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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI PAVAN KUMAR GADALE & SHRI AMARJIT SINGH
आदेश / O R D E R PER BENCH The revenue has filed the appeals against the separate orders of the Commissioner of Income Tax (Appeals) – 37, Mumbai and the assessee has filed the cross objections.
Since the issues in these two appeals and cross objections are common and identical, hence are clubbed, heard and consolidated order is passed. For the sake of convenience, we shall take up the A.Y. 2008-09 as a lead case and the facts narrated. The revenue has raised the following grounds of appeal: i. "Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was right in scaling down addition from Rs.16,36,16,437/- to Rs.17,82,665/-, which was made by the Assessing Officer under the provisions of section 14A of the I.T. Act r.w. Rule 8D of the 1.T. Rules, 1962? ii. "Whether on the facts and in the circumstances of the case and in Law, the learned CIT(A) was right in holding that interest expenditure of Rs.25.24 crores cannot be taken for computing disallowance under Rule 8D(2)(ii), without appreciating the fact that in the course of assessment proceedings the assessee has failed to & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 3 - furnish any evidence to prove the nexus between interest free funds available and investments made there from and considering the fact that no such material evidence is produced by the assessee, the disallowance made by the Assessing Officer was correct, as was held by Hon'ble High Court of Calcutta in the case of Dhanuka & Sons (339 ITR 319) (2011).
2. The brief facts of the case are that the assessee company is engaged in the business as builders and developers. A search and seizure operation u/s 132(1) of the Act conducted in the course of Rustomjee Evershine Group on 21.10.2010 and the assessee also was covered under search action, therefore notice u/s 153A of the Act was issued. In compliance to the notice, the assessee has filed the return of income for the A.Y 2008-09 on 29.10.2011 disclosing a total income of Rs. 58,576,146/-.Subsequently the AO has issued notice u/s 143(2) and 142(1) of the Act along with questionnaire. In compliance to the notices, the Ld. AR of the assessee appeared from time to time and submitted the details and the case was discussed. On perusal of the financial statements, the Assessing Officer (AO) found that the assessee has earned dividend income of Rs.75,038/- and claimed exempt. & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 4 - The AO observed that the assessee case is covered under provisions of section 14A r.w.r 8D. Whereas, the Ld. AR has filed the explanations that the assessee has made suomoto disallowance of Rs.2,501/- u/s 14A of the Act and there is necessity for making further disallowance.The AO has considered the submissions and the nature of investments made by the assessee and applicability of provisions of Sec. 14A of the Act and further the funds available with the assessee are mix of own funds and borrowed funds. The AO is under the presumption that the assessee has made investments out of the borrowed funds and earning the exempt income. Therefore the administrative and other expenses incurred by the assessee company in respect of exempt income has to be disallowed. The AO applied the provisions of Sec.14A r.w.r 8D and worked out the disallowance of Rs.1,63,616,437/- and similarly made observation that the exempt income has to be added to the book profits u/s 115JB of the Act. Further the AO has dealt on the various facts with respect to the director’s statements recorded on 21.10.2010 on disclosure of unexplained income and & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 5 - considered the facts with respect to sale of parking area/transfer fee and also deduction claimed U/sec80IB of the Act and assessed the total income of Rs. 258,731,840/- and passed the order u/s 143(3) r.w.s 153A of the Act dated 31.03.2013.
3. Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas the CIT(A) has passed the common appellate order and for this assessment year, the CIT(A) has considered submissions of the assessee, findings of the AO and applicability of provisions of Sec. 14A r.w.r 8D and financial statements and recomputed the disallowance to the extent of Rs.17,82,665/- and partly allowed the assessee’s appeal. Aggrieved by the CIT(A)order, the revenue has filed an appeal before the Honble Tribunal.
4. At the time of hearing, the Ld. DR submitted that the CIT(A) erred in restricting the addition u/s 14A to the extent of 17,82,665/- irrespective of the fact that the assessee has incurred the interest expenditure and the AO was correct in considering the factual aspects and relied on the order of the AO. Contra, the Ld. AR submitted that the assessee has filed the & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 6 - cross objections on this disputed issue of disallowance u/s 14A r.w.r. 8D(2).
