ACG ASSOCIATED CAPSULES PRIVATE LIMITED,KANDIVALI INDUSTRUSTRIAL ESTATE, MUMBAI vs. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE(2)(3), MUMBAI, MUMBAI

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ITA 1829/MUM/2026Status: DisposedITAT Mumbai09 July 2026AY 2020-218 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in not adjudicating the additional grounds raised by the assessee, particularly the disallowance under Section 14A. The Tribunal restored the matter to the CIT(A) for fresh adjudication on merits.

What were the facts?

The assessee filed appeals against the orders of the CIT(A) for AY 2018-19 and 2020-21. The CIT(A) had dismissed the assessee's appeal without adjudicating certain grounds, including disallowance under Section 14A and addition on account of interest on delayed MSME payments.

What were the issues?

Whether the CIT(A) was justified in not adjudicating the additional grounds of appeal raised by the assessee, and whether the disallowance under Section 14A and addition on account of MSME interest were correctly handled.

Which sections of the Income-tax Act were involved?

Section 14A,Section 153C,Section 143(3),Section 74,Section 115UB(2A),Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Before: SHRI ANIKESH BANERJEE & SHRI BIJAYANANDA PRUSETH

For Appellant: Shri Abdul Kadir Jawadwala
For Respondent: Shri Manoj Kumar (CIT DR)
Hearing: 09.07.2026Pronounced: 24.07.2026

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “A” BENCH, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.1828 & 1829/MUM/2026 (AY: 2018-19 & 2020-21) ACG Associated Capsules Pvt. Ltd. vs. DCIT, Central Circle 2(3), Mumbai 131, Kandivali Industrial Estate Room No. 803, 8th Floor, Pratishtha Kandivali (West) Mumbai- 400 067. Bhavan Old CGO Annexe, Maharishi Karve Road, Mumbai 400020. PAN/GIR No: AAACA 4769 K (Appellant) (Respondent) Assessee by Shri Abdul Kadir Jawadwala Revenue by Shri Manoj Kumar (CIT DR) Date of Hearing 09.07.2026 Date of Pronouncement 24.07.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

These two appeals filed by the assessee emanate from the orders passed under section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of Income Tax, Appeal-48, Mumbai [in short, ‘CIT(A)’], both dated 30.12.2025 for the assessment years (AY) 2018-19 and 2020-21. Since facts and the grounds are similar, with consent of both parties, the appeals were clubbed and heard together and a common order is passed for the sake of convenience and brevity. ITA No.1828/Mum/2026 is taken as a “lead case.” 2. The grounds of appeal raised by the assessee in ITA No.1828/Mum/2026

(AY 2018-19) are as under:

“1:0 Disallowance u/s. 14A of the Income-tax Act, 1961 r.w. Rule 8D(2)(ii) of the Income-tax Rules, 1962: 1:1 The Assessing Officer has erred in making a disallowance of Rs. 2,41,26,203 u/s. 14A of the Act on account of expenses incurred towards exempt income and the Commissioner of Income-tax (Appeals) has erred in not adjudicating the same. 1:2 The Appellant submits that considering the facts of the case and the law prevailing on the subject, the disallowance of Rs. 2,41,26,203 u/s. 14A ought not to be made by the Assessing Officer and hence the action of the Assessing Officer in making the disallowance u/s 14A is incorrect, erroneous and bad in law 1:3 The Appellant submits that that considering the facts of the case and the law prevailing on the subject, it has inadvertently computed suo-moto disallowance u/s. 14A of Rs. 2,91,667 (out of suo-moto disallowance of Rs. 1,19,15,613) on average of the monthly average balances of the investments of Rs. 2.91,66,667 which are not exempt but taxable 1:4 The Appellant submits that the Assessing Officer be directed to delete the aforesaid disallowance of Rs. 2,41,26,203 u/s. 14A of the Act and also to restrict the suo-moto disallowance to only Rs. 1,16,23,947/- instead of the disallowance computed by the Appellant of Rs. 1,19,15,613. 2:0 General: 2:1 The Appellant craves leave to add, alter, amend and/or substitute and/or modify in any manner whatsoever modify all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”

3.

