K G PAN PRODUCTS (P) LTD.,GORAKHPUR vs. DY/ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 1, GORAKHPUR

BECAUSE delay of 46 days in filing the appeal is attributable to the fact that Chartered Accountant of the appellant [namely CA. Sri Prakash Agarwal, Gorakhpur] was preoccupied in attending the medical needs of her mother who had finally left for her Heavenly abode in the month of March 2023, therefore CIT(A) has erred in law and on facts in dismissing the appeal on the ground that "the appellant has miserably failed in establishing bonafide delay by the CA and the delay stands attributed solely to the appellant itself." 4. BECAUSE the appellant has duly filed their written submission alongwith supporting documents in response to earlier notices (wherein no such issue was ever raised regarding delay of 46 days in filing the appeal) issued for hearing, therefore the CIT(A) has grossly erred in law in dismissing the appeal "in limine" without considering the submission made by the appellant on the merits of the case. WITHOUT PREJUDICE TO ABOVE 5. BECAUSE the appellant has not incurred any expenditure towards earning the exempt income (being share of profit from partnership firm), disallowance of Rs.19,35,768/-made by invoking the provisions of section 14A of the Act without bring on record any direct nexus between the exempt income and the expenses incurred to earn the same, is wholly bad in law and on facts of the case. 5.1 BECAUSE failure of the authorities below to bring on record the proximate cause for disallowance of Rs.19,35,768/-vis-à-vis the exempt income earned by the appellant vitiates disallowance made by invoking the provisions of section 14A of the Act and therefore same is not legally maintainable in law. 5.2 BECAUSE disallowance of Rs.19,35,768/- by invoking the provisions of section 14A of the Act is not maintainable in law for the reason that assessing officer has failed to explicitly record a finding with reference to the appellant's accounts as to how the expenditure claimed by the appellant out of the non-exempt income is related to the exempt income. 5.3 BECAUSE without prejudice to Ground Nos.5, 5.1 & 5.2 disallowance of Rs.19,35,768/-under section 14A is not justified on the facts of the case for the reason that the appellant has sufficient availability of free funds (in the form of shareholders fund) to invest as capital investment in the partnership firm and to earn exempt income as share of profit from partnership firm. 6. BECAUSE disallowance of deduction claimed for Rs.20,84,500/- under section 80G of the Act is wholly bad in law and on facts of the case for the reasons that donations aggregating to Rs.41,69,000/- had been paid by the appellant to various organization duly registered under section 12A/12AA of the Act and notified under section 80G of the Act. 6.1 BECAUSE all the supporting documents in support of donations aggregating to Rs.41,69,000/- paid by the appellant to various organization duly registered under section 12A/12AA of the Act and notified under section 80G of the Act had been placed on record during the course of appellate 2 proceedings before the CIT(A), disallowance of deduction for Rs.20,84,500/- claimed under section 80G of the Act completely ignoring the supporting documents placed on record is wholly erroneous and therefore deserves. to be allowed. 7. BECAUSE the appellant craves for leave to modify, alter and raise any other ground during the course of appellate proceedings. 8. BECAUSE the order appealed against is contrary to facts, law and principles of natural justice.” 2. The facts of the case are that the assessee filed a return of income declaring total income of Rs. 25,68,28,140/-. The case was selected for scrutiny on ground of large difference in the opening stock of the current year, when compared with the closing stock of the previous year, in the trading and manufacturing account as per the return of income. The ld. AO records that he issued a notice to the assessee and the assessee submitted a reply in this regard, on which he did not draw any adverse inference. However, the ld. AO noted that the assessee had received share of profit of Rs. 19,35,768.78/- from a partnership firm M/s Shudh Plus Hygiene Products, which was claimed as exempt and the assessee had not made any disallowance under Rule 14A r.w.r. 8D of the Income Tax Act. In view of the same, the assessee was asked to submit a computation under rule 8D. The assessee did not submit such a computation, but submitted the details of investment in the partnership firm M/s Shudh Plus Hygiene Products from where it had received the said exempt income. The AO therefore, issued a show cause notice to the assessee asking why 1% of the annual average of investment should not be disallowed (restricted to the exempt income of Rs. Rs. 19,35,768.78/-). However, the assessee did not make compliance and therefore a sum of Rs. Rs. 19,35,768.78/- was disallowed and added back to the income of the assessee. The Assessing Officer also noted that the assessee had made donations of Rs. 41,69,000/- and claimed deduction of Rs. 20,84,500/- under section 80G but had not filed any details in this regard. 