5. We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue as envisaged by the Ld. DR that the CIT(A) erred in restricting the addition u/s 14A of the Act overlooking the various factual aspects and also the financial statements. The Ld. DR contentions are that the AO was correct in calculating the disallowance u/s 14A r.w.r8D and therefore the order of the AO has to be restored. Whereas the Ld.AR submitted that the assessee has filed cross objections and raised the grounds in respect of restricting the disallowance u/s 14A to the extent of exempt income. We find that the CIT(A) has dealt on the issue considering the various aspects of investments. Further the Ld.DR could not controvert the findings of the CIT(A) with new any cogent material or information to take a different view, accordingly we do not find infirmity in the order of the CIT(A) and dismiss the grounds of appeal of the revenue.
CO. 173/Mum/2018, A.Y 2008-09 & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 7 -
The assessee has filed the Cross Objections(CO) for restricting the addition u/s 14Ar.w.r 8D to the extent of exempted income. The Ld. AR submitted that there is a delay in filing the CO before the Honble Tribunal and condonation petition is filed. The assessee has raised the grounds in CO as under: (1) On the facts and circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the action of the Ld AO in considering all the investments for the purpose of computation of disallowance u/s 14A r.w. Rule 8D. (2) On the facts and circumstances of the case and in law, the Hon'ble CIT (A) ought to have held that for the purpose of computation of disallowance u/s 14A r.w. Rule 8D, the value of only those assets that yielded exempt income during the relevant previous year ought to have been considered.
Further the assessee also filed the addition grounds as under:
(1) On the facts and circumstances of the case and in law, the Hon'ble CIT (A) ought to have restricted the disallowance u/s 14A r.w.r 8D to the relevant exempt income during the year under consideration.
The Ld. AR has restricted the submissions on the additional grounds in CO considering the legal decisions, factual aspects and relied on the judicial & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 8 - decisions on restricting the disallowance u/s 14A of the Act to the extent of exempted income earned. The Ld. AR submitted that the delay in filing the CO is not a wanton Act but due to not proper guidance of legal representative and further substantiated the submissions relying on the judicial decisions on the delay condonation. The Ld.AR emphasized on the affidavit filed by the director of the company and the chartered accountant who was assisting and has given opinion for non filing the cross objections within the time. Contra, the Ld.DR had objected to the condonation petition.
We heard the rival submissions and perused the material on record. The sole grievance of the assessee in the cross objection that the disallowance u/s 14A should be restricted to the extent of exempted income earned. Though the Ld. AR has substantiated the submissions with the judicial and legal decisions in support of the restricting the disallowance to the extent of dividend income but there is a delay in filling the cross objections. We consider it appropriate and refer to the affidavit filed by the director of the & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 9 - company on 15.06.2018 for condonation of delay in filling CO as under: “Percy Chowdhry, Director of Keystone Realtors Private Limited, aged 47 Chowdhry residing at 1501 Rustomjee Lasonrisa, N. Road, Behind Opp Ruia College, Dadar (E), Mumbai 400 014 do hereby sincerely affirm and state as follows;
That am the Director of the Respondent in the instant Appeal and as such I am competent to depose by way of the present Affidavit on the basis of my knowledge derived from the official records.
"That I state as the said appeal being a departmental appeal, the cross objection against the said appeal remained to be filed before due date in respect of the Assessment Year 2008-09 on account that we were advised by the Chartered Accountants during the said time that since we have won the appeal there is no need to file the appeal or cross objection.
That I state that it is only when we were able to hire the present counsel for attending the hearing before the Hon'ble ITAT just few days before the date of hearing, he advised us to file the cross objection against the said departmental appeal and hence has resulted in delay in filing the instant Cross Objection.
That I state that because of filing of the said cross objection the interest of the revenue has not been & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 10 -
adversely affected in any manner and we have not received any undue advantage in the said matter.
That I state that I pray the Hon'ble Tribunal to condone the delay occurred which is beyond the control of the Respondent for which kind of act, the Respondent will remain ever grateful.”
