M/s. Nova Hamlet Private Limited, Bangalore V. Income-Tax officer, Ward-5(1)(1), Bangalore

ITA 33/BANG/2023

AI Insights

The case involves M/s. Nova Hamlet Private Limited appealing against an ex-parte order from the CIT(A) under section 250 of the Income Tax Act, 1961, for the Assessment Year 2014-15. The primary contention was that the CIT(A) concluded the assessment ex-parte without the assessee's knowledge, as notices were sent to a defunct email address. The assessee argued that the Income Tax Officer (ITO) incorrectly treated the writing off of irrecoverable advances as unexplained cash credit under section 68, which was contested on several grounds including misdirection in invoking section 68, failure to appreciate the tax-neutral nature of the entry, and overlooking the normal business loss incurred.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124890 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-04-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 19-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHASHANK NADIG
• Section: 68; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No.33/Bang/2023 Assessment Year : 2014-15 M/s. Nova Hamlet Private Limited, No.96, Krishnageet Apartments, 2 nd Main Road, Sheshadripuram, Bengaluru – 560 020. PAN : AACCN 4042 L Vs. The Income Tax Officer, Ward – 5(1)(1), Bengaluru. APPELLANTRESPONDENT Assessee by:Shri.Shashank Nadig, CA Revenue by :Shri. P. Suresh Rao, Addl. CIT(DR)(ITAT), Bengaluru Date of hearing:26.04.2023 Date of Pronouncement:26.04.2023 O R D E R Per George George K, Judicial Member : This appeal at the instance of assessee is directed against the CIT(A)’s order dated 21.11.2022 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2014-15. 2. The grounds raised by the assessee read as follows: 1.The impugned order is opposed to law and facts of the case insofar as it is prejudicial to the interest of the Appellant. 2.The Ld. CIT(A) erred in law by concluding the assessment ex-parte without appreciating that the assessee was not aware of the notice being sent for reasons beyond his control. ITA No.33/Bang/2023 Page 2 of 4 3.The Ld. CIT(A) erred in law insofar as he failed to consider the merits of the case while disposing appeal ex-parte. 4.The action of the Ld. AO in treating the writing off of irrecoverable advances as irrecoverable as unexplained Cash Credit u/s 68 is invalid, bad in law and untenable and in doing so: A.Th e L d. A O ha s m i sdi re ct e d hi m s el f w i th re ga rd i n in vo k i n g S ec 6 8 of t h e a c t w hi c h r e q u ir e s t h e re t o b e a n u ne x pl ai ne d c re di t e n t r y i n t h e b oo k s o f t he a s se ss e e wh e r e as i n t h e i ns t a n t case the entry is actually a debit in the books of the assessee. B.The Ld. AO failed to appreciate that the adjusting entry is a tax-neutral entry and the amount of advance written off was inadvertently presented as an adjustment to "changes in inventory" accounts which did not have the effect of distorting the profits. C.The Ld. AO failed to appreciate that the amount written off in the books of accounts was a normal loss incurred in the ordinary course of business which is deductible under Sec 28 of the Income Tax Act. 5.The Ld. AO failed to consider the confirmation given by the Landowner to the effect that the amount was not refunded to the appellant in view of the changed sharing ratio warranting the write-off in the books of accounts 3. At the outset, we notice the impugned order of the CIT(A) is ex-parte order for non-compliance of notices issued. The learned AR submits that he had provided an email when he was doing his articles in the CA Firm. Subsequent to he leaving the CA firm, the above said email address to which these notices were sent by the First Appellate Authority’s (FAA) Office had become defunct and was not aware of the notices being sent online. The learned AR submitted that the impugned order of the CIT(A) came to the notice of the assessee only when the same was served. Therefore, in the interest of justice and equity, the issue may be restored to the files of the CIT(A) for an effective representation of the case. ITA No.33/Bang/2023 Page 3 of 4 4. Learned DR was duly heard. 5. We heard the rival submissions and perused the material on record. Assessee has not complied with 5 notices issued by the FAA’s Office. The learned AR submits that he had provided email for service of notices and the same had become defunct, hence, was not aware of the notices being issued. In the interest of justice and equity, we are of the view that one more opportunity should be provided to the assessee for proper representation of its case. Hence, the matter is restored to the file of the CIT(A). 6. The CIT(A) is directed to issue a fresh notice and take on record the written submissions of the assessee before a decision is rendered in the matter. The assessee is directed to co-operate with the Revenue for furnishing the written submissions and shall not seek unnecessary adjournments in the matter. It is ordered accordingly. 7. In the result, the appeal filed by the assessee is allowed for statistical purposes. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- (LAXMI PRASAD SAHU) (GEORGE GEORGE K) Accountant MemberJudicial Member Bangalore. Dated: 26.04.2023. /NS/* ITA No.33/Bang/2023 Page 4 of 4 Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR, ITAT, Bangalore.6.Guard file By order Assistant Registrar, ITAT, Bangalore.