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2023 (7) TMI 221 - AT - Income TaxDisallowance of expenditure incurred on packing penalty - ex-parte order by CIT(A) - plea of the assessee that the penalty paid in the instant case are in the nature of damages paid for breach of contract and therefore, fully deductible u/s 37 of the Act and Explanation-1 is not attracted - HELD THAT:- It is true that damages paid for breach of contract are treated to be normal incidence of business unlike the penalty paid on violation of statutory provisions. Similar issue has been examined in CIT vs. Catholic Syrian Bank Ltd., , [2002 (11) TMI 17 - KERALA HIGH COURT], Jammu Auto Industries [2008 (1) TMI 62 - PUNJAB & HARYANA HIGH COURT] and plethora of other judgments. Thus, the issue raised by the assessee appears to be meritorious on first principles.In the same vein, we note that the assessee has failed to attend before the CIT(A) and the CIT(A) has passed order ex-parte without expressing any opinion on merits. We straightaway refer to Section 250(6) of the Act which enjoins that the CIT(A) shall state the points for determination before it and the decision shall be rendered on such points along with reasons for decision. Thus, it is incumbent upon the CIT(A) to deal with the grounds on merits even in ex-parte order. CIT(A) plays role of both adjudicating authority as well as appellate authority. Thus, the CIT(A) could not have shunned the appeal for non-compliance without addressing the issue on merit. Thus, in view of Section 250(6) of the Act, the issue requires to be restored back to the file of the CIT(A) for adjudication in accordance with law - Appeal of the assessee is allowed for statistical purposes.
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