The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, held that authorities should not pass orders in casual manner, disregarding to the principles of natural justice.
The aforesaid observation was made by the Ahmedabad (ITAT), when an appeal was filed before it by the Assessee, as against the order passed by the Commissioner of Income Tax (Appeals), Ahmedabad [CIT(A)], under section 250(6) of the Income Tax Act, 1961, dated 13.03.2019, pertaining to Asst.Year2014-15.
The grounds of the assessee’s appeal were that the CIT(A) has erred in passing the appeal order confirming the action of the ITO whereby he confirmed the disallowance of interest of Rs.9195/-, interest of Rs.21,295/- under section 40A(2)(b) of the Act, that the CIT(A) has erred in confirming the disallowance of interest of Rs.51,662/- (interest to partner), and further that the CIT(A) has grievously erred in confirming the disallowance of Rs.7,84,957/- for the fund advanced to Ashok Sales Corporation.
Hearing the opposing contentions of both sides, as submitted by Shri IsaniVaris, the A.R. on behalf of the Assessee, and by B.P. Makwana, the Sr.D.R., on behalf of the Revenue, the ITAT observed:
“I may begin by stating that after hearing both the parties, and going through orders of the authorities below, I find that this is a classic case of orders passed by the Revenue officers i.e., both the AO and the CIT(A) in gross disregard to the principles of natural justice, totally ignoring the pleadings of the assessee before them, giving no reason for the same, and passing cryptic orders without any reasoning. The order of the ld.CIT(A) needs to be set aside for this reason alone and the assesses claims be allowed. Having said so, we shall now bring out the reasoning for the same from the orders of the authorities below”.
“The AO, we find, has simply rejected both these contentions and explanation of the assessee by stating that they were not acceptable, and incase of Brijesh Chauhan, by merely mentioning that he falls in the category of person specified under section 40A(2)(b) of the Act and in other cases the assessee had paid interest at the rate of 12%. There is no further reasoning by the AO for rejecting the explanation of the assessee. The order of the ld.CIT(A) is nothing but cryptic who merely mentioned that the AO had given full justification for the disallowance and his order is logical and specific. 11. Similarly, on the disallowance of interest of Rs.51,662/-, the same was made by the AO on the withdrawals made by one of the partnersofthe firm, Brijesh Chauhan (HUF), noting that asper the partnership deed, 12% interest was to be charged on the withdrawals, but the assessee had not charged the same. In his order the AO simply notes that the assessee furnished reply, but it was not satisfactory. What exactly was the reply, finds no mention in his assessment order. The AO straight-away arrives at a finding and conclusion that the reply was not satisfactory, without even giving any reasons and basis for rejecting the same. The ld.CIT(A) has nothing to say in the matter except that the assessment order is justified, and proper show cause notice has been given to the assessee.”, the ITAT added.
Further observing the the coram of Annapura Gupta, the Accountant Member, added:
“Similarly, in the case of disallowance of interest of Rs.7,84,957/-, the same pertained to advances given to Ashok Sales Corporation without charging any interest on the same. The assessee had explained that the advances related to business transactions with Ashok Sales Corporation, which were rejected by the AO outrightly by stating that no prudent businessman would give advance without interest. The AO has not even cared to consider the assessee’s statement of facts that the advance was in relation to business transactions carried out by the assessee and was purely commercial advance. On the contrary, the AO has gone to hold that no business transaction has been shown by the assessee, and it was only financial transaction. The ld.CIT(A) has again upheld order of the AO finding it to be totally justified. The assessee had given detailed explanation to the ld.CIT(A) in appellate proceedings.”
Thus, allowing the assessee’s appeal, the ITAT held:
“It is clear therefore that both the authorities below having passed orders in a very casual manner, totally ignoring the pleadings of the assessee and in complete disregard to the principles of natural justice. The orders are highly unjustified and are not sustainable in law. In view of the above, I set aside the order passed by the ld.CIT(A) being a cryptic and non-speaking order. Accordingly, the grounds raised by the assessee are allowed. In the result, the appeal of the assessee is allowed.”
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