MARVEL INDUSTRIES LIMITED , MUMBAI V. DY COMM OF INCOME TAX, CIRCLE 2(2)(2), MUMBAI

ITA 1486/MUM/2022

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0921 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 30-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Set aside
• Section: 143(3); 14A; 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VP AND SHRI ABY T. VARKEY, JM आयकर अपील सं/ I.T.A. No. 1486/Mum/2022 (निर्धारण वर्ा / Assessment Year: 2012-13) Marvel Industries Ltd. 20 Podar Chambers, SA Brelvi Road, Bombay, Mumbai-400023. बिधम/ Vs. DCIT, Circle-2(2)(2) Aayakar Bhavan, Mumbai. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAACM3243J (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 22/08/2022 घोषणा की तारीख /Date of Pronouncement: 02/09/2022 आदेश / O R D E R PER ABY T. VARKEY, JM: By preferring this appeal, the assessee/appellant has challenged the impugned action of the Ld. CIT(A)/ NFAC, Delhi passed on 28 th March 2022. It was brought to our notice that the CIT(A) has passed an ex-parte order without considering the merits of the action of AO by observing as follows: “5. During the course of appellate proceedings, notice for hearing was issued to appellant on 09.08.2019, 18.10.2019, 22.12.2021 and 03.03.2022. All these notices were issued through ITBA System via e- Mail ID provided in the ITBA Portal. In response, appellant failed to file any submission in support of the grounds raised by him nor did appellant seek for any adjournment. 6. It is clear from the above that appellant has been granted opportunities to represent its case in the appellate proceedings but has failed to make any submissions in support of the grounds of appeal filed by appellant. Appellant is not interested in prosecuting the appeal Assessee by: Shri Haridas Bhat Revenue by: Shri Chetan M. Kacha (Sr. AR) ITA No.1486/Mum/2022 A.Y. 2012-13 Marvel Industries Ltd. 2 filed. In the appellate proceedings, burden of proof lies on the appellant to prove that the facts and findings of Assessing Officer are incorrect. Since appellant has chosen not to attend the hearing notices issued, appeal is decided on the basis of material available on record. 7. I have considered the facts and circumstances of the case, the observations of the AO and material available on record on the above matter. As mentioned in para 5 of this appeal order, this office has issued several notices to file written submission. However, neither any adjournment was sought for nor any written submissions were filed. The letters were issued through ITBA System at the e-maillD provided in ITBA System. From the above conduct of the assessee, it is evident that the assessee is no more interested in pursuing the appeal. The Hon'ble Supreme Court in the case of CIT Vs B.N. Bhattacharjee and others [1979] 10 CTR 354 (SC) observed that preferring an appeal, means effectively pursuing it. The Hon'ble M.P. High Court in the case of Estate of Late Tukojirao Holkar Vs CWT [1979] 223 ITR 480 (M.P.) dismissed the reference filed at the instance of the assessee for default and for not taking necessary steps. Considering the conduct of the assessee in the present circumstance, | am of the view that the assessee is not interested in pursuing the appeal. This view has been affirmed by Hon’ble ITAT Ahmedabad in case of Amit kumar H. Shah Vs. ACIT in ITA No. 2985/Ahd/2010 vide their order dated 31.12.2013, wherein following the order of ITAT Delhi Bench in the case of CIT Vs Multiplan India Pvt. Ltd., [1991] 38 ITD 320 (Del), ITAT has dismissed the appeal filed by the assessee for want of persuasion. Under these circumstances, the current appeal of the appellant is liable to be dismissed. I am not discussing the case on merit.” ITA No.1486/Mum/2022 A.Y. 2012-13 Marvel Industries Ltd. 3 2. From a perusal of the impugned order, it is noted that there is no adjudication on merits and rather the Learned CIT(A) has simply dismissed the appeal summarily without even referring to the elaborate statement of facts and specific issues raised in the grounds of appeal. When we pointed out this fact to the learned Commissioner (DR), he relied upon the stand of the learned CIT(A) and submitted that, in the absence of any specific submissions by the assessee, learned CIT(A) could not have done anything more. It was also pointed out that the assessee has been completely non-cooperative in the appellate proceedings. We were thus urged to confirm the action of the learned CIT(A) and decline to interfere in the matter. 