Case Law Details
Mono Steel (India) Ltd. Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that where Commissioner (Appeals) passed ex-parte order in violation of principles of natural justice, one more opportunity should be granted to assessee. Accordingly, matter restored back to CIT(A) for de-novo consideration.
Facts- The assessee is a company engaged in the business of Manufacturing and Resale of Angle Channels Ingots. During the course of assessment, the assessee had claimed deduction u/s. 80-IA in respect of it’s power plant division on which a very high net profit rate of 67.16% was declared. Accordingly, AO was of the view that the assessee had loaded more profits to the power plant unit, on which deduction u/s. 80-IA of the Act was claimed and assessee had reduced the profits of the steel plant, so as to evade taxes. AO noted that on being asked, the assessee failed to furnish distribution of expenses under the head “other expenses” to the unit on which 80-IA deduction was claimed (power plant unit) and the other unit on which no deduction was claimed (steel unit). Considering the turnover of the assessee, the Assessing Officer was of the view that 10% of the “other expenses” was attributable to unit on which deduction u/s. 80-IA of the Act was being claimed by the assessee. Since a sum of Rs. 20.98 crores had been shown as “other expenses” where 10% of these other expenses i.e. Rs. 2.09 crores were considered to be expenses made u/s. 80-IA of the Act, this amount of Rs. 2.09 crores was held to be attributable to such exempt unit and the same was disallowed and added to the total income of the assessee.
AO also initiated proceedings u/s. 270A of the Act. While passing the order u/s. 270A of the Act AO noted that Ld. CIT(A) has given relief to the assessee in quantum proceedings vide order dated 29.11.2019, but since the appeal effect against such order had not yet been received and the penalty order was getting time barred, penalty u/s. 270A of the Act was determined on the additions made in the assessment order. Accordingly, AO imposed penalty @ 50% of the tax on the under-reported income amounting to Rs. 36,31,592/- u/s. 270A of the Act.
CIT(A) dismissed the appeal due to non-appearance. Being aggrieved, the present appeal is filed.
Conclusion- Held that in the case of Amitkumar Dhirajlal Joshi vs. ITO 166 taxmann.com 310 (Rajkot – Trib.), the ITAT held that where Commissioner (Appeals) passed ex-parte order in violation of principles of natural justice, as he had not passed order as per mandate of provisions of Section 250(6), one more opportunity should be granted to assessee to plead it’s case before Commissioner (Appeals). Accordingly, in the interest of justice, the matter is restored to the file of Ld. CIT(A) for de-novo consideration and to pass appropriate orders, after giving due opportunity of hearing to the assessee and taking into consideration the orders passed by Ld. CIT(A) and ITAT for the impugned assessment year under consideration in quantum proceedings.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Both the appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 15.01.2024 passed for A.Ys. 2017-18 & 2018-19.
2. The Assessee has taken the following grounds of appeal:-
“1. Learned CIT(A) has erred in law and on facts of the case in passing the impugned order ex-parte and without deciding the Appeal on merits.
2. Learned CIT(A) has erred in law and on the facts of the case in confirming the action of learned AO in levying penalty u/s 270A of the Act amounting to Rs. 36,31,592/-.
3. In any case, the quantification of the penalty is erroneous and excessive.
4. In any case, the penalty order is barred by limitation and therefore not sustainable.
5. Learned CIT(A) has erred in law and on facts in not properly appreciating and considering various evidence and supporting documents available on record during the course of the assessment proceedings and not properly appreciating various facts and law in its proper perspective.
6. Your appellant reserves the right to add, delete, modify or revise any ground of appeal.”
3. The brief facts of the case are that the assessee is a company engaged in the business of Manufacturing and Resale of Angle Channels Ingots. During the course of assessment, the Assessing Officer observed that the power plant division of the assessee had a turnover of 14.51 crores on which net profit of Rs. 9.75 crores was shown. This net profit percentage shown by the assessee on it’s power plant division amounted to 67.16% as against net profit percentage of 2.77% shown by the assessee on it’s steel business. The assessee had claimed deduction under Section 80-IA in respect of it’s power plant division on which a very high net profit rate of 67.16% was declared. However, the net profit rate from the steel plant unit, which was inextricably related to the power plant unit and on which no deduction was claimed, was shown at a very low figure of 2.77% only. Accordingly, the Assessing Officer was of the view that the assessee had loaded more profits to the power plant unit, on which deduction under Section 80-IA of the Act was claimed and assessee had reduced the profits of the steel plant, so as to evade taxes. The Assessing Officer noted that on being asked, the assessee failed to furnish distribution of expenses under the head “other expenses” to the unit on which 80-IA deduction was claimed (power plant unit) and the other unit on which no deduction was claimed (steel unit). Considering the turnover of the assessee, the Assessing Officer was of the view that 10% of the “other expenses” was attributable to unit on which deduction under Section 80-IA of the Act was being claimed by the assessee. Since a sum of Rs. 20.98 crores had been shown as “other expenses” where 10% of these other expenses i.e. Rs. 2.09 crores were considered to be expenses made under Section 80-IA of the Act, this amount of Rs. 2.09 crores was held to be attributable to such exempt unit and the same was disallowed and added to the total income of the assessee. The Assessing Officer also initiated proceedings under Section 270A of the Act. While passing the order under Section 270A of the Act the Assessing Officer noted that Ld. CIT(A) has given relief to the assessee in quantum proceedings vide order dated 29.11.2019, but since the appeal effect against such order had not yet been received and the penalty order was getting time barred, penalty under Section 270A of the Act was determined on the additions made in the assessment order. Accordingly, the Assessing Officer imposed penalty @ 50% of the tax on the under-reported income amounting to Rs. 36,31,592/- under Section 270A of the Act.
4. In appeal, Ld. CIT(A) dismissed the appeal of the assessee on account of non-appearance.
5. The assessee is in appeal before us against the order passed by Ld. CIT(A) dismissing the appeal of the assessee on account of non-appearance.
6. Before us, the Counsel for the assessee submitted that this is not a fit case for levy of penalty under Section 270A of the Act. This is for the reason that firstly Ld. CIT(A) has itself in the quantum order for the impugned assessment order dated 29.11.2019 has given substantial relief to the assessee wherein, Ld. CIT(A) held that production expenses and expenses related to purchase of store spares, repairing and maintenance to the extent of Rs. 1.64 crores were not at all related to power plant business i.e. exempt unit, as these expenses were exclusively for manufacturing related activity. Accordingly, Ld. CIT(A) deleted the allocation with respect to these expenses holding that the expenditure of Rs. 1.6 crores was not allocable to the 80-IA unit, since they were exclusively for manufacturing activity. Regarding, the allocation of 10% of “administrative and other expenses” to the 80-IA unit, Ld. CIT(A) held that the same should be allocated in proportion of the turnover of the eligible and non-eligible unit i.e. the expenses are required to be allocated in the ratio of turnover of power plant and the steel unit and directed the Ld. Assessing Officer to allow the claim of the assessee accordingly. In the appeal filed by the Department, the ITAT vide order dated 15.06.2022 dismissed the appeal of the assessee and upheld the order passed by Ld. CIT(A). However, while dismissing the appeal of the assessee with regards to penalty under Section 270A of the Act, Ld. CIT(A) did not take into consideration the case records for the impugned assessment year, in which Ld. CIT(A) in quantum proceedings had given substantial relief to the assessee and in appeal against 270A order, Ld. CIT(A) summarily dismissed the appeal of the assessee in a high handed manner and against the principles of natural justice.
7. On going through the records of the instant case, we observe that while dismissing the appeal of the assessee against the Section 270A order, Ld. CIT(A) did not take into consideration the facts of the case submitted by the assessee (in Form No. 35) in which it was pointed out that Ld. CIT(A) had granted substantial relief to the assessee in quantum proceedings. It is further observed that Ld. CIT(A) has also not taken into consideration the grounds of appeal of the assessee in which it was submitted that since the entire additions were on account of ad-hoc apportionment of expenses, penalty was not liable to be levied in the instant facts under Section 270A of the Act. On going through the contents of the order passed by the Ld. CIT(A), it is observed that Ld. CIT(A) has not discussed either the facts of the case submitted by the assessee and nor discussed the grounds of appeal raised by the assessee. In the case of Amitkumar Dhirajlal Joshi vs. ITO 166 taxmann.com 310 (Rajkot – Trib.), the ITAT held that where Commissioner (Appeals) passed ex-parte order in violation of principles of natural justice, as he had not passed order as per mandate of provisions of Section 250(6), one more opportunity should be granted to assessee to plead it’s case before Commissioner (Appeals). Accordingly, in the interest of justice, the matter is restored to the file of Ld. CIT(A) for de-novo consideration and to pass appropriate orders, after giving due opportunity of hearing to the assessee and taking into consideration the orders passed by Ld. CIT(A) and ITAT for the impugned assessment year under consideration in quantum proceedings.
8. In the result, the appeal of the assessee is allowed for statistical purposes.
Now we shall come to Assessee’s Appeal in ITA No. 285/Ahd/2024 (A.Y. 2018-19)
9. The Assessee has raised the following grounds of appeal:
“1. Learned CIT(A) has erred in law and on facts of the case in passing the impugned order ex-parte and without deciding the Appeal on merits.
2. Learned CIT(A) has erred in law and on the facts of the case in confirming the action of learned AO in passing the order u/s 144B of the Act in gross violation of the procedures stated in section 144B of the Act. Under the facts, the passing of the assessment order is non-est in the eyes of law and thus deserves to be annulled.
3. Learned CIT(A) has erred in law and on the facts of the case in confirming the action of learned AO in making an addition of Rs.31,46,961/- u/s 28 on account of duty drawback.
4. Learned CIT(A) has erred in law and on the facts of the case in confirming the action of learned AO in disallowing Rs.2,70,94,527/- u/s 80-IA of the act.
5. Learned CIT(A) has erred in law and on facts in not properly appreciating and considering various evidence and supporting documents available on record during the course of the assessment proceedings and not properly appreciating various facts and law in its proper perspective.
6. Learned CIT(A) has erred in law and on the facts in confirming the action of AO in charging interest u/s.234A/B/C/D.
7. Learned CIT(A) has erred in law and on facts in confirming the action of AO in initiating penalty u/s.270A of the Act which is wholly unsustainable in law and on facts of the case.
8. Your appellant reserves the right to add, delete, modify, or revise any ground of appeal.”
10. The brief facts of the case are that during the course of assessment, the Assessing Officer made addition of Rs. 31.46 lakhs on account of short income booking with respect to duty draw back received, but not offered for taxation by the assessee. Further, the Assessing Officer also made an addition of Rs. 2.70 crores by reducing the deduction allowable under Section 80-IA of the Act on account of apportioning of certain expenses from the ineligible unit (Sponge Iron Plant) to the eligible unit (solar power plant) by holding that the assessee had allocated excessive expenses to the ineligible unit.
11. In appeal, Ld. CIT(A) dismissed the appeal of the assessee on account of non-appearance.
12. Before us, the Counsel for the assessee submitted that since substantial additions have been made by the Assessing Officer and Ld. CIT(A) had passed an ex-parte order against the principles of natural justice without giving a fair hearing to the assessee and also without considering the various grounds of appeal raised by the assessee in it’s appeal. Therefore, in the interest of justice, the matter may be restored to the file of Ld. CIT(A) for de-novo consideration, after giving due opportunity of hearing to the assessee.
13. On going through the records of the case, taking into consideration the fact that substantial additions have been made by the Assessing Officer to the income of the assessee and also Ld. CIT(A) while passing the order has not discussed / dealt with the individual grounds of appeal raised by the assessee before him, we are of the considered view that interests of justice would be served if the matter is restored to the file Ld. CIT(A) for de-novo consideration. Accordingly, the matter is restored to the file of Ld. CIT(A) for de-novo consideration after giving due opportunity of hearing to the assessee to present it’s case on merits.
14. In the result, the appeal of the assessee is allowed for statistical purposes.
15. In the combined result, both the appeals of the assessee are allowed for statistical purposes.
This Order is pronounced in the Open Court on 15/01/2025
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