AO Not Justified in disallowing expense when Form 15CA Relates to prior year: ITAT

The company missed earlier hearings due to oversight, but had actually submitted all necessary documents. The tax authorities wrongly added Rs. 1.56 crore as income for the wrong year. The Tribunal accepted the explanation and removed the addition, but fined the company Rs. 10,000 for non-cooperation.

The present appeal has been filed by a company named M/s. Techmill Technologies Private Limited (Appellant), against the ACIT (Respondent), in the Income Tax Appellate Tribunal (ITAT) “B” Bench: Bangalore, before Shri. Laxmi Prasad Sahu (Accountant Member) And Shri. Keshav Dubey (Judicial Member). The case is related to the assessment year 2016-17.

Background of Case:

The appeal has been filed by the assessee challenging an ex parte Order dated December 28, 2023, passed by the CIT(A) under Section 250 of the Act. The assessee filed its income tax return (ITR) for the assessment year 2016-17, declaring a total income of Rs. 1.75 crore. The case was selected for limited scrutiny to check whether foreign remittances made by the company were from disclosed sources and whether TDS and reporting obligations were properly followed.

In the context of assessment proceedings, the assessing officer (AO) issued several notices asking the assessee to furnish relevant documents and explanations. The company initially submitted its balance sheet, profit & loss account, and bank statements, but did not respond to later notices.

Since the assessment was getting time-barred, additionally, the company did not furnish full details as asked by the assessing officer; in conclusion, the AO disallowed Rs. 1.56 crore of foreign remittances (treating it as undisclosed income) and completed the assessment on December 12, 2018.

Appeal before CIT(A)

Assessee dissatisfied with the action of the assessing officer, then filed an appeal before the Commissioner of Income Tax (Appeals), but did not appear in scheduled hearings. As a result, CIT(A) issued an ex parte order without hearing the side of the assessee, where it confirmed the addition made by the assessing officer (AO).

Appeal before ITAT

Assessee then approached the Income Tax Appellate Tribunal (ITAT), Bangalore; however, this time the appeal was filed 372 days late. Assessee gave the reason behind this delay that it missed the earlier notice because it went to the spam folder. The tribunal examined the reason given by the assessee and found the reason to be genuine; hence, it condoned the delay, allowing the case to be heard.

Tribunal’s Findings:

The tribunal observed that the order passed by the CIT(A) was without examining the case on its merits. All the relevant documents were already available in the record. The impugned amount of Rs. 1.56 crore was linked to an earlier financial year, i.e., FY 2014-15, not the current one. Hence, the assessing officer (AO) was wrong in making the addition of Rs. 1.56 crore in the income for the assessment year 2016-17.

In the final decision, the tribunal deleted the addition of Rs. 1.56 crore made by the AO and allowed the present appeal. However, since the assessee failed to cooperate earlier, the Tribunal imposed a cost of Rs. 10,000 to be paid before getting the final order. Meaning, the final decision has been announced in favour of the assessee.