2024 (10) TMI 931 - AT - Income Tax

Ex-parte Order Set Aside: Appeals Cannot Be Dismissed Solely for Non-Prosecution; Case Remanded for Fair Hearing.

Mrs. Shruti Mayank Shah Versus Dy. Commissioner of Income Tax, Circle-19 (3), Mumbai

Mrs. Shruti Mayank Shah Versus Dy. Commissioner of Income Tax, Circle-19 (3), Mumbai - TMI Issues:- Disallowance of interest paid to Infina Finance Private Limited- Tax under section 115BBDA on Dividend received from Mutual Fund- Non-appearance of the assessee leading to an ex-parte order by the CIT(A)Analysis:1. Disallowance of interest paid to Infina Finance Private Limited:The assessee challenged the disallowance of interest paid to Infina Finance Private Limited against interest income earned from Partnership Firms. The grounds for appeal included arguments on the indirect utilization of the loan for business purposes and the deductibility of the interest paid under section 36(1)(iii) of the Income Tax Act, 1961. The Tribunal noted that the CIT(A) had passed an ex-parte order due to the non-appearance of the assessee. Citing the case of CIT v/s Premkumar Arjundas Luthra (HUF), the Tribunal held that the appeal cannot be dismissed solely based on non-prosecution by the assessee. Consequently, the Tribunal set aside the order and directed the matter to be reconsidered by the CIT(A) on merits, with a requirement to afford a reasonable opportunity of hearing to both parties.2. Tax under section 115BBDA on Dividend received from Mutual Fund:The appellant contested the tax imposed under section 115BBDA on Dividend received from a Mutual Fund, which was claimed as exempt under section 10(35). The discrepancy between the Assessment Order and the Computation sheet regarding the taxation of this income was highlighted. The Tribunal did not delve into this issue in detail as the appeal was being remanded to the CIT(A) for reconsideration on other grounds. However, it was noted that the tax on the said income should be deleted if it is indeed exempt under section 10(35).3. Non-appearance of the assessee leading to an ex-parte order by the CIT(A):The Tribunal emphasized the importance of providing a fair opportunity to the parties involved in a case. It was observed that the CIT(A) had dismissed the appeal ex-parte due to the non-compliance with notices by the assessee. Referring to legal precedent, the Tribunal held that the appeal cannot be dismissed solely on the basis of non-prosecution by the assessee. Therefore, the Tribunal set aside the CIT(A)'s order and instructed a fresh adjudication on the merits of the case, ensuring that both parties are given a reasonable opportunity to present their arguments. The appeal by the assessee was allowed for statistical purposes, and the matter was remanded to the CIT(A) for further proceedings.