Loading judgment…
Facts
The assessee declared NIL income for AY 2014-15, claiming interest expenses deductible against interest income. The AO capitalized these expenses, disallowing them. The CIT(A) dismissed the assessee's appeal ex-parte due to non-compliance.
Held
The Tribunal condoned the 509-day delay in filing the appeal due to a bonafide reason concerning the assessee's tax consultant's health issues. The case was remanded to the CIT(A) for fresh adjudication.
Key Issues
Whether the appeal delay of 509 days can be condoned, and whether the matter should be remanded for fresh adjudication to the CIT(A) after condonation.
Sections Cited
250, 57(iii), 37
AI-generated summary — verify with the full judgment below
Before: SHRI AMIT SHUKLA & SMT. RENU JAUHRI
आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the CIT(A)/ National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 18.10.2023 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year 2014-15.
The assessee has raised the following grounds of appeal: “Condonation of delay AY 2014-15 Sahyadri Renewable Energy Pvt Ltd.
1. The Hon’ble Bench is requested to condone the delay in filing the appeal before the Hon’ble Bench against the order passed by Ld. CIT(A), NFAC considering the affidavit and application for condonation of delay Grounds of appeal
1. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in dismissing the appeal ex- parte on the ground of non-participation, without considering the merits of the case or the Appellant’s submissions before the Assessing Officer (AO). The dismissal violates principles of natural justice, as the Appellant faced procedural challenges in the faceless appeal mechanism, and no effective opportunity of being heard was provided.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the AO’s action to treat the interest income of Rs. 38,80,373/-, earned prior to the commencement of business from temporary deployment of borrowed funds, as taxable under the head “Income from Other Sources.” The Appellant submits that such interest is a capital receipt, not liable to tax as revenue income, as per settled judicial precedents.
4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not directing that the interest income of Rs. 38,80,373/-, earned on temporary deployment of funds borrowed for the Mini Hydroelectric Project, be reduced from the capital cost, including pre-operative expenses, to determine the actual cost of fixed assets.
5. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the AO’s disallowance of interest expenses of Rs. 1,56,30,895/- as a deductible expenditure under Section 57(iii) of the Income-tax Act, 1961. The Appellant submits that the interest paid on borrowed funds, temporarily invested to earn the interest income of Rs. 38,80,373/-, may kindly be allowed as deduction under Section 57(iii).
6. On the facts and in the circumstances of the case and in law, the learned AO ought to have appreciated that the company availed the borrowed funds by incurring interest cost of Rs. 1,56,30,895 and such funds were deployed temporarily to reduce the interest burden and therefore was eligible for deduction / set off u/s 57(iii).
7. On the facts and in the circumstances of the case and in law, the learned AO ought to have appreciated the difference of the language employed in section 57(iii) requiring deduction if the expenditure is incurred for the purpose as against the language employed in section 37 of expenditure incurred wholly and exclusively for the purpose of business. The Ld. AO we directed to reduce the income to NIL by considering the interest cost incurred.
8. The Appellant craves leave to add, alter, or amend any of the above grounds of appeal as may be necessary at the time of the hearing.”
Brief facts of the case are that the assessee filed return declaring NIL income for AY 2014-15 on 29.11.2014. It claimed interest expenses of Rs. AY 2014-15 Sahyadri Renewable Energy Pvt Ltd. 1,56,30,895/- as deductible against the interest income of Rs. 38,16,050/-. The case was selected for scrutiny under CASS and the assessment was completed at an income of Rs. 38,80,373/- being interest income taxable under other sources. Ld. AO held that the interest expenses claimed against interest received were to be capitalised and these are not allowable u/s. 57(iii) of the Act. Aggrieved with the order of the Ld. AO, the assessee preferred an appeal before the CIT(A). As no compliance was made to various notices issued by Ld. CIT(A), he proceeded to dismiss the appeal ex-parte. Aggrieved with the order of Ld. CIT(A), the assessee has filed an appeal before the Tribunal.
At the outset, it is noticed that the appeal is delayed by 509 days. The assessee has filed an affidavit for condonation explaining the circumstances leading to the delay. It has been stated that his tax consultant, being a senior citizen, was facing serious health issues during the relevant period. Accordingly, he could not check and respond to the notices and communications sent by the Income Tax Authorities on his e-mail address. As no physical notices were ever sent to the assessee’s registered address, the assessee remained unaware of the proceedings before Ld. CIT(A) as well as passing of the appellate order. Subsequently, on coming to know about the dismissal of the first appeal, the assessee filed an appeal before the Tribunal, which resulted in a delay of 509 days. It has been submitted that the delay being due to bonafide reasons, the same may be condoned.
AY 2014-15 Sahyadri Renewable Energy Pvt Ltd. 4.1. We have heard the rival submissions. After carefully considering the facts and circumstances explained by the assessee, we hereby condone the delay of 509 in filing of appeal as there is a bonafide and reasonable cause for such delay.
Ld. AR has further submitted that for the same reasons as explained in the affidavit for condonation of delay, the assessee could not make compliance before the Ld. CIT(A). He has, therefore requested that the case may be remanded to Ld. CIT(A) for fresh adjudication. In the interest of justice, we deem it appropriate to remand the matter to Ld. CIT(A) for fresh adjudication after providing due opportunity to the assessee.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 31.07.2025. Sd/- Sd/- AMIT SHUKLA RENU JAUHRI (न्यानयक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai दिन ुंक /Date 31.07.2025 दिव्य रमेश न ुंिग वकर/ स्टेनो आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यानित प्रनत //True Copy// आदेशािुसार/ BY ORDER,