Right of ‘limited finality’ violated if reasoning adopted by CIT(A) for dismissing appeal not considered at assessment

Case Details: Energy Infratech (P.) Ltd. v. DCIT - [2021] 131 taxmann.com 124 (Delhi - Trib.)

Judiciary and Counsel Details

• • Amit Shukla, Judicial Member and Anadee Nath Misshra, Accountant Member
  • Puneet Thukral, CA for the Appellant. 
  • Avikal Manu, Sr. DR for the Respondent.

Facts of the Case

Assessee-company claimed deduction on account of payment towards reimbursement of expenses to its USA-based subsidiary company. The Assessing Officer (AO) noted that the assessee’s subsidiary was a separate tax entity, and it had already taken allowance of such expenses incurred by it. Therefore, reimbursement of expenses by the parent company was a double deduction being claimed by the assessee.
AO further held that the assessee had not deducted TDS on such payment made by it. Accordingly, he disallowed the claim of deduction towards reimbursement of expenses made by the assessee.
CIT(Appeals) also confirmed said disallowance, however, on a completely different ground.

ITAT Held

CIT(A) held that the assessee failed to prove that such expenditure was incurred by the assessee wholly and exclusively for business purposes.
On further appeal, the assessee contended that he got no opportunity to make submission before AO in respect of such reasoning adopted by Commissioner (Appeals). Since reasoning adopted by CIT(A) for dismissing the assessee’s appeal was not considered at the stage of assessment proceedings before AO, there was a violation of the assessee’s right of ‘limited finality’.
Therefore, the impugned order was to be set aside, and the matter was to be remanded back to AO for fresh order after providing the opportunity to assessee to make necessary submissions regarding reasoning adopted by CIT(A).