MR. PANKAJ SEVANTILAL SHAH, MUMBAI V. ITO, WARD-30(2)(5), MUMBAI

ITA 1380/MUM/2023

AI Insights

The case involves Mr. Pankaj S. Shah, who appealed against the order of the National Faceless Appeal Centre (NFAC) concerning the assessment year 2014-15. The primary grievances included the ex-parte nature of the CIT(A)'s decision, disallowance of interest expenses on loans, and additions made for unexplained expenditures. The Tribunal found that the CIT(A) had not adequately considered the adjournment requests made by the assessee and had decided the case in a hurried manner without proper hearings. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the case for a fresh decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301313 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 23-04-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B. LAXMI KANTH
• Keywords: Unexplained expenditure; Opportunity of being heard; Set aside
• Section: 143(3); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.1380/M/2023 Assessment Year: 2014-15 Mr. Pankaj S. Shah, A-301, Sky High Society, Shankar Lane, Kandivali West, Mumbai – 400 067 PAN: AAHPS1823L Vs. Income Tax Officer, Ward 30(2)(5), 519, Kautilya Bhavan, C-41 to C-43, G Block, BKC, Bandra (East), Mumbai – 400 051 (Appellant) (Respondent) Present for: Assessee by : Shri Prashant Shah, A.R. Revenue by : Shri B. Laxmi Kanth, D.R. Date of Hearing : 09 . 08 . 2023 Date of Pronouncement : 24 . 08 . 2023 O R D E R Per : Kuldip Singh, Judicial Member: The assessee by filing the present appeal, sought to set aside the impugned order dated 21.02.2023 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2014-15 on the grounds inter-alia that :- “1. The learned Commissioner of Income Tax (Appeals) [CIT(A)'] erred in passing an ex-parte order on 21 February 2023 stating that the Appellant had not requested for adjournment without considering the fact that request for adjournment was made on 5th January 2023 and also on 30 January 2023. 2. The learned CIT(A) erred in disallowing Interest expense of Rs239,629 computed at 12% on interest free loans and advances ITA No.1380/M/2023 Mr. Pankaj S. Shah 2 without appreciating that the Appellant had adequate interest free funds. Your appellant submits that the suo-moto and arbitrary action of the Assessing Officer is unwarranted and ought to be quashed and annulled. Without prejudice to the above, the disallowance made by the learned CIT(A) is excessive and ought to be reduced substantially. 3. The learned CIT(A) erred in confirming Assessing Officer's action of disallowing interest expense of Rs 23,210 paid to Mr Vimal Shah under section 40(2)(b) of the Act. Your appellant submits that the arbitrary action of the Assessing Officer is unwarranted and ought to be quashed and annulled. Without prejudice to the above, the disallowance made by the learned CIT(A) is excessive and ought to be reduced substantially. 4. The learned CIT(A) erred in confirming the action of Assessing Officer in making addition of Rs 4,46,800 by considering the purchases made from M/s Rushi Enterprises as unexplained expenditure. Your appellant submits that the arbitrary action of disallowing purchases as unexplained expenditure is merely based on presumptions, assumptions and surmises and ought to be quashed and annulled. Without prejudice to the above, the learned CIT(A) erred in disallowing the entire amount paid to M/s Rushi Enterprises instead of restricting the disallowance to the extent of gross profit margin of the Appellant. Without prejudice to the above, the disallowance made by the learned CIT(A) is excessive and ought to be reduced substantially. 5. Without prejudice to the above, the learned CIT(A) erred in not adjudicating the without prejudice ground of appeal raised by your Appellant in respect of Assessing Officer having erred in expanding the scope of limited scrutiny assessment proceedings initiated under CASS Selection Criteria for review of interest expenses incurred by the Appellant. Your Appellant submits that the action of learned Assessing Officer deserves to be quashed as the same is ultra vires and not in accordance with the provisions of the Act and the binding guidelines of the Central Board of Direct Taxes. 6. Your appellant further reserves the right to add, amend or alter the aforesaid grounds of appeal as he may think fit by himself or by his representatives.” 3. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee is into the business of resale of chemicals and dyes. Assessee's return of ITA No.1380/M/2023 Mr. Pankaj S. Shah 3 income declaring total income of Rs.17,26,230/- was subjected to scrutiny. From the profit and loss account it is noticed by the Assessing Officer (AO) that the assessee has debited an amount of Rs.1,02, 800/- towards interest paid towards unsecured loan and interest on overdraft facility to the tune of Rs.5,07,368/-. Balance Sheet shows that the assessee has availed of secured loan of Rs.47,31,158/- which includes bank overdraft loan of Rs.35,37,654/- and also advanced interest free of loan of Rs.27,58,715/-. AO while examining the financials of the assessee noticed that the assessee has paid interest between 10% to 19% however low interest has been charged on loans and advances given by the assessee to the other parties. Declining the contentions raised baby assessee AO proceeded to hold that the interest at the rate of 12% is charged on the interest free loans and advances and computed the same to Rs.3,31,046/- and added the same back to the income of the assessee. The assessee paid interest to one Shri Vimal P Shah to the tune of Rs.63,000/- at the rate of 19% on loans taken from him whereas the interest paid to other unsecured creditors was @ 10% to 12% and as such excess interest at the rate of 7% paid under section 40(2)(b) of the Income Tax Act,1961 (for short 'the Act') to Vimal P. Shah which comes to Rs.23,210/- is disallowed and added the same back to the income of the assessee. AO also noticed that the assessee has shown purchases of Rs.1,96,74,927/- qua which no detail has been furnished nor the assessee produced the parties during the assessment proceedings. Consequently the AO disallowed the purchases made from M/s. Rushi Enterprises as unexplained expenditure and added the same back to the total income of the assessee to the tune of Rs.4,46,800/- ITA No.1380/M/2023 Mr. Pankaj S. Shah 4 and AO thereby framed the assessment under section 143(3) of the Act. 4. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal. 5. I have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. 6. Bare perusal of the impugned order passed by Ld. CIT(A) particularly para 3 of the impugned order goes to prove that the impugned order has been passed at the back of the assessee without providing adequate opportunity of being heard to him. Three opportunities for 13.01.21, 05.01.23, and 23.01.23 are shown to be given to the assessee but on failure of the assessee to file any written submissions Ld. CIT(A) proceeded to decide the appeal in absentia. The assessee brought on record one fact that assessee made an adjournment request on 05.01.23 seeking adjournment for 19.01.23 but he was never intimated if their request was taken on record or it has been acceded to or not. Copy of adjournment application uploaded on the e-proceeding portal is on record. 7. All these facts go to prove that this case has been decided in a hurried manner by giving two adjournments within 22 days even ITA No.1380/M/2023 Mr. Pankaj S. Shah 5 without taking the adjournment application filed by assessee on record. Providing adequate opportunity of being heard is a sine qua non for the complete and proper adjudication of the controversy at hand by the quasi judicial authority which has not been provided and as such impugned order passed by Ld. CIT(A) is not sustainable in the eyes of law and hence set aside. File is remitted back to the Ld. CIT(A) to decide afresh after providing opportunity of being heard to the assessee. 8. Resultantly, the appeal filed by the assessee is allowed. Order pronounced in the open court on 24.08.2023. Sd/- (KULDIP SINGH) JUDICIAL MEMBER Mumbai, Dated: 24.08.2023. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.