2022 (7) TMI 279 - AT - Income Tax

Tribunal orders fresh assessment for incorrect disallowance, stresses importance of assessee's right to be heard

Lalitkumar Ratanchand Chadha Versus Dy. Commissioner of Income Tax Circle–4 (2) (2), Mumbai

The Tribunal allowed the appeal by the assessee for statistical purposes, directing the issue of incorrect computation of disallowance under section 14A ... Rectification of mistake u/s 154 - incorrect computation of disallowance u/s 14A - AO rejected the rectification application filed by the assessee by treating the issue to be an appealable issue - HELD THAT:- We find that as the issue pointed out by the assessee in its rectification application, deals with the correct computation of disallowance u/s 14A therefore, we deem it appropriate to restore this issue to the file of jurisdictional AO for de novo adjudication after verification of all the details as may be filed by the assessee. Needless to mention that no order shall be passed without affording opportunity of hearing to the assessee. As a result, the sole ground raised in assessee’s appeal is allowed for statistical purpose. Issues:Challenge to dismissal of appeal by CIT(A) as non-maintainable.Analysis:The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The only grievance raised in the appeal was the dismissal of the appeal by the CIT(A) as non-maintainable. The assessee, a manufacturer of dyes and chemicals, also earned income from investments and shares. The Assessing Officer disallowed expenditure under section 14A r/w rule 8D of the Income Tax Rules, 1962, in relation to income not forming part of the total income. The assessee sought rectification of the assessment order, which was rejected by the Assessing Officer, leading to the appeal before the CIT(A).The CIT(A) dismissed the appeal on the grounds that the rectification application did not represent an order issued under section 154 of the Income Tax Act, as claimed by the appellant. The CIT(A) highlighted the absence of a separate order passed by the Assessing Officer under section 154, along with a demand notice bearing the same date. The CIT(A) also pointed out the lack of a computer-generated Document Identification Number (DIN) in the document claimed to be a rectification order, rendering it invalid as per CBDT Circular 19 of 2010. Consequently, the CIT(A) held the appeal as not maintainable under section 246A of the Act.During the hearing, the Authorized Representative argued that the incorrect computation of disallowance under section 14A led to the rectification application. The Authorized Representative contended that the CIT(A) dismissed the appeal on technical grounds. On the other hand, the Departmental Representative argued that the disallowance under section 14A was not covered under section 154 of the Act. The Tribunal considered the submissions and found that the issue raised by the assessee in the rectification application pertained to the correct computation of disallowance under section 14A. Therefore, the Tribunal decided to restore the issue to the jurisdictional Assessing Officer for fresh adjudication after verifying all details provided by the assessee.In conclusion, the Tribunal allowed the appeal by the assessee for statistical purposes, emphasizing that no order should be passed without giving the assessee an opportunity to be heard. The decision was pronounced in the open court on 05/07/2022.