is payable by the firm, only if the partners agree and make the provision my executing the supplementary deed. As per the provision of section 40(b) sub clause (ii) no interest to any partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not disputed the fact that there was no payment of interest or credit of interest by the partnership firm in the account of the assessee partner. The A.O. has added the said income as notional interest on the capital balance of the assessee with the partnership firm. The assessee has now produced the audited financial statements of partnership firm as well as the assessment order passed under section 143(3), dated 18.11.2019 to show that the partnership firm has neither made any provision of the interest to the partners nor claimed any deduction on this account. We further note that the CIT(A) has passed the ex parte order after granting six opportunities to the assessee however, on the last date of hearing, the assessee sought adjournment vide application filed online alongwith the medical certificate of the A.R. of the assessee. Therefore, once the assessee has requested for adjournment of hearing on the ground of illness of the A.R. and proof of illness was also filed then the CIT(A) ought to have granted one more opportunity of hearing to the assessee. Though, the assessee has not responded to the earlier notices issued by the CIT(A) however, once on the last date of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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