Sri. Bandi Hemasunder Reddy, Bangalore V. Assistant Commissioner of Income-Tax, Circle-2(2)(1), Bangalore

ITA 523/BANG/2023

AI Insights

The case involves an appeal by Shri Bandi Hemasunder Reddy against the order of the National Faceless Appeal Centre (NFAC), Delhi, which arose from an ex-parte assessment order passed by the AO under sections 147, 144, and 144B of the Income Tax Act, 1961 for the Assessment Year 2016-17. The primary contention was regarding the disallowance of a penalty of Rs.9,39,837 paid by the appellant to clients for breach of contract, which the appellant argued was a business expenditure and thus allowable under section 37 of the Act. The Tribunal found merit in the appellant's request for a fresh adjudication by the CIT(A) and remitted the matter back to the AO for a detailed examination and a reasoned decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124272 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-09-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 20-07-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 37; 144; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 523/Bang/2023 Assessment Year : 2016-17 Shri Bandi Hemasunder Reddy, 186/401, J C Complex, Sirur Park Road, Seshadripuram, Bangalore – 560 020. PAN: ABVPR6938E Vs. The Assistant Commissioner of Income Tax, Circle – 2 (2)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Smt. Sunaina Bhatia, Advocate Revenue by : Shri Nischal .B, Addl.CIT (DR) Date of Hearing : 21-09-2023 Date of Pronouncement : 21-09-2023 ORDER PER MADHUMITA ROY, JUDICIAL MEMBER The instant appeal filed by the assessee is directed against the order dated 30.05.2023 passed by the National Faceless Appeal Centre (NFAC), Delhi arising out of the order dated 30.03.2022 passed by the assessing officer u/s. 147 r.w.s. Page 2 ITA No. 523/Bang/2023 144 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2016-17. 2. Infact, in this particular case, the Ld.CIT(A) has uphold the order of the Ld.AO in completing the assessment u/s. 144 though the order passed by the Ld.AO is an ex-parte one. The disallowance under challenge is made upon invoking the Explanation 1 to section 37(1) of the Act to the tune of Rs.9,39,837/- in respect of the penalty paid by the appellant to its clients / customers for breach of contract under the facts and circumstances of the case. At the time of hearing the instant appeal, it was submitted by Ld.Counsel appearing for the assessee that the penalty is for non-performance of contract and this penalty is in course of business expenditure since the same is paid for non-performance of contract and not as a result of committing an offence which is prohibited under any law and same is an allowable expenses u/s. 37 of the Act. 3. Merely because the assessee’s claim in respect of certain expenditure was not found acceptable, the penalty in the instant case is not allowable as the main argument advanced by the Ld.Counsel appearing for the assessee. In that view of the matter, it was prayed that the matter may be remitted to the file of Ld.CIT(A) for fresh adjudication of the same. Such prayer has not been able to be controverted by the Ld.DR. Page 3 ITA No. 523/Bang/2023 4. Thus having regard to the penalty compensatory in nature and the assessment order is ex-parte, we, for the ends of justice, find it fit and proper to remit the issue to the file of the Ld.AO to verify the same afresh and to pass a reasoned order. The Ld.AO is further directed to give an opportunity of being heard to the assessee and to consider the evidence / judgment to be relied upon by the assessee during the course of hearing of the matter. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 21 st September, 2023. Sd/- Sd/- (CHANDRA POOJARI) (MADHUMITA ROY) Accountant Member Judicial Member Bangalore, Dated, the 21 st September, 2023. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file By order Assistant Registrar, ITAT, Bangalore