POWER MECH INFRA PRIVATE LIMITED ,VIJAYAWADA V. DCIT., CENTRAL CIRCLE-1(3), HYDERABAD

ITA 201/HYD/2025

AI Insights

Power Mech Infra Private Limited appealed against the order of the Commissioner of Income-Tax (Appeals), Hyderabad, which had dismissed their appeal for want of prosecution without considering the merits of the case. The original assessment by the Assessing Officer included disallowances of certain subcontract expenses and delayed deposit of employee contributions towards ESI/PF, which the assessee contested. The ITAT found that the CIT(A) erred in dismissing the appeal solely for non-prosecution without addressing the specific grounds of appeal. The case was thus remanded back to the CIT(A) for a decision on merits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314303 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2018-2019
• Other Referred Cases: Benny D' Souza and Others Vs. Melwin D' Souza and Others, CIT, Madras Vs. S. Chennappa Mudaliar, CIT Vs. Premkumar Arjundas Luthra (HUF)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Accommodation entries; Bogus
• Section: 147; 148; 37(1)

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B‘ Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER आयकरअपीलसं./I.T.A.No.201/Hyd/2025 (निर्धारण वर्ा/ Assessment Year : 2018-19) Power Mech Infra Private Limited, Vijayawada, PAN : AAFCP0541F The Deputy Commissioner of Income Tax, Central Circle – 1(3), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri A.V. Raghuram, Advocate. राजस्व का प्रतततितित्व/ Department Represented by : Ms. Reema Yadav. Sr.D.R सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 01.05.2025 घोर्णध की तधरीख/Date of Pronouncement : 07.05.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), Hyderabad – 11, dated 13.12.2024, which in turn arises 2 ITA No.201/Hyd/2025 from the order passed by the Assessing Officer (for short “A.O.”) u/s 147 of the Income Tax Act, 1961 (for short “the Act”) dated 26.09.2023 for A.Y. 2018-19. The assessee company has assailed the impugned order on the following grounds of appeal before us: “1. The order of the learned Commissioner of Income Tax (Appeals)-11, Hyderabad, is erroneous both on facts and in law so far as it is prejudicial to the appellant. 2. The learned Commissioner of Income Tax (Appeals)-11, Hyderabad, erred in dismissing the appeal without providing further opportunity. 3. The learned Commissioner of Income Tax (Appeals)-11, Hyderabad, failed to appreciate that the appellant had filed all the necessary details during the course of assessment proceedings including copies of ledger account as per books of account, copy of bill, other supporting documents and contract agreement with regard to sub-contract expenses amount of Rs.1,52,86,000 paid to Radha Swami Infracon & Engineers Limited, Jamshedpur and the entire addition of Rs.1,52,86,000 is to be deleted. 4. The learned Commissioner of Income Tax (Appeals)-11, Hyderabad and Assessing Officer, has erred in considering sub-contract expenses amount of Rs.1,52,86,000 paid to Radha Swami Infracon & Engineers Limited, Jamshedpur. The sub-contract expenses amount of Rs.1,52,86,000 is included in service tax amount of Rs.17,58,566, which was not claimed as expenditure. 5. The learned Commissioner of Income Tax (Appeals)-11, Hyderabad and Assessing Officer, ought to have considered appellant submissions submitted during the course of assessment proceedings and considered the subcontract expenses of Rs.1,35,27,434 paid to Radha Swami Infracon & Engineers Limited, Jamshedpur. 6. The learned Commissioner of Income Tax (Appeals)-11, Hyderabad, has failed to appreciate the fact that, the appellant had filed all the information relating to employees contribution of Provident Fund Rs.1,06,276 and the entire addition of Provident Fund Rs.1,06,276 is to be deleted.” 3 ITA No.201/Hyd/2025 2. Succinctly stated, the assessee company which is engaged in civil construction works and providing plant and machinery on rent, had filed its return of income for A.Y. 2018-19 on 13.10.2018, declaring an income of Rs.2,82,61,250/-. The return of income filed by the assessee company was initially processed as such u/s 143(1) of the Act on 18.02.2020. 3. Subsequently, the A.O. based on specific information that was flagged as per the “Risk Management Strategy” formulated by the CBDT, that the assessee company during the subject year was a beneficiary of accommodation entries provided by M/s. Radha Swami Infracon & Engineering Limited (for short M/s.RSIEL), Jamshedpur, issued notice u/s 148A(b) of the Act, dated 20.03.2022, wherein the assessee company was called upon to show cause as to why a notice u/s 148 of the Act may not be issued based on the aforesaid information. In reply, the assessee company claimed that on 05.03.2017 it had placed work order for providing skilled, semi-skilled, unskilled and helpers for its projects to M/s. RSIEL, but the same in the absence of supporting details did not find favor with the A.O. Accordingly, the A.O. 4 ITA No.201/Hyd/2025 passed an order u/s 148A(d) of the Act, dated 31.03.2022, and based on the same issued a notice u/s 148 of the Act, dated 31.03.2022. In compliance, the assessee company filed its return of income for A.Y. 2018-19 on 26.04.2022, declaring an income of Rs.2,87,39,650/-. 4. During the course of the assessment proceedings, the A.O. based on information that was shared by the ADIT (Investigation), Jamshedpur, observed that the assessee company was one of the beneficiaries of the accommodation entries provided by M/s. RSIEL. The A.O. taking cognizance of the fact that the assessee company, had in the garb of payments made towards the supply of goods/services to M/s. RSIEL booked bogus expenses aggregating to Rs.1,52,86,000/-, disallowed the same u/s 37(1) of the Act. Apart from that, the A.O. disallowed u/s 36(1)(va) r.w.s. 2(24)(x) of the Act the claim of the assessee company for deduction of the delayed deposit of the employee share of contribution towards ESI/PF amounting to Rs.1,06,276/-. The A.O. vide his order u/s 147 of the Act dt.26.09.2023 after making the aforesaid 5 ITA No.201/Hyd/2025 additions/disallowances determined the income of the assessee company at Rs. 4,41,31,926/-. 5. Aggrieved the assessee company carried the matter in appeal before the CIT(A). As the assessee company despite having been afforded sufficient opportunities had on five occasions i.e., vide notices dated 12.02.2024, 22.05.2024, 25.06.2024, 27.09.2024 and 03.12.2024 failed to make any compliance, while for on the remaining two occasions i.e., on 10.07.2024 and 21.09.2024 had only sought for some further time so that the necessary information may be collated, which, however were never filed, therefore, the CIT(A) holding a firm conviction that the assessee company was not interested in prosecuting the appeal, dismissed the same on the said count itself. For the sake of clarity, the observations of the CIT(A) are culled out as under : 6 ITA No.201/Hyd/2025 7 ITA No.201/Hyd/2025 8 ITA No.201/Hyd/2025 -left blank intentionally- 9 ITA No.201/Hyd/2025 10 ITA No.201/Hyd/2025 11 ITA No.201/Hyd/2025 6. Ostensibly, the CIT(A) while dismissing the assessee’s appeal for want of prosecution had, inter alia, relied upon the judgment of the Hon'ble Supreme Court in the case of Benny D’ Souza and Others Vs. Melwin D’ Souza and Others, Special Leave to Appeal(C) No(s) 23809/2023, dated 24.11.2023. It was observed by him that the Hon'ble Apex Court had held that if the assessee does not appear when the appeal was called for hearing, then it can only be dismissed for non-prosecution and not on merits. 7. The assessee company being aggrieved with the order of CIT(A), has carried the matter in appeal before us. 8. Shri A.V. Raghuram Advocate, learned Authorized Representative (for short “ld.AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that the CIT(A) had grossly erred in law and on facts of the case in dismissing the assessee’s appeal for want of prosecution i.e., without adverting to 12 ITA No.201/Hyd/2025 and adjudicating the specific issues based on which the impugned order was assailed before him. The ld.AR submitted that the matter, in all fairness, be restored to the file of CIT(A) with a direction to dispose of the appeal vide a speaking order. The ld.AR to fortify his aforesaid claim has drawn our attention to the order of the ITAT, Hyderabad Tribunal in the case of Uttam Kumar Challa Vs. Income Tax Officer, Ward-6(1), Hyderabad in ITA No.795/Hyd/2024, dated 17.10.2024 9. We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record as well as considered the judicial pronouncements that were pressed into service by the ld.AR to drive home his contentions. 