ESSEL HIGHWAYS LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, DELHI

PER KRINWANT SAHAY, AM:

Appeal in this case has been filed by the assessee against the order dated 12.11.2025 passed by the ld. CIT(A) NFAC, Delhi for Assessment Year: 2018-19. 2. Grounds of appeal taken by the assessee are as under:

2 ITA No. 977/Del/2026 Essel Highways Ltd “1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre ["the learned CIT(A)"] has erred in dismissing the appeal of the Appellant on presumption that appeal is filed beyond the prescribed date. 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not adjudicating the following grounds raised on merits and technical: 2.1 That on the facts and under the circumstances of the case and in law, the learned Assessing officer ("the Ld. AO/ NeAC") erred in assessing the total loss of the Appellant at INR 54,96,91,806 as against the returned loss of INR 57,62,74,543. 2.2 That on the facts and in law, the Ld. AO/ NeAC has erred in making the addition amounting to INR 2,65,82,737 under section 14A the Income tax Act, 1961 ("the Act") read with Rule 8D of the Income Tax Rules, 1962 ('the Rules'), on basis of wrong surmise that the Appellant has incurred certain cost and expenditure to earn exempt income. The detailed grounds are as under: 2.2.1 That the Ld. AO/ NeAC failed to appreciate that no expenditure debited to the profit & loss account can be directly attributed for the purpose of earning of exempt income. 2.2.2 That the Ld. AO/ NeAC grossly erred in ignoring the fact that no exempt income has been earned during the year. 2.2.3 That the Ld. AO/ NeAC has not placed on record any cogent reason for applicability of the provisions of Section 14A of the Act or any finding to prove that the Appellant has actually incurred certain expenses to earn the exempt income and applied Rule 8D mechanically. 2.2.4 That the Ld. AO/ NeAC has applied the principles laid down by Hon'ble Supreme Court in the case of CIT v. Walfort Share and Stock Brokers P. Ltd. [2010] 326 ITR 1 (SC) blatantly ignoring the fact, that the facts and legal proximity of both the cases are not identical. 2.2.5 That the ld. AO/NeAC has erred in relying upon the Circular 5/2014 issued by Central Board of Direct Taxes (CBDT), however ignored the facts and principles laid by Hon’ble Delhi High Court in case of PCIT v. IL & FS Energy Development

3 ITA No. 977/Del/2026 Essel Highways Ltd Company Ltd. [2017] 84 taxmann.com 186 (Delhi), wherein it is held that the Circular No. 5/2014 cannot override the express provisions of section 14A, read with Rule 8D. 2.2.6 That the Ld. AO/NeAC has erred in facts and law that in case of contrary law, guidance, and judicial precedence under taxation statute, the guidance beneficial to the taxpayer shall prevail. 2.2.7 That the Ld. AO/ NeAC has failed to appreciate that the law nowhere envisages that even if exempt income is not earned, expenditure has to be disallowed under section 14A of the Act merely on the basis of investments made. The law requires that it has to be seen as to whether any expenditure has been actually incurred by the Appellant in relation to earning any exempt income or not 2.2.8 That the Ld. AO/ NeAC has failed to appreciate that the investment made by the Appellant are to be treated as strategic investments in subsidiaries and associates with no direct intention to earn exempt income. 2.2.9 Therefore, the addition made under section 14A of the Act r.w.r 8D of the Rules of INR 2,65,82,737 in the Assessment Order is unwarranted, unlawful and is deterrent to the Appellant. Thus, the same needs to be deleted and the said Order needs to be quashed. 2.3 That the Ld. AO/NeAC has grossly erred and ignored legislative procedure stipulated in para (x)/ (xv) of point no 5. - Procedure for assessment under Faceless Assessment Scheme 2019 and completed the assessment proceedings without issuing any Show Cause Notice ('SCN') and/or draft assessment order under section 143(3) of the Act. 2.4 That the Ld. AO/ NeAC has grossly erred in not providing an opportunity of being heard against the addition made under section 14A of the Act. Thus, the principle of natural justice has not been granted to the Appellant in the instant case. 2.5 That the Ld. AO/ NeAC has made the addition is haste and ignoring the settled law that secret assessment is not allowed under Income-tax statute. 2.6 That on the facts and in law, the Ld. AO/ NeAC has erred in not providing the full credit of Tax Deducted at Source ("TDS") to the Appellant for the concerned year.

4 ITA No. 977/Del/2026 Essel Highways Ltd 2.7 That on the facts and in law, the Ld. AO/ NeAC has erred in computing the interest under section 244A of the Act from the date of filing of return of income instead of first day of April of the relevant assessment year. 2.8 That on the facts and in law, the Ld. AO/ NeAC erred in initiating the penalty proceedings under Section 274 r.w.s 270A of the Act on the ground that the Appellant has under-reported its income. Each of the above grounds of appeal is independent and without prejudice to the other grounds of appeal. The Appellant craves leave to add, amend, modify, rescind, supplement, alter or withdraw any of the grounds stated here-in-above either before or at the time of hearing of this appeal.”

5 ITA No. 977/Del/2026 Essel Highways Ltd giving adequate opportunity to the assessee as required under law. The assessee is also directed to file all relevant details and documents before the ld. CIT(A) in time.

Order pronounced in the Open Court on 24.09.2026

Sd/- Sd/- (ANUBHAV SHARMA) (KRINWANT SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24.09.2026 *GP/Sr.PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(E) 4. CIT 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI