Appeal Against Unexplained Expenditure Addition – Akhil Ribbons Pvt Ltd vs ITO Ward-2(1), New Delhi

Case Summary: Akhil Ribbons Pvt Ltd vs ITO Ward-2(1), New Delhi

Case Number: ITA 6054/DEL/2019
Appellant: Akhil Ribbons Pvt Ltd, New Delhi
Respondent: Income Tax Officer (ITO), Ward-2(1), New Delhi
Assessment Year: 2016-17
Case Filed On: 15th July 2019
Order Type: Final Tribunal Order
Date of Order: 4th January 2021
Pronounced On: 4th January 2021

Introduction

The case of Akhil Ribbons Pvt Ltd vs ITO Ward-2(1), New Delhi, pertains to an appeal filed by the appellant against an ex parte order passed by the Commissioner of Income Tax (Appeals)-1, New Delhi, concerning the assessment year 2016-17. The primary issue in the appeal was the addition of Rs. 29,73,600/- made by the Assessing Officer (AO) under section 69C of the Income Tax Act, 1961, on account of unexplained expenditure.

Background of the Case

Akhil Ribbons Pvt Ltd is a company based in New Delhi that filed its income tax return for the assessment year 2016-17, declaring a total loss of Rs. 5,35,026/-. The case was selected for limited scrutiny under the Computer Assisted Scrutiny Selection (CASS) process. During the assessment, the AO noted an advance payment of 40,000 Euros made by the company, which was not substantiated with proper documentation or explanation. Consequently, the AO added Rs. 29,73,600/- to the income of the company as unexplained expenditure under section 69C of the Income Tax Act, 1961.

The company, aggrieved by the addition made by the AO, filed an appeal before the Commissioner of Income Tax (Appeals)-1, New Delhi. However, the appeal was dismissed ex parte by the CIT(A) due to the non-appearance of the appellant. The CIT(A) relied on the decision of the Hon’ble Madhya Pradesh High Court in the case of Estate of Late Tukojirao Holkar vs. CWT 223 ITR 480, which allows for the dismissal of an appeal when the appellant does not appear to prosecute it.

Appeal Before the ITAT

Unhappy with the ex parte dismissal by the CIT(A), Akhil Ribbons Pvt Ltd filed a second appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench “SMC-2”. The appeal was heard through video conferencing due to the ongoing COVID-19 pandemic. The hearing took place on 4th January 2021, with Shri R.K. Panda, Accountant Member, presiding over the matter.

During the hearing, none appeared on behalf of Akhil Ribbons Pvt Ltd, despite the service of notice. However, the Tribunal decided to proceed with the hearing based on the material available on record and after hearing the arguments of the Senior Departmental Representative (DR), Ms. Shivani Bansal.

Tribunal’s Decision

The Tribunal carefully reviewed the order passed by the CIT(A) and noted that the appeal had been dismissed solely on account of the non-appearance of the appellant. The CIT(A) did not adjudicate on the merits of the case, which is required under section 250(6) of the Income Tax Act. This section mandates that the CIT(A)’s order should be in writing, stating the points for determination, the decision thereon, and the reasons for the decision.

The Tribunal observed that the CIT(A) failed to follow the statutory requirement and dismissed the appeal without considering the merits of the case. The Tribunal cited the case law that the CIT(A) is obligated to pass a speaking order, addressing the merits of the case even if the appellant does not appear.

In light of these observations, the Tribunal deemed it appropriate to set aside the order passed by the CIT(A) and remand the case back to the CIT(A) for a fresh adjudication. The Tribunal directed the CIT(A) to decide the appeal on merits and pass a speaking order after giving one last opportunity to Akhil Ribbons Pvt Ltd to present its case. The Tribunal also directed the appellant to cooperate with the proceedings and appear before the CIT(A) as required, failing which the CIT(A) would be free to pass an order as per law.

Conclusion

The appeal filed by Akhil Ribbons Pvt Ltd against the ex parte order of the CIT(A) was allowed by the ITAT for statistical purposes. The case was remanded back to the CIT(A) for a fresh adjudication on merits, with clear instructions to pass a speaking order after providing the appellant with an opportunity to be heard.

This case underscores the importance of adjudicating tax disputes on their merits and ensuring that the statutory requirements under the Income Tax Act are followed. The decision also highlights the responsibility of taxpayers to participate in the appellate process and present their cases effectively.

Order Pronounced in Open Court: 4th January 2021

Judicial Member: Shri R.K. Panda

Assistant Registrar: ITAT, New Delhi

Appeal Against Unexplained Expenditure Addition – Akhil Ribbons Pvt Ltd vs ITO Ward-2(1), New Delhi