The grounds of appeal raised by the assessee in ITA No.1829/Mum/2026

(AY 2020-21) are as under:

“1:0 Addition on account of interest on delayed payment to Micro Small Medium Enterprises ['MSME']: 1:1 The Assessing Officer has erred in making an addition of INR 14,83,380 on account of interest of delayed payments to MSME vendors and the Commissioner of Income-tax (Appeals) has erred in not adjudicating the same. 1:2 The Appellant submits that considering the facts of the case and the law prevailing on the subject, the addition of Rs. 14,83 380 on account of interest on delayed payments to MSME vendors ought not to be made by the Assessing Officer since the Appellant has already disallowed the same in its return of income, and hence the action of the Assessing Officer in making the addition is incorrect, erroneous and bad in law 1:3 The Appellant submits that the Assessing Officer be directed to delete the aforesaid double disallowance of Rs 14,83,380 on account of interest on delayed payments to MSME vendors and re-compute the Appellant's total income. 2:0 Non-granting of set-off of brought forward Long-term capital loss: 2:1 The Assessing Officer has erred in not allowing the set-off of brought forward long-term capital loss of Rs. 16,22,273 and the Commissioner of Income-tax (Appeals) has erred in not adjudicating the same. 2:2 The Appellant submits that that considering the facts of the case and the law prevailing on the subject, the Assessing Officer has erred in not granting the set-off of brought forward long-term capital loss against the long-term capital gains in terms of section 74 r.ws 115UB(2A) of the Act and hence the action of the Assessing Officer in not granting set-off of brought forward Long-term capital loss is incorrect, erroneous and bad in law. 2:3 The Appellant submits that the Assessing Officer be directed to grant the set-off of brought forward long-term capital loss and re-compute the Appellant's total income. 3:0 General: 3:1 The Appellant craves leave to add, alter, amend and/or substitute and/or modify in any manner whatsoever modify all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”

4.

Facts of the case, in brief, are that the assessee filed return of income for the AY 2018-19 on 30.11.2018 declaring total income at Rs.212,99,14,500/-. Consequent upon the search and seizure action u/s 132 of the Act in case of PPCO Group (Political parties & Charitable Organizations) of Ahmedabad and the information received from DCIT- Central Circle-2(3), Ahmedabad, the case was selected for scrutiny and notice u/s 153C was issued. In response, the assessee e- filed its return declaring income of Rs.213,80,92,010/-. The AO added Rs.2,41,26,203/- u/s 14A r.w.r. 8D of the Act and also Rs.81,77,510/- on account of difference between the total income declared in the original return and that in the return filed u/s 153C of the Act. 5. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) noted that the original assessment u/s 143(3) r.w.s. 144C(13) r.w.s 144B of the Act was already completed. Subsequently, due to search action u/s 153C, proceedings u/s 153C was initiated and a fresh disallowance u/s 14A r.w.r. 8D amounting to Rs.2,41,26,203/- was made. Thereafter, the CIT(A) has mentioned about the grounds of appeal raised by the assessee. Since the grounds are already challenged before the CIT(A) against the original assessment order u/s 143(3) of the Act, which was still pending, the CIT(A) did not adjudicate the grounds No. I, III, IV, V, VI and VII. He also dismissed the grounds on violation of principles of natural justice and levy of interest u/s 234C of the Act. In the result, the appeal of the assessee was dismissed. 6. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal and has raised the grounds mentioned in para 2 of this order. The Ld. AR has filed a paper book and submitted that the only ground pertains to disallowance u/s 14A r.w.r. 8D(2)(ii) of the Act. He submitted that this ground was not adjudicated by the CIT(A) and hence, he requested to set aside the matter to the file of the AO. 7. On the other hand, the Ld. Sr. DR supported the order of CIT(A). He has however, no objection if the matter is restored to the file of CIT(A) for fresh adjudication.

8.

We have heard both sides and perused the materials on record. We find that the assessee had not originally raised the ground on disallowance u/s 14A of the Act r.w.r. 8D(2)(ii) of the IT Rules, 1962 while filing the appeal before the CIT(A). However, the assessee raised additional ground before the CIT(A) vide letter dated 04.11.2024 and requested to admit the same as the decision of the Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. vs. CIT, 229 ITR 383 (SC). Copy of the request to admit additional ground and the said additional grounds are at page 27 to 29 of the paper book. The relevant portion is as under: “ADDITIONAL GROUND OF APPEAL Without prejudice to the ground of appeals originally raised: 1:0 Re.: Disallowance u/s. 14A of the Act r.w. Rule 8D(2)(ii) of the Income-tax Rules, 1962: 1:1 The Assessing Officer has erred in making disallowance u/s. 14A on account of expenses incurred towards earning exempt income. 1:2 The Appellant submits that considering the facts of the case and the law prevailing on the subject, the disallowance u/s. 14A ought not to be made by the Assessing Officer and hence the action of the Assessing Officer in making the disallowance u/s. 14A incorrect, erroneous and bad in law. 1:3 The Appellant submits that the Assessing Officer be directed to delete the disallowance u/s. 14A and to re-compute its total income accordingly. 2:0 Re: Erroneous levy of interest u/s. 234A of the Act: 2:1 The Assessing Officer has erred in levying interest u/s. 234A of the Act on the Appellant. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the interest levied by the Assessing Officer u/s. 234A is Incorrect. 2:3 The Appellant submits that the Assessing Officer be directed to delete the interest leviable u/s. 234A and to re-compute its final tax liability accordingly. 3:0 Re.: Erroneous levy of interest u/s. 234B of the Act: 3:1 The Assessing Officer has erred in levying interest u/s. 2348 of the Act on the Appellant.

3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the Interest levied by the Assessing Officer u/s. 234B is incorrect. 3:3 The Appellant submits that the assessing Officer be directed to delete the interest leviable u/s. 234B and to re-compute its final tax liability accordingly. 4:0 Re.:.: Interest u/s. 234C of the Act has been levied in excess: 4:1 The Assessing Officer has erred in levying interest of Rs. 48,62,278/- instead of Rs. 47,90,872/- u/s. 234C of the Act. 4:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, no further interest is leviable u/s. 234C (over and above the interest u/s. 234C of Rs. 47,90,872/- computed and paid by the Appellant at the time of filing its return of income) and hence the action of the Assessing Officer in this regard is incorrect, erroneous and not in accordance with the law. 3:3 The Appellant submits that the Assessing Officer be directed to delete the excess interest so levied u/s. 234C and to re-compute its final tax liability accordingly. 4:0 General: 4:1 The Appellant craves leave to add, alter, amend and/or substitute all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”

8.1 It is clear from above that the appellant had raised additional ground on disallowance made u/s 14A r.w.r. 8D(2)(ii) before the CIT(A) during the appellate proceedings. However, the CIT(A) has not adjudicated this ground. The Hon’ble Supreme Court in case of NTPC Co. Ltd. (supra) and the Hon’ble Bombay High Court in case of CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) have held that the CIT(A)/ITAT have power to admit additional ground and new claim. The facts in respect of the additional ground were available on record of the AO and goes to the root of the matter. Hence, the CIT(A) was required to consider the request of the assessee to admit the additional ground. He has neither considered the request to admit the additional grounds nor has he decided the said ground. Therefore, in the interest of justice and fair play, we set aside the order of CIT(A) and restore the file to him to decide the impugned ground in accordance with law after granting adequate and reasonable 6 opportunity of being heard to the assessee. The ground is allowed for statistical purpose. 9. In the result, the appeal of the assessee is allowed for statistical purpose. ITA No.1829/Mum/2026 (AY 2020-21) 10. At the outset, the Ld. AR submitted that the CIT(A) has not adjudicated the grounds on account of addition of interest on delayed payment to Micro Small Medium Enterprises ['MSME'] and non-granting of set-off of brought forward long-term capital loss by observing that separate appeal is pending before the CIT(A) against the original assessment order passed u/s 143(3) of the Act. We find that the reasons for not adjudicating the grounds are similar to that of ITA No/1828/Mum/2026 decided above. Hence, following the reason given above, the order of CIT(A) is set aside and the matter is restored to his file for adjudication on merit in accordance with law after granting adequate and reasonable opportunity of being heard to the assessee. The ground is allowed for statistical purpose. 11. In the combined result, the appeals of the assessee are allowed for

statistical purpose.

Order is pronounced on 24.07.2026.

Sd/- Sd/- (ANIKESH BANERJEE) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER *Aniket Chand; Sr. PS MUMBAI Date: 24.07.2026 Copy of the Order forwarded to:

1.

The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order

Assistant Registrar ITAT, MUMBAI

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