3. We cannot countenance the impugned action of Ld. CIT(A) to have summarily dismissed the statutory appeal without adjudicating the merits of the action/grounds of appeal assailed by the assessee before him. It has to be borne in mind that as per the scheme of the Act, if an assessee is aggrieved by the action of AO (inter alia u/s 143(1)/143(3)/144/154) then he (assessee) has a statutory right to file an appeal before the Ld. CIT(A) who has co-terminus powers as that of AO and if the assessee prefers an appeal before the Ld. CIT(A), he has to state the points for determination and the decision there on by passing a speaking order (giving reason for the decision) as laid down u/s 250(6) of the Act which states that “the order of CIT(A) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision”. As far as the points of determination, is concerned in our considered ITA No.1486/Mum/2022 A.Y. 2012-13 Marvel Industries Ltd. 4 view, it cannot be open to the learned CIT(A) to disregard what the assessee has placed before him by way of a statement of facts and the grounds of appeal. In the present case, the assessee-appellant has set out, statement of facts, and, self-explanatory grounds of appeal which are reproduced as below: Statement of facts “The appellants had filed Return of Income for the above year on 31/10/2007 declaring total loss of Rs. 2,98,99,727/-. Appellants’ case was selected for scrutiny. Pursuant to the notices issued u/s 143(3) and 142(1) of the Act, the appellants representatives appeared from time to time and submitted the relevant details called for by the Deputy Commissioner of Income Tax - 2(2) (OSO), Mumbai ( the “AO” ) . The Id. AO has for various reasons stated in the assessment order made the following additions / disallowances; 1. Disallowance u/s 14A of the Income Tax Act, 1961 85,346/- 2. Disallowance of Prior Period Expenditure 5,81,498/- 3. Disallowance of Freight Charges u/s 40(a)(ia) of the Act. 3,33,63,542/- 4. Disallowance of Set off of Brought Forward Losses. The Id. AO has determined the total income at Rs. 41,30,659/- without adjusting the brought forward losses of the appellant company. Being aggrieved by the said additions / disallowances, the appellants have filed this appeal for your Honours’ kind consideration. In this connection the appellants have to submit the following; Disallowance u/s 14A: The appellants have made Investments in the Shares and Securities during the past years. As such the Investments do not have any nexus with the borrowed funds, which have been utilized for the purpose of business. The id. AO has computed the disallowance in respect of Interest on Borrowed Funds and also the ITA No.1486/Mum/2022 A.Y. 2012-13 Marvel Industries Ltd. 5 Administrative Expenses. However, he has not proved the nexus between the Borrowed Funds and the Investments. In the circumstances, the disallowance to that extent is excessive and should not be sustained. The appellants pray for the deletion thereof. Disallowance of Prior Period Expenses: While disallowing the Prior Period Expenses, the ld. AO has not pointed out any specific reason or item of expenditure, which is not proved to have crystallized during the year under consideration. The appellants had filed the required details. However, he has not asked any question as to why any particular item should not be disallowed. In the circumstances, the said disallowance is totally arbitrary and needs to be deleted. Disallowance of Rs. 3,33,63,542/u/s 40(a)(ia) of the Act.: The appellants have incurred huge expenditure on Freight Charges, payable / paid to Foreign Airlines / Shipping Companies, from whom, No Tax was deducted as the same was found to be not deductible. The ld. AO has not considered our said contentions and made disallowance of the entire amount, without looking into the facts. Allowing the Set Off of B/f Losses: The Id. AO has computed appellants total me at Rs. 41,30,659/-. However, he has without assigning any reason for the same not adjusted any b/f losses / depreciation there against. The appellants have incurred huge losses during the past years and are entitled to the carry forward and set off of the unabsorbed losses and depreciation. The Id. AO’s decision for not are the same is against the principles of law. The appellants pray for a suitable relief. The appellants request your Honour to consider the aforesaid facts and submissions and grant the necessary relief to the appellant and oblige.” 4. Grounds of Appeal ITA No.1486/Mum/2022 A.Y. 2012-13 Marvel Industries Ltd. 6 “1. On the facts and in the circumstances of the case and in law, the learned Assessing Officer erred in making disallowance of Rs. 85,346/- u/s 14A of the Income Tax Act, 1961 without proving the direct nexus between the investments and the Interest bearing borrowed funds. 2. On the facts and in the circumstances of the case and in law, the learned Assessing Officer erred in disallowing Rs. 5,81,498/- as the Prior Period Expenses. 3. On the facts and in the circumstances of the case and in law, the learned Assessing Officer erred in making the disallowance of Freight Charges of Rs. 3,33,63,542/- u/s 40(a)(ia) of the Act. 4. On the facts and in the circumstances of the case and in law, the learned Assessing Officer erred in not allowing the set off of brought forward losses. 5. On the facts and Circumstances of the case and in law, the learned Assessing Officer erred in initiating the Penalty Proceedings u/s 271(1)(c) of the Act. 6. The appellant craves leave to add, alter, amend or withdraw any of the aforesaid Grounds of Appeal.” 5. As seen (supra), the assessee has filed the statement of facts and the grounds of appeal before the Ld. CIT(A). Despite that the Ld. CIT(A) has dismissed the appeal without following the procedure prescribed u/s 250(6) of the Act. Such a scenario, arose in an appeal before the co-ordinate bench of this Tribunal in assessee’s own case for AY.2011-12 in ITA. No. 779/Mum/2022 wherein also the Ld. CIT(A)/NFAC had passed similar/ex-parte summarily dismissing the appeal of assessee, which action was not countenanced by this Tribunal by order dated 19 th July, 2022 wherein the Hon’ble Vice ITA No.1486/Mum/2022 A.Y. 2012-13 Marvel Industries Ltd. 7 President Shri Pramod Kumar held that “The issues implicit in the statement of facts in the grounds of appeals, as extracted above, do raise specific “points for determination” calling for adjudication by the learned CIT(A). While an assessee indeed has, under section 250(2)(a), “the right to be heard at the hearing of the appeal”, such a right of the assessee-appellant cannot be put against the assessee inasmuch while the assessee-appellant is to be essentially extended a fair and reasonable opportunity of hearing before an appeal can be disposed of, the non-exercise of this right by the assessee-appellant cannot be a reason enough for the CIT(A)’s not dealing with the points so raised before him on merits. The exercise of the “right to be heard at the hearing of the appeal” by “the appellant, either in person or by an authorized representative condition”, under section 250(2)(a), is not a condition precedent for the disposal of appeal on merits in accordance with the scheme of Section 250(6). In our considered view, irrespective of the non-appearance of the assessee before the CIT(A), the CIT(A) ought to have dealt with the issues so raised by the assessee-appellant on merits and by way of speaking order and in accordance with the law. We, therefore, deem it fit and proper to remit the matter to the file of the CIT(A) for adjudication on merits, in the light of the above observation. As the matter is being remitted to the file of the learned CIT(A), we also deem it appropriate to direct the learned CIT(A) to provide the assessee yet another fair and reasonable opportunity of hearing. Ordered, accordingly. As the matter is being remitted to the file of the learned CIT(A) for adjudication on merits, ITA No.1486/Mum/2022 A.Y. 2012-13 Marvel Industries Ltd. 8 the grievances of the assessee, on merits, do not call for any adjudication at this stage”. 6. Respectfully following the Tribunal’s order (supra), we set aside the impugned order of the Ld. CIT(A)/NFAC and restore the appeal back to the file of the Ld. CIT(A) for adjudication on merits in accordance to law. Needless to say that assessee be provided with reasonable opportunity of hearing. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 02/09/2022. Sd/- Sd/- (PRAMOD KUMAR) (ABY T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 02/09/2022. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai