Appeal Remanded Due to Non-Receipt of Notices – Pellet Energy Systems vs ACIT, Circle-19(2), New Delhi

Case Summary: Pellet Energy Systems Pvt Ltd vs ACIT, Circle-19(2), New Delhi

Case Number: ITA 6065/DEL/2019
Appellant: Pellet Energy Systems Pvt Ltd, Ghaziabad
Respondent: Assistant Commissioner of Income Tax (ACIT), Circle-19(2), New Delhi
Assessment Year: 2015-16
Case Filed On: 16th July 2019
Order Type: Final Tribunal Order
Date of Order: 27th June 2022
Pronounced On: 27th June 2022

Introduction

The case of Pellet Energy Systems Pvt Ltd vs ACIT, Circle-19(2), New Delhi, revolves around an appeal filed by the appellant challenging the addition made under section 56(2)(viib) of the Income Tax Act, 1961, for the assessment year 2015-16. The appeal was initially dismissed ex-parte by the Commissioner of Income Tax (Appeals) [CIT(A)] due to non-appearance by the appellant. However, the Income Tax Appellate Tribunal (ITAT) restored the appeal to the CIT(A) for fresh adjudication after observing that the Interim Resolution Professional (IRP) did not receive the hearing notices.

Background of the Case

Pellet Energy Systems Pvt Ltd, a company based in Ghaziabad, filed its income tax return for the assessment year 2015-16. During the assessment proceedings, the Assessing Officer (AO) made an addition of Rs. 2,00,00,000/- under section 56(2)(viib) of the Income Tax Act, 1961, treating it as unexplained income. The company, aggrieved by the addition, filed an appeal before the CIT(A).

However, during the appellate proceedings, the National Company Law Tribunal (NCLT) Principal Bench at New Delhi, in the case titled Oriental Bank of Commerce vs. Pellet Energy Systems Pvt. Ltd. & Ors., appointed Ms. Reshma Mittal as the Interim Resolution Professional (IRP) on 20th July 2018 under the Insolvency and Bankruptcy Code, 2016. The company was undergoing insolvency proceedings, and the IRP was responsible for managing the affairs of the company.

The CIT(A) sent hearing notices to the company’s address on three occasions: 16th March 2019, 12th April 2019, and 26th April 2019, but no one appeared on behalf of the company. As a result, the CIT(A) dismissed the appeal ex-parte for non-prosecution and upheld the addition made by the AO. Aggrieved by the dismissal, the IRP, Ms. Reshma Mittal, filed the present appeal before the ITAT.

Tribunal’s Decision to Restore the Appeal

The ITAT, consisting of Shri Anil Chaturvedi, Accountant Member, and Shri N.K. Choudhry, Judicial Member, heard the appeal on 14th June 2022. The Tribunal observed that the CIT(A) had dismissed the appeal ex-parte due to non-appearance, but it was unclear whether the CIT(A) was informed about the NCLT’s order appointing Ms. Reshma Mittal as the IRP.

Ms. Reshma Mittal submitted before the Tribunal that she never received any of the hearing notices sent by the CIT(A). The Tribunal noted that the CIT(A)’s order did not reflect whether the CIT(A) was aware of the IRP’s appointment or whether the notices were sent to the correct address.

Considering the peculiar facts of the case and the fact that the CIT(A) did not decide the appeal on merits, the Tribunal deemed it appropriate to remand the case to the CIT(A) for fresh adjudication. The Tribunal directed the CIT(A) to issue fresh notices to the IRP at the address provided and to afford a reasonable opportunity of being heard to the appellant.

The Tribunal also instructed Ms. Reshma Mittal, the IRP, to appear before the CIT(A) in the appellate proceedings and to provide relevant documents regarding the insolvency proceedings before the NCLT. The Tribunal emphasized the need for the appellant to cooperate fully with the proceedings and to avoid unnecessary adjournments.

Conclusion

The appeal filed by Pellet Energy Systems Pvt Ltd against the ex-parte order of the CIT(A), New Delhi, was allowed for statistical purposes by the ITAT. The case was remanded back to the CIT(A) for fresh adjudication, with directions to provide the appellant with a fair opportunity to present their case and to ensure that the hearing notices are properly served to the IRP.

This case highlights the importance of procedural fairness in tax proceedings, particularly in cases where companies are undergoing insolvency proceedings. The decision underscores the Tribunal’s role in ensuring that appeals are adjudicated on merits and that all relevant parties are given adequate opportunities to present their cases.

Order Pronounced in Open Court: 27th June 2022

Accountant Member: Shri Anil Chaturvedi
Judicial Member: Shri N.K. Choudhry

Assistant Registrar: ITAT, New Delhi

Appeal Remanded Due to Non-Receipt of Notices – Pellet Energy Systems vs ACIT, Circle-19(2), New Delhi