Rakesh Kumar Anand vs ACIT, New Delhi

Per Raj Kumar Chauhan, Judicial Member: The appeal is directed against the order dated 29.12.2025 of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [ hereinafter referred to as the “C IT (A)/NFAC”] passed u/s 250 o f the Income T ax Act, 1961 [hereinafter referred to as “ the Act”] wherein the addition made u/s 36 of the Act by Assessment Order dated 20.09.2021 were confirmed and assessment order was upheld.

The brief facts as culled out from o ur proceedings of the authorities below are that the asse ssee has filed return o f income for AY 2019-20 showing to tal income of Rs.83 ,08,434/-. The case was se lected fo r complete scrutiny under the E-assessment Scheme, 2019 on the ground that:

Notice u/s 143(2) of the Act was issued on 31 .03.2022 followed by notice u/ s 142(1) of the Act dated 30.07.2021 along with annexure containing a detailed que stio nnaire to which response was filed explaining how the assessee has claimed deduction of interest expenses amounting to Rs. 53.50 lakhs on loan taken from various bank for business purposes. From the balance sheet, the ld . AO noticed that the interest of Rs. 32,15,009/- was paid for loan taken from non-business purpose, and he nce disallowable u/s 36 o f the Act. T he ld. AO further noticed that the assessee has shown as (-) negative capital balance in the balance sheet which shows that the assessee has diverted part of interest bearing fund for his personal use. Accordingly, the disallowances were made o n the said accounts. The ld. Assessing Officer further o bserved that the assessee has not furnished any documentary e vidence because the assessee has failed to furnish the copy of the new sanctioned plan from competent authority, copy of agreement with Bank, certificate/letter from bank, building use permission letter/certificate for co mmercial use of the property from the competent authority so as to prove that the property against which bank lo an taken and interest paid is for the use of hotel business purpose.

Aggrieved by the impugned assessment order, the assessee filed an appeal before the ld . CIT(A) who has dismissed the same on the ground that the assessee has failed to contest his case despite issuing notice on 4 dates as the assessee has simply sought adjournment for 15-20 days and failed to avail the opportunity give n to him. It was observed that the sufficient opportunity has been allowed but no submissions has been made by the appellant hence it was totally non prosecution from the appellant’s side and accordingly, the assessment order was upheld, making observations in para 3 .1.1 to 3.3 extracted below as under:

Aggrieved by the imp ugned order the assessee is in appeal and raised the following grounds of appeal:

We have heard the ld. AR as well as the ld. DR. It was argued o n behalf of the assessee/appellant that the ld. C IT(A) has not given the effective opportunity of hearing and the impugned order has been passed witho ut following princip les of natural justice because the assessee has sought ad journment on reasonable grounds and without giving effective opportunity of hearing the impugned order has been passed. The ld. DR while relying on the order of the ld. lower authorities has left it to the discretion of the Tribunal to restore the matter to the file of the ld. CIT( A) for giving further opportunity if so deemed expedient in the interest of justice .

The ld. AR however tried to impress upon the Tr ibunal that there is a jurisd ictional legal issue involved in this case because the return o f income was filed o n 25.10.2019 for AY 2019-20 and as per provisio ns of the Act, notice u/s 143(2) of the Act has to be issued within six months from the end of the financial year in which ret urn of inco me is filed , i.e. no tice u/s 143(2) of the Act is to be issued by 30.09.2020 but the same was issued on 30.03.2021 and as such the assessment order passed was bad in law and the w hole assessment proceedings are liable to be quashed. In support of this argument, written submissions have been filed after conclusion of hearing wherein the same argument has been taken and the ld. AR has relied upon the case of Hon’b le jurisdictional Delhi Be nch in ITA No. 1600/Del/201 7 order dated 22.09.2022 and in ITA No . 1449/Del/2023 order dated 01.04.2026. In both these cases the legal grounds raised before the Tribunal as additional grounds pertaining to the no tice u/s 143(2) were decided in favour of the assessee.

A q uestion arises whether the Tribunal can consider the correctness of no tice u/s 143(2) having been issued beyond the period of limitation without raising any grounds either before the ld. C IT(A) or before the Tribunal in that regard. On examination of the Form 35 and the grounds taken therein as well as taken before the Tribunal nothing is stated about the notice s u/s 143(2) having been issued beyond t he per iod of limitatio n.

Rule 11 o f Income Tax (Appellate Trib unal) Rule 1963 provided as under:

Admitted ly, no legal ground has been raised before the Tribunal with regard to the notice u/s 143(2) of the Act being barred by limitation. Similar ly, no such gro und has been raised before the ld. C IT(A) as is evident from For m 35 where grounds of appeal are mentioned as extracted below:

The ld. asse ssee/ appellant in this case has no t availed the opportunity of filing additional g round before the Tribunal or before the ld. CIT(A) and the question raised by written submissions before us can be considered by the ld. CIT(A) u/s 250(5) of the Act extracted below as under:

Hence for the above reasons, the issue of notice u/s 143(2) being issued beyond period of limitation, cannot be decided by the Tr ibunal because no ground/additional ground in that regard was raised by ap pellant before us.

Now the q uestio n arises whe ther the impugned order has been passed by fo llow ing principles of natural justice or an effective opportunity o f hear ing has been given to the assessee or no t. Section 2 50(2)(a) of the Act provides as under:

Thus it is evident from the provisions of section 250(2)(a) of the Act that the opportunity to be given by the ld. first appellate authority is not a mere formality but it is mandatory requirement of law. O n perusal of the impugned order, we have noticed that though the notice of hearing was issued on 4 dates and on each date, the assessee has so ught ad jo urnment. It is argued by the assessee before us that the adjo urnment was sought on justified grounds.

In these given facts and circumstances, we are of the considered opinion that the end of justice required that the asessee be given e ffective opportunity of hearing by the ld. CIT(A) for presenting its case and producing the necessary materials/documents as per law in support o f its case for claiming deduction of interest amount which has been disallowed by the Assessing Officer and the disallowance has been confirmed by the ld. first ap pellate authority. For these reasons, the matter is re stored to the file of the ld. C IT(A) for decid ing afresh and the assessee may file evide nce in support of its claim by submitting the necessary documents as mentioned in the assessment order and for that reason the disallow ance was made by the Assessing Officer. The assessee shall submit the necessary evidence/material/submissions before the ld. CIT(A) within a period of 60 days from this order who shall consider it as per law and d ecide the matter afresh.

The appeal of the assessee is accordingly allowed for statistical purposes.