10. We find that the CIT(A) had dismissed the appeal simply for want of prosecution without adverting to the specific issues based on which the impugned order was assailed before him. Although, it is a matter of fact borne from the record that the assessee company, despite having been afforded sufficient opportunities, had failed to participate in the proceedings before the first 13 ITA No.201/Hyd/2025 appellate authority, but the same would in no way justify summary dismissal of its appeal for want of prosecution without adverting to and adjudicating the specific grounds based on which the impugned order was assailed by the assessee/appellant before him. In so for the judgment of the Hon'ble Apex Court in the case of Benny D’ Souza and Others Vs. Melwin D’ Souza and Others (supra) is concerned, we are of the view that as the same is distinguishable on the facts, therefore, the same would not carry the case of the Revenue any further. The issue before the Hon'ble Apex Court in the aforesaid case was as to whether or not the Hon'ble High Court in the backdrop of Order XLI, Rule 17 of the Code of Civil procedure (CPC) was justified in law and on facts of the case in dismissing the appeal on merits for non-prosecution by the assessee/appellant. The Hon'ble Apex Court by referring to “Explanation” to Rule 17 (supra), had observed that the same categorically provides that if the appellant does not appear before the Court when the appeal is called for hearing, then it can only be dismissed for non-prosecution and not on merits. At this stage, we deem it fit to cull out Order XLI, Rule 17 of CPC as had been 14 ITA No.201/Hyd/2025 looked into by the Hon'ble Apex Court in its aforesaid order, as under: \"17. Dismissal of appeal for appellant's default :- (1) Where on the day fixed, or on any other day to which the hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Court may make an order that the appeal be dismissed. Explanation - Nothing in this sub-rule shall be construed as empowering the Court to dismiss the appeal on the merits.\" (emphasis supplied by us) 11. Ostensibly, as the aforesaid Rule 17(supra) is applicable to the proceedings before a “Court”, therefore, we are of a firm conviction that the same cannot be applied qua the proceedings before the CIT(A) which is a quasi-judicial authority. Rather, we find that the Hon'ble Supreme Court in the case of CIT, Madras Vs. S. Chennappa Mudaliar 1969 SCC (1) 591, while interpreting Section 33(4) of the Income Tax Act, 1922, had held, that the appellate tribunal is bound to give a proper decision both on the question of fact as well as law, and that can only be done if the appeal is disposed off on merits and not dismissed owing to the absence of the appellant. 15 ITA No.201/Hyd/2025 12. Apart from that, our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Premkumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom). In the aforementioned case the Hon’ble High Court had observed as under: \"8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. Further, Sec. 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under s. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the 16 ITA No.201/Hyd/2025 CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.” 13. We thus, in terms of our aforesaid observations, set aside the matter to the file of CIT(A) with a direction to re-decide the appeal vide a speaking order. Needless to say, the CIT(A) shall in the course of set aside proceedings afford a reasonable opportunity of being heard to the assessee company. 14. Resultantly, the appeal filed by the assessee company is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in the Open Court on 7th May, 2025. Sd/- SSd/- (मंजूनाथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Sd/-Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Hyderabad, dated 07.05.2025. TYNM/sps 17 ITA No.201/Hyd/2025 आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Power Mech Infra Private Limited, 40-1-46, M.G. Road, Near DV Manor, Vijayawada, Andhra Pradesh – 520010. 2. रधजस्व/ The Revenue : The Deputy Commissioner of Income Tax, Central Circle – 1(3), Hyderabad. 3. The Principal Commissioner of Income Tax (Central), Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad "