Assessee’s Limited ITBA Knowledge: ITAT Bangalore directs Re-Adjudication

Blue Reservoir Business Services LLP Vs DCIT (ITAT Bangalore)

In the appeal case of Blue Reservoir Business Services LLP versus DCIT, the ITAT Bangalore has taken a unique stance. Owing to the assessee’s lack of familiarity with the ITBA (Income Tax Business Application), the tribunal directed the case for re-adjudication, underlining the critical role of technological familiarity in modern tax procedures.

Analysis: The primary issue at hand involved double disallowances of certain expenses by the Assistant Director of Centralized Processing Center (CPC), resulting in inflated tax liability. However, when the assessee appealed against this at NFAC (National Faceless Appeal Centre), they did not comply with the notices issued. The NFAC consequently confirmed the order of the AO (Assessing Officer) in an ex-parte judgment.

The non-compliance by the assessee was attributed to their Principal Officer’s limited understanding of ITBA, the key platform for managing tax procedures. In light of this, the ITAT Bangalore decided to remit the issue back to NFAC. This step acknowledged the potential technology barrier that could impede the fair hearing of a case, underlining the importance of equal access and understanding of digital platforms in tax procedures.

Conclusion: The case between Blue Reservoir Business Services LLP and DCIT brings forward the significant influence of technology literacy in modern tax practices. ITAT Bangalore’s decision to direct the case for re-adjudication due to the assessee’s limited knowledge of ITBA emphasizes the necessity of familiarizing oneself with such platforms. It also stresses the importance of creating more user-friendly and accessible digital systems in the taxation sector to avoid such occurrences in the future.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This appeal by assessee is directed against order of NFAC passed u/s 250 of the Income-tax Act,1961 [‘the Act’ for short] for the assessment year 2020-21 dated 22.1.2023.

2. Facts of the issue are that the assessee is a limited liability partnership firm. For the year under consideration, return of income was filed on November 8, 2020 vide acknowledgement number 08003801081120 declaring a total income of 52,34,920. The total income consists of income from profits and gains from business of Rs 52,24,794/- and Income from other sources Rs 10,124/-. The tax liability was determined at Rs 16,33,295/- which the assessee discharged by claiming TDS credit of Rs 17,09,422/- and claiming a refund of Rs 76,130/-. The return was processed and a communication from the CPC dated 23.12.2021 and the assessee received a intimation under section 143(1) of the Act demanding a sum of Rs 1,00,240/- as tax payable and interest and a notice of demand was issued. The Assistant Director of CPC proceeded to pass the intimation order giving effect to the following. The loss on sale of assets sold discarded of Rs 4,50,860/- was disallowed by the assessee and the same was shown under serial no. 7(b) in Schedule BP in the income tax return. The same is reported in the Tax Audit Report under clause 21(a) Amount debited to profit and loss account in the nature of capital expenditure. While passing the intimation, the learned ADIT, CPC has once again disallowed the loss on sale of discarded assets to the tune of Rs 4,50,860/- by adding back as income under the head profits and gains of business or profession. This has resulted in a double disallowance of the same expense. The assessee has added disallowed a sum of Rs 350/- being the penalties and fined and the same has been disallowed under serial number 7(i) of Part A :OI Other Information in the income tax return. The same is reported in the Tax Audit Report under clause 21(a) Expenditure by way of penalty or fine not covered above. While passing the intimation, the ld. ADIT, CPC has once again disallowed the penalties and fines to the tune of Rs.350/- by adding back as income under the head profits and gains of business or profession. This has resulted in a double disallowance of the same expense. The assessee has disallowed a sum of Rs.32,18,906/- as amount inadmissible under partners remuneration and the same has wrongly been reported as Rs.32,81,499/- in the tax audit report.

3. Against this assessee carried an appeal before NFAC. There was no compliance of the following notices issued by the NFAC by the assessee:

3.1 The NFAC confirmed the order of the AO by ex-parte order. Against this assessee is in appeal before us.

4. We have heard the rival submissions and perused the materials available on record. At the time of hearing, the ld A.R. submitted that the ex-parte order passed by the ld. CIT(A) to be set aside as the Principal Officer of the assessee company who is looking after affairs of assessee company was not well versed with ITBA Hence, there was no compliance on the various notices issued by the NFAC and prayed that one more opportunity be given to present the case of the assessee’s counsel. Accordingly, we remit the entire issue in dispute to the file of NFAC to decide the issue on merit after giving opportunity of hearing to the assessee. Since we have remanded the issue to the file of NFAC to give an opportunity, we refrain from going into the other grounds raised by the assessee on merit of the addition and kept it open.

5. In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on ^7th June, 2023