3 The assessee was asked to furnish these details, which the assessee did not furnish and therefore, the deduction of Rs. 20,84,500/- claimed under section 80G was disallowed. 3. Aggrieved with the said assessment order, the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) noted that there was a delay of 46 days in the filing of appeal. The assessee submitted an application in which it was pointed out that its C.A. was very busy in his personal work and forgot to file the appeal in time. However, the ld. CIT(A) held that this did not constitute sufficient cause for condoning the delay. Therefore, after relying on a number of case laws, the ld. CIT(A) held that merely attributing the delay on the part of the C.A.’s negligence, without submitting an affidavit by the respective C.A. did not substantiate the assertion of the assessee. Accordingly, he dismissed the appeal in limine. 4. The assessee is aggrieved with this dismissal of its appeal and has accordingly come before us. On the appointed date of hearing, nobody was present on behalf of the assessee. Sh. Deepak Yadav, Sr. DR (hereinafter referred to as the ld. DR) assisted the Bench in this regard. He pointed out that the assessee had been in receipt of exempt income and had not apportioned any expenses towards the earning of this exempt income. Therefore, the AO had justifiably computed the amount under Rule 8D and restricted the addition to the extent of exempt income. He further submitted that the assessee had been negligent in filing of appeal against the said order and therefore, the ld. CIT(A) had rightly dismissed the said order. He, therefore, prayed that the order passed by the ld. AO may kindly be upheld. 5. On the other hand, ongoing through the grounds of appeal and statement of facts, we find that the delay of 46 days in filing of the appeal was stated to be attributable to the fact that the Chartered Accountant of the 4 assessee, C.A. Sh. Prakash Agarwal of Gorakhpur was preoccupied in attending to the medical needs of his mother, who subsequently passed away in March, 2023. It was further submitted that due to a medical urgency of his counsel cum Representative Sh. Saurabh Agarwal, who was based at Prayagraj, compliance could not be made to notice dated 6.03.2025 issued by the ld. CIT(A). It was further submitted that the assessee had not incurred any expenditure towards earning of exempt income and the Assessing Officer had failed to record any satisfaction, with reference to the assessee’s accounts, as to how the expenditure claimed by the assessee out of non- exempt income was related to the exempt income. It was furthermore submitted that the assessee had sufficient availability of free funds to invest his capital investment in the firm and therefore, no disallowance was called for on this amount. With regard to the disallowance of Rs. 20,84,500/- made under section 80G of the Act, it was submitted that the same was bad in law on account of the fact that donations aggregating to Rs. 41,69,000/- had been made by the assessee firm to various organizations that have been duly registered under section 12A / 12AA and notified under section 80G. 6. We have duly considered the arguments of the ld. DR and the submissions of the assessee as recorded in its grounds of appeal. In view of the circumstances, outlined in the grounds of appeal regarding the illness of the mother of the Chartered Accountant and the medical emergency stated in respect of the present Authorized Representative, we deem it appropriate to restore this matter back to the file of the ld. CIT(A) so that the ld. CIT(A) may afford the assessee due opportunity to present its case on merits and may thereafter consider their appeal in accordance with law. Accordingly, we restore this matter back to the file of the ld. CIT(A) for an appropriate decision.

In the result, the appeal of the assessee is allowed for statistical purpose. Orders pronounced on 31.08.2026 in the open Court.