Arian Steels Pvt. Ltd. vs ITO – Dismissal and Restoration for Re-Adjudication Under AY 2016-17

Case Summary: Arian Steels Pvt. Ltd. vs ITO Ward-3(2), New Delhi – AY 2016-17

This case analysis discusses the proceedings and the final order issued by the Income Tax Appellate Tribunal (ITAT) Delhi in the case of Arian Steels Pvt. Ltd. versus Income Tax Officer, Ward-3(2), New Delhi. The appeal was filed by Arian Steels Pvt. Ltd. under the case number ITA 6692/DEL/2019 for the assessment year 2016-17. The order was pronounced on December 23, 2020, by the Tribunal.

Background and Case Filing

Arian Steels Pvt. Ltd., a company based in Delhi, filed its return of income for the assessment year 2016-17 on October 14, 2016, declaring a loss of Rs. 1,85,796. The case was subsequently selected for scrutiny, and the assessment was completed under Section 143(3) of the Income Tax Act, 1961, on November 26, 2018. During this assessment, the Assessing Officer (AO) determined the total income at Rs. 12,32,978, leading to the filing of the appeal.

Reasons for Filing the Appeal

The primary reason for filing the appeal was the disallowance made under Section 14A of the Income Tax Act, amounting to Rs. 14,18,774. The assessee challenged this disallowance on the grounds that it had not earned any income which did not form part of the total income for the relevant year. Additionally, the assessee contested the CIT(A)’s ex parte order, arguing that notices had been sent to the wrong address, depriving them of a fair hearing.

Proceedings Before the ITAT

The appeal was heard by a bench comprising Sh. Bhavnesh Saini, Judicial Member, and Sh. Anil Chaturvedi, Accountant Member, through video conferencing due to the ongoing pandemic.

Ex Parte Order by CIT(A)

The Commissioner of Income Tax (Appeals)-I, New Delhi, had dismissed the appeal filed by Arian Steels Pvt. Ltd. through an ex parte order dated June 12, 2019. The dismissal was primarily due to the non-appearance of the assessee during the appellate proceedings. The CIT(A) did not examine the merits of the case and instead dismissed the appeal for lack of prosecution.

The assessee argued that the dismissal was unjust as the notices for the hearing had been sent to an incorrect address, resulting in the assessee’s unintentional absence during the proceedings.

ITAT’s Examination and Ruling

The ITAT bench reviewed the appeal and noted the procedural lapses in the handling of the case by the CIT(A). The Tribunal observed that the CIT(A) failed to follow the mandate of Section 250(6) of the Income Tax Act, which requires the appellate authority to state the points of dispute and provide reasons for their conclusions.

The ITAT also emphasized the importance of natural justice, stating that sufficient opportunity for a fair hearing should be provided to all parties, and no party should be condemned unheard. The Tribunal found that the CIT(A) had not complied with these principles, as the appeal was dismissed without a proper hearing or examination of the merits.

Restoration of the Appeal

In light of these findings, the ITAT set aside the impugned order of the CIT(A) dated June 12, 2019, and restored the matter to the CIT(A) for re-adjudication. The Tribunal directed the CIT(A) to grant sufficient opportunity to the assessee for a hearing and to decide the case on its merits. The assessee was also instructed to cooperate with the lower authorities by furnishing the required details during the re-adjudication process.

Conclusion and Implications

The ruling in Arian Steels Pvt. Ltd. vs ITO Ward-3(2), New Delhi highlights the importance of adhering to procedural norms and the principles of natural justice in tax proceedings. The ITAT’s decision to restore the appeal for re-adjudication underscores the Tribunal’s commitment to ensuring that all parties are given a fair opportunity to present their case.

This case also serves as a reminder to tax authorities to exercise due diligence in issuing notices and conducting hearings, as procedural errors can lead to the quashing of their orders by higher judicial bodies. For taxpayers, the case reinforces the importance of ensuring that their contact details are accurately recorded with tax authorities to avoid missing critical communications that could affect their appeals.

In summary, the ITAT’s decision to restore the appeal in the case of Arian Steels Pvt. Ltd. is a significant step in ensuring that the assessee receives a fair hearing and that the issues in dispute are adjudicated based on their merits, rather than procedural technicalities. The case will now return to the CIT(A) for a fresh examination, where the assessee will have the opportunity to present its case comprehensively.

Arian Steels Pvt. Ltd. vs ITO – Dismissal and Restoration for Re-Adjudication Under AY 2016-17