Further the Chartered accountant has also filed affidavit on 22.01.2020 as under:
.I Yogesh Joijode , son of prakash joijode aged 39 years proprietor of yogesh joijode &Associates chartered Accountants, do hereby solemnly affirm as under: 1. I state that I had been approached by the management of Keystone Realtors Private Limited for seeking an opinion for filing an appeal before Income Tax Appellate Tribunal, Mumbai. In this regard, I had given my opinion for not filing the cross objection against the appeal filed by the department before Income Tax Appellate Tribunal, Mumbai considering the relief granted by Commissioner of Income Tax (Appeal) during the appellate proceedings in the following cases:
Keystone Realtors Private Limited - Assessment Year 2008-09 (ITA 5629/M/14) ii) Keystone Realtors Private Limited - Assessment Year 2009-10 (ITA 5630/M/14) iii) Keystone Realtors Private Limited - Assessment Year 2010-11 (ITA 5631/M/14) & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 11 - iv) Keystone Realtors Private Limited - Assessment Year 2011-12 (ITA 5632/M/14)
2. This is to solemnly affirm that whatever has been stated in this affidavit is true to the best of my knowledge and belief. 11. We considering the facts, provisions and the contents of the affidavit found that there is a reasonable cause explained and we support our view relying on the decision of Honble High Court Of Bombay in the case of Vijay Vishin Meghnani & Anr Vs. DCIT&Anr (398 ITR 0250)(Bombay) as under; Appeal-Condonation of Delay-Claim for deduction under Section 80-0 made by Assessee was disallowed by AO for Assessment Year 1993-94 and confirmed by the Commissioner of Income Tax (Appeals)-Against order of Commissioner, assessee preferred appeal before Tribunal- Tribunal restored matter back to file of AO for Assessment Year 1993-94-AO passed order allowing claim under that section of the I.T. Act, 1961-Assessee preferred rectification application to AO to rectify his order for Assessment Year 1994-95 and Assessment Year 1996-97- Rectification application was rejected by AO-CIT(A) upheld order of AO-Assessee filed application for condonation of delay in filling appeal against order of CIT(A)— Tribunal held that assessee simply put responsibility for delay on Revenue- Tribunal dismissed two appeals filed by assessee holding that same as barred by limitation-Tribunal held that delay of 2984 days in filling appeal could not be condoned-Held, & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 12 - Supreme Court in case of Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others held that legal advice tendered by a professional and litigant acting upon it one way or other could be sufficient cause to seek condonation of delay and coupled with other circumstances and factors for applying liberal principles and then said delay can be condoned-None should be deprived of an adjudication on merits unless the Court of law or the Tribunal/Appellate Authority found that litigant deliberately and intentionally delayed filing of appeal-Tribunal though aware of these principles but possibly carried away by fact that delay of 2984 days was incapable of condonation-In process Tribunal went about blaming assessee and professionals and equally Department-Tribunal's order did not meet requirement set out in law-Tribunal completely misdirected itself and had taken into account factors, tests and considerations which had no bearing or nexus with issue at hand- Tribunal, therefore, erred in law and on facts in refusing to condone delay-Explanation placed on affidavit was not contested nor Court found that from such explanation, High Court could not arrive at conclusion that assessee was at fault, he intentionally and deliberately delayed matter and had no bona fide or reasonable explanation for delay in filing proceedings-High Court condoned delay of 2984 days in filing appeals-Assessee's Appeals allowed. Held :
In Concord of India Insurance Co. Ltd.Vs. Smt. Nirmala Devi and others, the Hon'ble Supreme Courthas held that a legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and coupled with the & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 13 - other circumstances and factors for applying liberal principles and then said delay can be condoned. Eventually, an overall view in the larger interest of justice has to be taken. None should be deprived of an adjudication on merits unless the Court of law or the Tribunal/Appellate Authority finds that the litigant has deliberately and intentionally delayed filing of the appeal, that he is careless, negligent and his conduct is lacking in bona fide.
We respectfully follow the ratio of the decision of Hon’ble High Court and condone the delay and admit the cross objections grounds raised
by the assessee. The grounds raised by the cross objections are with respect to restricting the disallowance u/s 14A to the extent of dividend income and the Ld.AR relied on the Catena of judicial decisions and We considering the facts and the decisions direct the Assessing officer to restrict the disallowance under secation 14A r.w.r 8D to the extent of exempt income earned and partly allow the cross objections. & CO No. 174/Mum/2018 (A.Y 2009-10) 13.. As the facts and circumstances in this appeal and CO are identical to CO No. 173/Mum/2014, for A.Y 2008
09. (except variance & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 14 - in figures) and the decision rendered in above paragraphs would apply mutatis mutandis for this case also and dismiss the appeal filed by the revenue and partly allow the Cross objections.
In the result, both the appeals filed by the revenue are dismissed and cross objections filed by the assessee are partly allowed.
Order pronounced in the open court on 25.01.2023.
Sd/- Sd/- (AMARJIT SINGH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 25.01.2023 KRK, PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / The CIT(A) 4. आयकर आयु�त(अपील) / Concerned CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Mumbai 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, & 5630/Mum/2014 & CO Nos. 173 & 174/Mum/2018 Keystone Realtors P Ltd, Mumbai. - 15 -