ITAT Delhi remands Hero Ecotech case to CIT(A) over deletion of ₹21.82 crore expenditure addition

The Delhi Bench of the Income Tax Appellate Tribunal has remanded the case involving Hero Ecotech Limited (Assessment Year 2017–18) to the Commissioner of Income Tax (Appeals) for fresh adjudication, after holding that the first appellate authority had passed a cryptic and non-speaking order while deleting a substantial addition made by the Assessing Officer.

Background

Hero Ecotech had filed its return declaring income of about ₹25.74 crore, later revised to ₹25.94 crore. During scrutiny, the Assessing Officer noticed that the company had claimed ₹21.82 crore as expenditure towards professional and technical services. To verify the genuineness of these expenses, notices under Section 133(6) of the Income-tax Act were issued to 13 parties, none of whom responded.

On this basis, the Assessing Officer treated the expenditure as bogus, disallowed the amount under Section 69C, and taxed it under the stringent provisions of Section 115BBE, completing the assessment at ₹27.77 crore.

CIT(A)’s relief and Revenue’s challenge

On appeal, the CIT(A) deleted the addition, observing that the assessee had furnished bills, vouchers, confirmations and bank statements, and that mere non-response by third parties to Section 133(6) notices could not be held against the assessee. The Revenue challenged this relief, contending that the CIT(A) failed to examine whether actual services were rendered and did not exercise powers under Section 250(4) to call for further enquiry.

Tribunal’s ruling

The Tribunal found merit in the Revenue’s grievance, noting that the CIT(A) had not recorded independent findings on the evidentiary material and had relied solely on the assessee’s submissions. Holding that such an approach was unsustainable, the Bench set aside the CIT(A)’s order and restored the matter for fresh consideration, directing the appellate authority to pass a reasoned, speaking order after giving due opportunity to both sides.

The Revenue’s appeal was accordingly allowed for statistical purposes.