NFAC's dismissal without considering merits held perverse, matter remanded for fresh adjudication following natural justice

ITAT held that NFAC's dismissal of appeal without adjudicating merits was perverse and bad in law. NFAC failed to consider detailed written submissions and Form 10 filed by assessee, merely reproducing assessment order without proper reasoning. Matter remanded to NFAC for fresh adjudication following principles of natural justice. NFAC directed to call for AO's report on Form 10 and consider assessee's submissions on merits. Appeal allowed for statistical purposes.

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Issues:
Assessment based on non-consideration of Form 10 | Lack of reasoning for additions by Assessing Officer | Failure to conduct specific inquiry by NFAC | Dismissal of appeal without adjudication on merits by NFAC

Assessment based on non-consideration of Form 10:
The appeal before the Appellate Tribunal ITAT Ranchi emanated from an order by NFAC, Delhi, related to the assessment year 2016-2017. The Assessee, a registered charitable trust, was required to spend 85% of their total receipts. The Assessing Officer had made additions to the trust's income, including amounts related to inter-unit transactions and the purchase of fixed assets. The Assessee had submitted Form 10 to demonstrate the balance amount to be spent and the proposed spending plan for the next five years. However, the Assessing Officer did not consider Form 10 while framing the assessment order, leading to the Assessee's contention that the additions would not have been made if Form 10 had been considered.

Lack of reasoning for additions by Assessing Officer:
The Assessing Officer added amounts to the Assessee's income without providing reasoning for the inter-unit transactions and the fixed asset purchase. The Assessee claimed that the land purchase was made from accumulated funds as per the Income Tax Act, supported by Form 10. The failure to consider Form 10 and relevant documents by the Assessing Officer was highlighted as jeopardizing the rights of the registered trust. The Assessee argued that all documents should have been considered by the Assessing Officer before making additions.

Failure to conduct specific inquiry by NFAC:
The NFAC, in its order, merely reproduced the Assessee's submissions without conducting a specific inquiry or providing independent reasoning. The NFAC dismissed the appeal without examining the facts or submissions in detail, stating that there was no material to warrant interference with the Assessing Officer's order. The lack of examination or enquiry into the genuineness of the submissions raised concerns about the NFAC's decision-making process.

Dismissal of appeal without adjudication on merits by NFAC:
The NFAC's order lacked adjudication on the merits of the case, as it did not delve into the issues raised by the Assessee in their written submissions. The NFAC's failure to conduct an independent inquiry and provide a speaking order was highlighted as contrary to the requirements under the law. Citing judicial pronouncements, the Appellate Tribunal emphasized the need for the NFAC to adjudicate matters on merits, call for reports from the Assessing Officer if necessary, and pass speaking orders to ensure a fair and reasoned decision.

In conclusion, the Appellate Tribunal found that the NFAC's dismissal of the appeal without adjudicating on the merits was improper. The matter was remanded back to the NFAC for a fresh adjudication, emphasizing compliance with natural justice principles. The NFAC was directed to consider Form 10, call for a report from the Assessing Officer, and make a decision based on the merits of the case. The Assessee was instructed to comply with hearing notices and submit relevant documents. The appeal was allowed for statistical purposes, and the Assessee's appeal was allowed in the result.

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