The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the assessee was not aware of the new faceless system and was dependent upon the authorised representative who could not follow up the matter.
It was observed that assessee had not complied with show-cause notices during transition of faceless assessment proceedings and as a result huge additions were been made.
The assessee challenged the order of the CIT (A) that the impugned order has been passed without deciding on merits and that assessee appeal has been dismissed merely on the ground of non-compliance when the assessee could not respond from physical to migration to new faceless scheme. Apart from that, assessee had also challenged the following additions:-
a. Royalty received from non-resident Rs. 5,12,75,575. It may be noted that in the first place no royalty at all is received from non-resident or from any club and hence the alleged amount is purely fictitious and imaginary.
b. Disallowance of amount of sundry creditors under section 41(1) unpaid for three years Rs. 15,48,309. It may be noted that subsequent to the period of three years till date, the assessee has paid an amount of Rs. 12,66,706 and this can be clearly borne out from the ledger account where party wise details of amount paid subsequently is shown. Thus, the addition under section41(1) cannot survive.
c. Disallowed amount decapitalized Rs. 1,18,20,607. As it was found that items of repairs were capitalized hence the same were decapitalized and claimed as revenue expenditure and consequently the depreciation was reversed.
d. Under any event the amounts cannot be taxed based on the operation of principals of mutuality.
The assessee has challenged the assessment order determining the total income at Rs.1,42,59,642/- as against the returned income of Rs.8,28,015/- after making various additions / disallowances. Even the AO has not considered the submissions and almost it an ex parte order.
The CIT(A) noted that certain notices were sent through mail on five occasions on which no compliance was made and accordingly, the appeal of the assessee has been dismissed without deciding on merits and for want of prosecution. He further submitted that, since this was the first year of faceless appeal and assessee was not aware of the notices of the communication sent and hence, proper representation could not be made and assessee could not follow-up the dates on ITB portal.
Apart from that, he submitted that even the AO has not considered various submissions which is evident from the fact that he has made huge addition on account of ‘Royalty’ received from non-resident of Rs.5,12,75,575/-, whereas the fact of the matter is that no such ‘Royalty’ has been received at all.
After considering the facts and perusal of record and the submissions made by both the parties, the tribunal found that in so far as CIT (A) is concerned, he has dismissed the appeal for want of prosecution as there was no compliance of notices sent through e-mail and the date mentioned in the ITB portal. To this it has been stated that the assessee was not aware of the new faceless system and was dependent upon the authorised representative who could not follow up the matter.
The two member bench of Amarjit Singh (Accountant member) and Amit Shukla (Judicial member) restored the matter back to the file of the AO to decide the issue afresh after giving due opportunity of hearing to the assessee and assessee was also directed to comply with the notices and substantiate its case. Thus the appeal was allowed.
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