Income Tax Act, 1961,
Section 251
Order of CIT(A)--Validity--Appeal
dismissed on account of non-prosecution
Conclusion: Once an
appeal is preferred before CIT(A), it becomes obligatory on his part to dispose
of the same on merits and it is not open for him to summarily dismiss the
appeal on account of non-prosecution of the same by assessee.
AO made certain additions/disallowances. Assessee carried
matter in appeal before CIT(A). Despite being afforded sufficient opportunity,
assessee failed to participate in proceedings before CIT(A), therefore, the
CIT(A) holding a conviction that assessee was not interested in prosecuting the
matter, dismissed the appeal. Held: CIT (A) disposed off
assessee's appeal for non-prosecution and failed to apply his mind to the
issues, which arose from impugned order and assailed by assessee before him.
Once an appeal is preferred before CIT(A), it becomes obligatory on his part to
dispose of the same on merits and it is not open for him to summarily dismiss
the appeal on account of non-prosecution of the same by assessee. In fact, a
perusal of section 251(1)(a) and (b), as well as "Explanation" to
section 251(2), revealed that CIT(A) remains under a statutory obligation to
apply his mind to all the issues, which arises from impugned order before him.
As per mandate of law, CIT (A) is not vested with any power to summarily
dismiss the appeal for non-prosecution. Hence, order of CIT(A) was set-aside
and matter was remanded with a direction to dispose of the same on merits after
affording a reasonable opportunity of being heard to assessee.
Decision: In
assessee's favour
Relied: Premkumar
Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom) :
2016 TaxPub(DT) 3496 (Bom-HC)
IN THE ITAT RAIPUR BENCH
RAVISH SOOD, J.M.
Pramod Infrastructure (P) Ltd. v. ITO
ITA No. 82/RPR/2024
8 April, 2024
Assessee by: Sakshi Gopal
Agrawal and Siddharth Parakh, CAs
Revenue by: Satya Prakash
Sharma, Sr. DR
Ravish Sood, J.M.
The present appeal filed by the assessee is directed
against the order passed by the Commissioner of Income-Tax (Appeals), National
Faceless Appeal Center (NFAC), Delhi, dated 12-1-2024, which in turn arises
from the order passed by the assessing officer under section 147 read with
section 144 read with section 144B of the Income-tax Act, 1961 (in short 'the
Act') dated 19-3-2022 for the assessment year 2013-14. The assessee has
assailed the impugned order on the following grounds of appeal:
"1. That on fact and
circumstances of case of appellant. Learned assessing officer, NFAC has erred
for disallowing depreciation at higher rate of 30% on JCB and Tata Hitachi as
the appellant was very much eligible for claiming higher depreciation and
Commissioner (Appeals), NFAC has erred for confirming the same.
2. That on fact and circumstances
of case of appellant. Learned assessing officer, NFAC has erred for disallowing
interest of Rs. 14,01,072 on hire charges under section 40(a)(ia) of Income Tax
Act on account of non-deduction of TDS as well as Commissioner (Appeals), NFAC
has erred for confirming the same.
3. That on the fact and
circumstances of the case, learned assessing officer, NFAC and has been erred
for making addition/adjustment to book profit under section 115JB which is
beyond the scope of addition/adjustment given under section 115JB and Commissioner
(Appeals), NFAC has erred for confirming the same.
4. That on the fact and
circumstances of the case, the honorable Commissioner (Appeals) has erred for
confirming the order of learned assessing officer without properly appreciating
the fact of the case.
5. That, assessee reserves the
right to add, amend, alter or withdraw any ground/grounds of appeal at the time
of hearing."
Also the assessee has raised additional grounds of appeal
which reads as under:
"That your honour, the
notice under section 148 of the Income Tax Act, 1961 dated 30-3-2021 for the
assessment year 2013-14 issued by ITO, Ward 1(1), Raipur is invalid. The
jurisdiction of the appellant company lies with ITO, Bhatapara and not with ITO
1(1), Raipur, who had issued the notice under section 148 without assuming the
jurisdiction over the appellant company as there is no evidence of transfer of
case of the appellant from ITO, Bhatapara to the ITO 1(1), Raipur as required
in terms of section 127 of Income Tax Act 1961. Accordingly, without a valid
notice under section 148 the whole proceeding as well as the assessment order
under section 147 read with section 144B will become null and void."
2. Succinctly stated, the
assessee company which is engaged in the business of executing electrical and
civil contracts had filed its return of income for assessment year 2013-14 on
28-9-2013, declaring a loss of Rs. (-) 17,02,395. Subsequently, the case of the
assessee company was selected for scrutiny assessment under section 143(2) of
the Act.
3. As the assessee company
had failed to put up an appearance in the course of the proceedings before the
assessing officer, therefore, the latter proceeded with the assessment on an
ex-parte basis and after, inter alia, making certain additions/
disallowances, viz. (i) disallowance of the assessee's claim for higher rate of
depreciation on JCB and Tata Hitachi vehicles i.e., @30%; (ii) disallowance
under section 40(a)(ia) of the Act of the assessee's claim for deduction of
interest charges; and (iii) carrying out adjustment to the "book
profit" disclosed by the assessee company under section 115JB of the Act
of the addition/disallowance made while framing the assessment, vide his order
passed under section 147 read with section 144 read with section 144B of the
Act dated 19-3-2022 determined its income at Rs. 4,40,470 (under the normal
provisions) and further reworked out the "book profit" under section
115JB at Rs. 26,23,092.
4. Aggrieved the assessee
company carried the matter in appeal before the Commissioner (Appeals). As the
assessee company despite having been afforded sufficient opportunity on two
occasions had failed to participate in the proceedings before the Commissioner
(Appeals), therefore, the latter holding a conviction that it was not
interested in prosecuting the matter dismissed the appeal.
5. The assessee being
aggrieved with the order of the Commissioner (Appeals) has carried the matter
in appeal.
6. I have heard the learned
Authorized Representatives of both the parties, perused the orders of the lower
authorities and the material available on record as well as considered the
judicial pronouncements that have been pressed into service by the learned
Authorised Representative to drive home his contentions.
7. Shri Sakshi Gopal
Aggrawal, learned Authorized Representative (for short 'AR') for the assessee
company assailed the addition/disallowance a/w the adjustment to the "book
profit" made by the assessing officer, which, thereafter, had been upheld
by the Commissioner (Appeals). Apropos the declining by the assessing officer
of the assessee's claim for higher depreciation i.e., @ 30% on the JCB/Tata
Hitachi vehicles, the learned Authorised Representative submitted that the
assessing officer had given two-fold reasons for not accepting the same, viz.
(i) that as the subject vehicles were not motor lorries/motor taxies used in
the business of running them on hire as provided in Rule 5, Appendix-I
(effective from assessment year 2006-07 onwards), thus, they were not eligible
for higher rate of depreciation; and (ii) the subject vehicles unlike motor
lorries, motor truck could not have been used in the business of running it on
hire. Rebutting the aforesaid observations of the assessing officer, the
learned Authorised Representative had drawn support from the judgment of the
Hon'ble High Court of Kerala in the case of CIT v. Gaylord Constructions,
ITA No. 1255 of 2009, dt. 19-8-2009 : 2010 TaxPub(DT) 0718 (Ker-HC), wherein
it was held that JCB is entitled to higher rate of depreciation.
8. Apropos the disallowance
under section 40(a)(ia) of the Act of the assessee's claim for deduction of
interest charges of Rs. 14,01,072, the learned Authorised Representative
submitted that the same was comprised of interest on hire charges paid to HDFC
bank Ltd : Rs. 6,01,178.40 and interest paid to NBFCs : Rs. 8,95,534.73.
Elaborating on his contention, the learned Authorised Representative submitted
that the interest charges paid to nationalized banks were not liable for
deduction of tax at source as per the mandate of Section 194A(3)(a) of the Act.
The learned Authorised Representative in support of his aforesaid contention
had taken me through the bifurcated details of interest paid/tax deducted at
source, Page 33 of APB. As regards the balance amount of interest charges of
Rs. 8,95,534, the learned Authorised Representative submitted that tax at
source of Rs. 1,23,843 was deposited by the assessee on 29-4-2013, i.e. within
the stipulated time period, Page 34 of APB.
9. Alternatively, the
learned Authorised Representative had assailed the validity of the jurisdiction
assumed by the ITO, Ward-1(1), Raipur who had issued notice under section 148
of the Act dated 30-3-2021 on the ground that as the jurisdiction over the case
of the assessee company was vested with the ITO, Bhatapara, therefore, the
assessment framed in absence of valid assumption of jurisdiction could not be
sustained and was liable to be struck down on the said count itself. Also, the
learned Authorised Representative had assailed the assumption of jurisdiction
by the ITO, Ward-1(1), Raipur de-hors any order of transfer of jurisdiction
under section 127 of the Act.
10. Per contra, the learned
Departmental Representative (for short 'DR') relied on the orders of the lower
authorities. It was vehemently submitted by him that as the assessee company by
adopting a lackadaisical approach had not only failed to participate in the
assessment proceedings, but had also failed to prosecute the matter before the
Commissioner (Appeals), therefore, the said appeal had rightly been dismissed
by the first appellate authority.
11. As is discernible from
the written submissions filed by the assessee company, it transpires that it
had in the "Form 35" based on exhaustive grounds of appeal assailed
the subject addition/disallowance as well as adjustment made by the assessing
officer to the "book profit" disclosed by the assessee under section
115JB of the Act. Admittedly, the assessee had not only failed to participate
in the proceedings before the assessing officer but had also failed to
prosecute the matter before the Commissioner (Appeals). However, I am of the
view that now when the assessee company had raised before the Commissioner
(Appeals) elaborate grounds of appeal, based on which, the order of the
assessing officer was assailed before him, it was incumbent on the part of the
Commissioner (Appeals) to have disposed off the appeal by way of a
well-reasoned and speaking order after considering the aforesaid claim of the
assessee. I am unable to concur with the manner in which the Commissioner
(Appeals) had summarily dismissed the appeal of the assessee for want of
prosecution.
12. As observed hereinabove,
the Commissioner (Appeals) had disposed off the appeal for non-prosecution and
had failed to apply his mind to the issues which did arise from the impugned
order and was assailed by the assessee before him. In my considered view, once
an appeal is preferred before the Commissioner (Appeals), it becomes obligatory
on his part to dispose off the same on merit and it is not open for him to
summarily dismiss the appeal on account of non-prosecution of the same by the
assessee. In fact, a perusal of section 251(1)(a) and (b), as well as the
"Explanation" to section 251(2) of the Act reveals that the
Commissioner (Appeals) remains under a statutory obligation to apply his mind
to all the issues which arises from the impugned order before him. As per
mandate of law the Commissioner (Appeals) is not vested with any power to
summarily dismiss the appeal for non-prosecution. The aforesaid view is
fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT
v. Premkumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom) : 2016
TaxPub(DT) 3496 (Bom-HC). In the aforementioned case the Hon'ble High Court
had observed as under:
"8. From the aforesaid
provisions, it is very clear once an appeal is preferred before the
Commissioner (Appeals), then in disposing of the appeal, he is obliged to make
such further inquiry that he thinks fit or direct the assessing officer to make
further inquiry and report the result of the same to him as found in section
250 of the Act. Further, Section 250(6) of the Act obliges the Commissioner
(Appeals) to dispose of an appeal in writing after stating the points for
determination and then render a decision on each of the points which arise for
consideration with reasons in support. Section 251(1)(a) and (h) of the Act
provide that while disposing of appeal the Commissioner (Appeals) would have
the power to confirm, reduce, enhance or annul an assessment and/or penalty.
Besides Explanation to sub-section (2) of section 251 of the Act also makes it
clear that while considering the appeal, the Commissioner (Appeals) would be
entitled to consider and decide any issue arising in the proceedings before him
in appeal filed for its consideration, even if the issue is not raised by the
appellant in its appeal before the Commissioner (Appeals). Thus once an
assessee files an appeal under section 246A of the Act, it is not open to him
as of right to withdraw or not press the appeal. In fact the Commissioner
(Appeals) is obliged to dispose of the appeal on merits. In fact w.e.f.
1-6-2001 the power of the Commissioner (Appeals) to set aside the order of the
assessing officer and restore it to the assessing officer for passing a fresh
order stands withdrawn. Therefore, it would be noticed that the powers of the
Commissioner (Appeals) are co-terminus with that of the assessing officer i.e.
he can do all that assessing officer could do. Therefore, just as it is not
open to the assessing officer to not complete the assessment by allowing the
assessee to withdraw its return of income, it is not open to the assessee in
appeal to withdraw and/or the Commissioner (Appeals) to dismiss the appeal on
account of non-prosecution of the appeal by the assessee. This is amply clear
from the section 251(1)(a) and (b) and Explanation to section 251(2) of the Act
which requires the Commissioner (Appeals) to apply his mind to all the issues
which arise from the impugned order before him whether or not the same has been
raised by the appellant before him. Accordingly, the law does not empower the
Commissioner (Appeals) to dismiss the appeal for non-prosecution as is evident
from the provisions of the Act."
13. I, thus, not being able
to persuade myself to subscribe to the dismissal of the appeal by the
Commissioner (Appeals) for non-prosecution, therefore, set-aside his order with
a direction to dispose off the same on merits. Needless to say, the
Commissioner (Appeals) in the course of the de novo appellate proceedings shall
afford a reasonable opportunity of being heard to the assessee who shall remain
at a liberty to raise the additional grounds of appeal which have been raised
before me. Thus, the grounds of appeal/additional ground of appeal raised by
the assessee are allowed for statistical purposes in terms of the aforesaid
observations.
14. In the result, the
appeal filed by the assessee company is allowed for statistical purposes in
terms of the aforesaid observations.
Order pronounced in open court on 8-4-2024.