Saidham Overseas Pvt. Ltd. vs. DCIT Circle-22(1), New Delhi: Appeal on Section 14A Disallowance for AY 2015-16

Saidham Overseas Pvt. Ltd. vs. DCIT Circle-22(1), New Delhi: Appeal on Section 14A Disallowance for AY 2015-16

The case between Saidham Overseas Pvt. Ltd., a company based in Gurgaon, and the Deputy Commissioner of Income Tax (DCIT), Circle-22(1), New Delhi, concerns the assessment year 2015-16. The appellant, Saidham Overseas Pvt. Ltd., filed an appeal (ITA No. 6463/DEL/2019) challenging the disallowance made by the Assessing Officer (AO) under Section 14A of the Income Tax Act, 1961. The appeal was filed on 1st August 2019, and the final order was pronounced on 2nd August 2022.

Background of the Case

The case originates from the assessment order dated 29th December 2017, passed by the AO under Section 143(3) of the Income Tax Act. The AO had disallowed an amount of Rs. 18,34,658/- under Section 14A, which pertains to the expenditure incurred in relation to income that does not form part of the total income under the Act. This disallowance was contested by the appellant, who argued that the disallowance was unwarranted and not based on the facts of the case.

Subsequently, the Commissioner of Income Tax (Appeals)-XXV, New Delhi [CIT(A)], upheld the disallowance made by the AO, leading the appellant to file an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench “G”. The appellant sought relief from the ITAT, contending that the disallowance under Section 14A was incorrectly applied and should be reconsidered.

Proceedings Before the Tribunal

When the case was called for hearing on 20th June 2022, there was no representation from the appellant’s side. The Tribunal, comprising Shri Challa Nagendra Prasad, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, decided to proceed ex-parte, given the absence of the appellant.

The respondent, represented by Shri Abhishek Kumar, Senior Departmental Representative (Sr. DR), supported the orders of the lower authorities and argued that the disallowance under Section 14A was justified. The Tribunal examined the records and found that the CIT(A) had dismissed the appeal for non-prosecution without addressing the merits of the case.

Tribunal’s Observations and Decision

The ITAT observed that the CIT(A) had dismissed the appeal in a very cryptic manner, without providing substantial reasoning or addressing the points raised by the appellant. The Tribunal noted that Section 250(6) of the Income Tax Act mandates that the CIT(A) must state the points for determination and provide a decision based on those points, even if the appeal is decided ex-parte.

The Tribunal highlighted the legal principle that an appeal cannot be dismissed merely due to the absence of the appellant, as per the ruling of the Hon’ble Bombay High Court in the case of CIT vs. Premkumar Arjundas Luthra HUF (2017) 291 CTR 614 (Bom.). It was emphasized that the CIT(A) should have dealt with the grounds on merits, even if the appellant failed to appear.

Given these observations, the ITAT concluded that the order passed by the CIT(A) was not in accordance with the law. The Tribunal found it just and necessary to restore the matter back to the CIT(A) for fresh adjudication, ensuring that the appellant is given a fair opportunity to present its case.

Restoration of the Appeal

In the interest of justice, the ITAT set aside the order of the CIT(A) and directed that the appeal be restored to the CIT(A) for fresh consideration on the merits of the case. The Tribunal instructed the CIT(A) to provide a reasonable opportunity of hearing to the appellant and to adjudicate the case in accordance with the law.

The ITAT also reminded the appellant of the importance of cooperation in the appellate proceedings and emphasized that any further non-compliance could lead to the appeal being decided based on the available records. This direction aimed to ensure that the appellant avails itself of the opportunity to contest the disallowance and that the case is decided on its merits.

Conclusion

The case of Saidham Overseas Pvt. Ltd. vs. DCIT Circle-22(1), New Delhi is a significant example of the importance of due process in appellate proceedings. The ITAT’s decision to restore the appeal highlights the necessity for appellate authorities to address the substantive issues in a case, rather than dismissing an appeal for non-prosecution.

The decision also underscores the responsibility of taxpayers to actively participate in the appellate process and the obligation of appellate authorities to provide clear and reasoned decisions. The restoration of this case to the CIT(A) ensures that Saidham Overseas Pvt. Ltd. will have another opportunity to contest the disallowance under Section 14A, and that the case will be decided based on its merits.

The ITAT’s order, pronounced on 2nd August 2022, reflects the Tribunal’s commitment to ensuring fairness and justice in tax proceedings, particularly in cases where procedural lapses may have occurred at the appellate level.

Order Pronounced in the Open Court on 2nd August 2022

Signed by:
Judicial Member: Shri Challa Nagendra Prasad
Accountant Member: Shri Pradip Kumar Kedia

Date of Pronouncement: 2nd August 2022

Saidham Overseas Pvt. Ltd. vs. DCIT Circle-22(1), New Delhi: Appeal on Section 14A Disallowance for AY 2015-16