KISHAN GOPAL MOHTA,KOLKATA vs. ACIT, CIRCLE 31,, KOLKATA

ITA 2199/KOL/2025Status: DisposedITAT Kolkata30 September 2026AY 2016-20178 pages
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What did the Tribunal hold?

On the issue of Section 14A disallowance (Grounds 1 & 2), the Tribunal held that while administrative overheads are incurred, the interest component of the disallowance calculated under Rule 8D could not stand, as the assessee possessed interest-free own capital far exceeding tax-exempt investments. Applying the jurisdictional precedent, the interest component was deleted. The administrative disallowance under Rule 8D(2)(iii) was restricted to investments yielding exempt dividend income and directed to be recomputed. This ground was partly allowed. Regarding the undisclosed interest income (Ground 3), the Tribunal noted the assessee's explanation of an unauthorized credit by M/s Unitech Ltd. but also the failure to produce formal confirmations. In the interest of natural justice, the issue was remitted back to the AO for fresh adjudication after the assessee furnishes necessary reconciliations and communication history. This ground was allowed for statistical purposes. Concerning the disallowance of salary expenses (Ground 5), the Tribunal found the complete disallowance of approximately 80% on an ad-hoc basis unsustainable for a commercial entity. The addition was deleted, and this issue was allowed in favour of the assessee. For the ad-hoc disallowance of business expenses (Ground 4), the Tribunal observed that contract notes and statements were filed, vouching the transactions. The ad-hoc disallowance was fully deleted, and this issue was allowed in favour of the assessee. Technical/general grounds (Grounds 6 & 7) were dismissed as they required no separate adjudication.

What were the facts?

The assessee, Kishan Gopal Mohta, filed a return for Assessment Year 2016-17 declaring a total loss. The Assessing Officer (AO) selected the case for scrutiny and made several disallowances and additions, including Rs. 1,54,90,460/- under Section 14A, Rs. 5,00,000/- as undisclosed income, Rs. 19,68,454/- under salary head, and Rs. 5,73,515/- for expenses irrelevant to business. The AO's order resulted in an assessed income of (-) Rs. 1,33,35,330/-. The assessee's appeal to the CIT(Appeals) was dismissed. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the Tribunal had to decide if the CIT(Appeals) erred in confirming the AO's action of invoking Section 14A of the Income Tax Act, 1961, and making a disallowance of Rs. 1,54,90,460/-. The assessee argued that its own capital exceeded investments yielding exempt income, implying investments were made from interest-free funds, and relied on the jurisdictional High Court's decision in CIT Kol. vs. GKK Capital Markets (P) Ltd. The revenue supported the impugned order. 2. Whether the Tribunal had to decide if the CIT(Appeals) erred in confirming the addition of Rs. 5,00,000/- as undisclosed interest income. The assessee contended this was an unauthorized credit by M/s Unitech Ltd. in Form 26AS, never received. The revenue supported the impugned order. 3. Whether the Tribunal had to decide if the CIT(Appeals) erred in confirming the disallowance of Rs. 5,73,515/- from business expenses. The assessee argued this was an ad-hoc disallowance and that expenses were for business purposes. The revenue supported the impugned order. 4. Whether the Tribunal had to decide if the CIT(Appeals) erred in confirming the disallowance of Rs. 19,68,454/- under the head 'Salary Expenses'. The assessee argued this was a normal increment and essential for business operations. The revenue supported the impugned order.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

Per Pradip Kumar Choubey, Judicial Member:

This appeal filed by the assessee is directed against the order dated 18.07.2025 of the Office of the National Faceless Appeal Centre (NFAC), Delhi passed under Section 143(3) of the Assessment Year 2016-17 of the Income- Tax Act, 1961 (hereinafter referred to as “the Act”).

2.

The brief facts of the case of the assessee is that the assessee filed re

The order continues below.

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