YOGESH DIXIT, Lucknow V. DCIT-6, , Lucknow-New

ITA 166/LKW/2022

AI Insights

The case involves an appeal by the assessee, Yogesh Dixit, against the order of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed the addition of Rs.16,61,550 to the assessee's income for the Assessment Year 2017-18. The addition was initially made by the Assessing Officer due to the assessee's failure to substantiate a claim for deduction of interest paid on an overdraft facility. Both the initial assessment and the NFAC's order were passed ex-parte due to the assessee's non-cooperation. The Tribunal, while acknowledging the assessee's previous non-cooperation, decided to give another opportunity for the assessee to present his case, emphasizing the need for cooperation in the future proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123080 (ITAT-LUCKNOW)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 19-09-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARISH GIDWANI
• Keywords: Business income; Business expenditure; Principle of natural justice
• Section: 44AD; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “SMC”, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.166/LKW/2022 A.Ys. 2017-18 DCIT-6, Lucknow Vs. Yogesh Dixit, 33, Geetapalli Alambagh, Lucknow PAN AEKPD 5431L (Respondent) (Appellant) Shri Sandeep Jain, CA Appellant by Shri Harish Gidwani, DR Respondent by 06/04/2023 Date of hearing 06/04/2023 Date of pronouncement O R D E R This appeal is preferred by the assessee against the order dated 29.07.2022 passed by National Faceless Appeal Centre (NFAC), Delhi for A.Y. 2017-18. 2. Brief facts of the case are that the assessee is engaged in Civil Contract work and the return of income was filed, declaring total income of Rs.22,23,380/-and agricultural income of Rs.71,715/-. The assessee had declared his income from business u/s. 44AD of the Income Tax Act, 1961 (hereinafter called ‘the Act’) and had also claimed as deduction an amount of Rs.16,61,550/- u/s. 57 of the Act on account of interest paid to Bank on overdraft facility. The case was selected under the norms for limited scrutiny through CASS and the assessee was required to explain why the interest paid and claimed as deduction u/s. 57 of the Act might not be disallowed. As per the assessment order, the assessee sought an adjournment for a week to respond but even after completion of one week’s time, the assessee did not furnish any response. Therefore, the Assessing Officer proceeded to complete 2 ITA No. 166/Lkw/2022 the assessment ex-parte qua the assessee and noted that since the assessee had failed to substantiate his claim of deduction of the interest paid amounting to Rs.16,61,550/-, the same was to be added to the income of the assessee. Thereafter, the assessment was completed at an income of Rs.38,84,930/-. 3. Aggrieved, the assessee approached the NFAC and challenged the addition. As per the impugned order, the assessee had earlier requested for adjournment, which was granted and subsequently also notices were issued from time to time but no response was forthcoming from the assessee. As per the impugned order, five notices had been issued between the dates 21.01.2021 to 20.07.2022. However, no reply or supporting documents were submitted by the assessee before the NFAC. Accordingly, the NFAC also proceeded to adjudicate the appeal before it ex-parte order qua the assessee and dismissed the appeal. 4. Aggrieved by this order of the NFAC, the assessee has now approached this Tribunal, challenging the impugned order by raising the following grounds of appeal: “1. Because the learned CIT(A), NFAC ought not to have passed the appellate order ex-parte and dispose the appeal without hearing the assessee. 2. Because the learned CIT(A), NFAC erred in law and on facts in confirming addition of Rs. 16,61,550/- made by the learned assessing officer to the total Income returned by the assessee. 3. Because the learned CIT(A), NFAC ought not to have confirmed the action of the learned assessing officer treating interest expense of Rs.16,61,550/- as business expenditure incurred in relation to business income which has been offered to tax by the assessee u/s 44AD of the Income Tax Act, 1961. 4. Because the learned CIT(A), NFAC failed to appreciate that the loan taken by the assessee in the name of its proprietary concern from Corporation Bank has been given to M/s Diamond Infrapromoters Private Limited and consequently interest paid by the assessee to Corporation Bank is allowable as deduction from interest earned from M/s Diamond Infrapromoters Private Limited u/s 57(iii) of the Income Tax Act, 1961. 3 ITA No. 166/Lkw/2022 5. Because the learned CIT(A). NFAC ought to have allowed interest expense of Rs. 16,61,550/- paid to Corporation Bank under section 57 of the Income Tax Act, 1961 from interest income earned from M/s Diamond Infrapromoters Private Limited. 6. Because, without prejudice to above, learned CIT(A), NFAC failed to appreciate that if the learned assessing officer was treating interest expense of Rs. 16,61,550/- as a business expense then the learned assessing officer ought to have treated interest income of Rs. 17,03,783/- earned by the assessee from M/s Diamond Infrapromoters Private Limited as business income and allowed deduction of interest paid from interest earned. 7. Because, without prejudice to above, the learned CIT(A), NFAC ought to have applied provisions of section 44AD of the Income Tax Act, 1961 to interest income of Rs. 17,03,783/- earned by the assessee from M/s Diamond Infrapromoters Private Limited. 8. Because the learned CIT(A) NFAC has made the assessment on the basis of conjectures and surmises and without considering the facts, the applicable law and without application of mind. 9. Because the learned CIT(A), NFAC ought to have directed the learned assessing officer not to charge interest u/s 234A and 234B as the assessee is not liable for such interest. 10. Because the CIT(A), NFAC did not allow the appellant sufficient opportunity to make compliance of the reasons relied upon for confirming disallowances and additions to income returned by the assessee. 11. Because the order appealed against is contrary to the fact, law and principles of natural justice. 12. Any other ground that may be taken at the time of hearing.” 5. At the outset, the ld. Authorized Representative submitted that both the assessment order as well as the impugned order had been passed ex-parte qua the assessee. He prayed that the assessee should be given an opportunity to present his case before the Assessing Officer. The ld. AR also gave an undertaking before this Court that if given an opportunity, the assessee will definitely cooperate during the assessment proceedings. 6. Per contra, the ld. Sr. DR strongly opposed the assessee’s prayer and argued that the assessee had so far not cooperated either in the assessment 4 ITA No. 166/Lkw/2022 proceedings or in the proceedings before the ld. First Appellate Authority and, therefore, such conduct should not be condoned. 7. I have heard both the parties and have also gone through the record. The contention of the ld. DR is correct that by and large the conduct of the assessee was of utmost recklessness and approach towards the proceedings has also been very casual. All the same, I am of the considered opinion that the assessee should be given an opportunity to explain and demonstrate with evidence as to how the impugned amount of Rs.16,61,550/- is deductable u/s. 57 of the Act. Therefore, I restore the file to the office of the Assessing Officer to decide the issue afresh after giving adequate opportunity to the assessee to explain and substantiate his case. However, I would also caution the assessee against casual and non cooperative attitude in the second round of proceedings before the Assessing Officer. Should the assessee not cooperate this time also, the Assessing Officer shall be at liberty to proceed ex-parte qua the assessee and decide the issue before him on merits in accordance with law. 8. In the final result, the appeal of the assessee stands allowed for statistical purposes. (Order pronounced in the open court on 06/04/2023) Sd/- (SUDHANSHU SRIVASTAVA) JUDICIAL MEMBER Aks – Dtd. 06 /04/2023 5 ITA No. 166/Lkw/2022 Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) Departmental Representative (5) Guard File By order Assistant Registrar