ITAT Bangalore Orders Re-adjudication Citing Lack of Adequate Opportunity

Comfortable Abode Private Limited Vs ACIT (ITAT Bangalore)

Introduction: In a recent case between Comfortable Abode Private Limited and the Assistant Commissioner of Income Tax (ACIT), the Income Tax Appellate Tribunal (ITAT), Bangalore, directed re-adjudication. The tribunal held that the assessment proceedings completed by the National Faceless Appeal Centre (NFAC) Delhi did not give sufficient opportunity to the assessee.

Analysis: The case originated with the assessment for the year 2016-17, wherein the company had declared a current year loss. Following scrutiny and notices, the assessment was finalized with an assessed loss of a lower amount. Dissatisfied, Comfortable Abode appealed before NFAC, which confirmed the assessment order due to the assessee’s non-compliance with the hearing notices.

The assessee then appealed to ITAT, claiming that they were not provided sufficient opportunities to represent their case. They also challenged the addition of notional interest on property advance and the disallowance under section 36[1][iii] of the Act.

The ITAT, after considering the submissions, ruled in favor of the assessee, in part, agreeing that there was a lack of sufficient opportunity for the company to represent its case. It ordered a fresh decision to be made after providing an opportunity for the assessee to be heard.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This appeal by assessee is directed against order of NFAC Delhi for the assessment year 2016-17 dated 2.2.2023.

2. Facts of the case are that the assessee company is in the field of business of undertaking development and construction of residential apartments. The company filed its original return of income for the AY 2016-17 on 30.11.2018 declaring current year loss of Rs.(-) 1,04,02,808/-. The case was selected for scrutiny through CASS. Statutory notice u/s 143(2) of the Income-tax Act, 1961 [‘the Act’ for short] dated 1.8.2017 was issued and served on the assessee company. Due to change in the incumbent officer, a notice u/s 142(1) r.w.s. 129 of the Act was issued on 10.11.2018. Notice u/s 142(1) of the Act were issued on 23.11.2018. Accordingly, assessment was completed u/ 143(3) of the Act on 28.12.2018 at assessed loss of Rs.6,92,061/-.

2.1 Aggrieved, the assessee went in appeal before NFAC. The NFAC has given notices of hearing to the assessee as follows:

In view of this non-compliance from the assessee’s side, the NFAC confirmed the order of AO. Against this assessee is in appeal before us by way of following grounds:

1) The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2) The learned CIT[A] is not justified in disposing off the appeal ex-parte without allowing sufficient and real opportunity to the appellant to represent the case and hence. the impugned order passed requires to be cancelled.

3) Without prejudice to the above, the learned CIT [A] is not justified in sustaining the addition in respect of notional interest on property advance to the extent of Rs. Rs. 89,70,956/- under the facts and in the circumstances of the appellant’s case.

4) Without prejudice to the above, and assuming that the impugned disallowance was made in terms of section 36[1][iii] of the Act, the learned CIT[A] ought to have held that the interest paid on ICD also had to be regarded as part of the closing work-in-progress of the project and accordingly inventorised under the facts and in the circumstances of the appellant’s case.

3. Before us, the ld. A.R. submitted that all the notices stated in para 2.1 above were issued electronically through ITBA portal. The person incharge Mr. Mohankumar Singapura Jayanna, Managing Director of the Company was not conversant with ITBA portal and failed to see or verify the notices sent electronically. Hence, he failed to take note of the above notices and failed to represent the case before the NFAC.

4. The ld. D.R. submitted that assessee has not make use of opportunities given to it before this NFAC. Hence, appeal be decided on merit only.

5. We have heard the rival submissions and perused the materials available on record. In this case, admittedly, assessee has not participated before NFAC by filing requisite information and the NFAC decide the issue ex-parte. In our opinion, in the interest of justice, it is appropriate to remit the entire issue in dispute to the file of NFAC to decide the issue afresh after giving an opportunity of hearing to the assessee.

6. In the result, the assessee’s appeal is partly allowed for statistical purposes.

Order pronounced in the open court on 1^st June, 2023