Case Law Details
York Transport Equipment (India) Private Limited Vs ITO (ITAT Pune)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Pune held that the Commissioner of Income Tax (Appeals) [CIT(A)] is not empowered to dismiss an appeal solely for non-prosecution. The case in question, York Transport Equipment (India) Private Limited Vs Income Tax Officer (ITO), underscores the necessity for CIT(A) to examine the merits of an appeal before arriving at a decision.
The appellant, York Transport Equipment (India) Private Limited, a company engaged in manufacturing and trading of automotive components, filed its return of income for the assessment year 2015-16 declaring nil income. The Assessing Officer, however, made an addition of ₹6,79,82,288 based on transfer pricing adjustments. Dissatisfied with the assessment, the appellant filed an appeal before the CIT(A).
The CIT(A) dismissed the appeal in limine, citing non-prosecution as the reason. The appellant, aggrieved by this decision, approached ITAT Pune. The Tribunal, after hearing both parties, noted several critical points:
1. Service of Notice: The CIT(A) issued hearing notices through the ITBA portal. However, as per Section 282(1) of the Income Tax Act, 1961, and reinforced by the case of Munjal BCU Centre of Innovation and Entrepreneurship Vs. CIT (Exemptions) by the Punjab & Haryana High Court, service of notice through the ITBA portal is not considered valid. The Tribunal emphasized that the appellant was not properly served notice, which is a breach of procedural justice.
2. Merits of the Case: The Tribunal found that the CIT(A) did not address the merits of the transfer pricing adjustment issue. It is well established in law that an appellate authority must delve into the merits of the case, even if the appeal is ex-parte. This principle was supported by the Bombay High Court’s decision in Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF), which stated that CIT(A) cannot dismiss an appeal for non-prosecution without addressing its merits.
3. Principles of Natural Justice: The ITAT underscored the necessity for adherence to natural justice principles, which mandate that a taxpayer must be given a fair opportunity to present their case. The failure to serve notice properly and the subsequent dismissal of the appeal without considering its merits contravened these principles.
Given these findings, the Tribunal concluded that the CIT(A) erred in dismissing the appeal without addressing the substantive issues raised by the appellant. The ITAT remanded the case back to the CIT(A) for de novo disposal, ensuring that the appellant receives a fair hearing and that the merits of the case are duly considered.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by the assessee directed against the order of CIT(A)-13, Pune dated 28.11.2023 for the assessment year 2015-16.
2.m Briefly, the facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of Manufacturing and Trading of Trailer axis, Suspension, Landing gears and other Automotive components. The appellant company filed the Return of Income for the A.Y. 2015-16 declaring Nil income on 30.11.2015. Against the said return of income, the assessment was completed by the Assessing Officer vide order dated 18.01.2019 passed u/s.143(3) r.w.s.144C(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘The Act’) after making addition on account Transfer Pricing adjustment u/s.92CA(3) of Rs.6,79,82,288/-.
3. Being aggrieved, an appeal was filed before the CIT(A), who vide impugned order dismissed the appeal in limine for non-prosecution, without rendering any finding on merits.
4. Being aggrieved, the appellant is in appeal before the Tribunal in the present appeal.
5. We heard the rival submissions and carefully perused the relevant material on record. At the outset, we find that the CIT(A) had issued the hearing notices through ITBA portal as mentioned in para 1.5 of his order. Then the CIT(A) had proceeded to dismiss the appeal in limine for non-prosecution. In our considered opinion, it is not a valid method and manner of service of notice as specified under the provisions of section 282(1) of the Act. Therefore, it is crystal clear that the notices were not served upon the appellant company. To fortify our view, we would like to make a reference to a decision of the Hon’ble Punjab & Haryana High Court in the case of Munjal BCU Centre of Innovation and Entrepreneurship Vs. CIT (Exemptions) (2024) 463 ITR 560 (P&H), wherein the Hon’ble High Court after making reference to provisions of 282(1) held that service of notice through ITBA portal is not valid service and remanded the matter to AO for denovo disposal of case. The relevant paragraphs of the judgment are reproduced below :
“7. We are afraid that we cannot subscribe to the submissions as advanced by the learned counsel for the Revenue-respondent. The provisions of section 282(1) of the Act of 1961 and rule 127(1) of the Income-tax Rules, 1962 provides for a method and manner of service of notice and orders which read as follows :
8. In view of the above, it is essential that before any action is taken, communication of the notice must be done in terms of the provisions as enumerated hereinabove. The provisions do not mention communication to be “presumed” by placing notice on the e-portal. A pragmatic view has to be adopted always in these circumstances. An individual or a company is not expected to keep the e-portal of the Department open all the time so as to have knowledge of what the Department is supposed to be doing with regard to the submissions of forms etc. The principles of natural justice are inherent in the income-tax provisions and the same are required to be necessarily followed.
9. Having noticed as above, this court is of the firm view that the petitioner has not been given sufficient opportunity to put up its please with regard to the proceedings under section 12A(1)(ac)(iii) of the Act of 1961 and as it was not served with any notice. Therefore, he would be entitled to file his reply and the Department would of course be entitled to examine the same and pass a fresh order thereafter.
10. In view of the above, the writ petition is allowed and the order dated January 16, 2023 (annexure P-5) is quashed and set-aside. The Department would provide an opportunity of hearing to the petitioner and they will also allow the petitioner to appear personally for the purpose and pass a speaking order independent of the order passed earlier by them on January 16,2023. The same shall be done expeditiously provided the petitioner file his reply within a period of three weeks.”
In view of the above legal position, we are of the considered opinion that the CIT(A) has not properly served the notice of hearing to the appellant company.
6. Furthermore, we find the ld. CIT(A) without discussing anything on merits of the controversy of the addition made on account of Transfer Pricing adjustment, simply dismissed the appeal in limine, which is contrary to settled position of law. It is a trite law that the CIT(A) should have dealt with the merits of the issue in appeal, even in the case of an ex-parte order. In this regard, reference is being made to a decision of the Hon’ble Bombay High Court in the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF) Bombay)/[2017] 297 CTR 614 (Bombay) wherein it was held that CIT(A) is not empowered to dismiss the appeal for non-prosecution.
7. In the light of above discussion, we deem it appropriate to remit the matter to the file of CIT(A) for de novo disposal of the issue in accordance with law. Ordered accordingly.
8. In the result, the appeal filed by the assessee stands partly allowed for statistical purpose.
Order pronounced on this 29th day of May, 2024.
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