M/S. EDELWEISS RURAL & CORPORATE SERVICES LIMITED (AS SUCESSOR OF EDELWEISS CAPITAL MARKETS LIMITED ),MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -3(1)(2), MUMBAI

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ITA 1752/MUM/2025Status: DisposedITAT Mumbai15 May 2025AY 2017-18Bench: SHIR VIKRAM SINGH YADAV (Accountant Member), SHRI RAJ KUMAR CHAUHAN (Judicial Member)1 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) did not provide an effective opportunity of hearing to the assessee, violating the principles of natural justice. Consequently, the impugned order was set aside, and the matter was restored to the CIT(A) for fresh adjudication.

What were the facts?

The assessee, engaged in trading shares and commodities, filed a NIL income return for AY 2017-18. The AO made a disallowance of Rs. 29,24,442/- under Section 14A read with Rule 8D, which was confirmed by the CIT(A). The assessee appealed, arguing that the CIT(A) passed an ex-parte order without adequate opportunity of hearing.

What were the issues?

Whether the CIT(A) violated principles of natural justice by passing an ex-parte order without providing adequate opportunity of hearing to the assessee. Whether the disallowance under Section 14A r.w. Rule 8D was justified.

Which sections of the Income-tax Act were involved?

Section 14A,Section 8D,Section 250,Section 115JB,Section 270A,Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI

Before: SHIR VIKRAM SINGH YADAV & SHRI RAJ KUMAR CHAUHAN&

For Appellant: Shri Ajit Jain, Ld. AR
For Respondent: Shri Hemanshu Joshi, Ld
Pronounced: 15.05.2025

O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order of Ld. Commissioner of Income Tax (Appeals) /Addl/JCIT(A), Patna M/s. Edelweiss Rural & Corporate Services Limited [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] dated 17.01.2025 for the A.Y. 2017-18, wherein the disallowance made by AO u/s 14A r.w.r. 8D of Rs. 29,24,442/- was confirmed.

2.

The brief facts as culled out from the proceedings of lower authorities are that the assessee is engaged in the business of trading in shares, securities and commodities including derivatives. The assessee filed return of income for AY 2017-18 which was filed on 12.09.2017 declaring total income of Rs.NIL. The case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act were issued to the assessee. In response, the assessee filed the requisite details before the Ld. AO, but the AO after considering the details, worked out the disallowance u/s 14A r.w.r. 8D to the tune of Rs. 29,24,842/-. After deducting the suo moto disallowance of Rs. 55,591/- balance amount of Rs. 28,69,251/- was added to the total income of the assessee.

3.

Being aggrieved, the assessee preferred the appeal before Ld. CIT(A) who in turn confirmed the order of AO on the ground that assessee has failed to submit necessary documents as called for despite multiple M/s. Edelweiss Rural & Corporate Services Limited opportunities given and no documentary or written submissions were filed before the Ld CIT(A), hence dismissed the appeal of the assessee.

4.

Aggrieved by the impugned order, the assessee preferred the appeal before us raising the following grounds:-

1. On the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) [hereinafter referred as CIT(A)] has erred in law in passing order u/s 250 of the Act and upholding additions made by assessing officer without giving adequate opportunity of being heard and violating the principles of natural justice.

Accordingly, the Appellant prays that the order passed by the CIT(A) under section 250 of the Act is bad in law and ought to be quashed.

2. (a) The Commissioner of Income Tax (Appeals), Patna erred in upholding the addition made by Assessing officer by disallowing Rs.29,24,842/- (including suo-motto disallowance) made under section 14A of the Act r.w. Rule 8D of the Rules as against Rs. 55,591/- disallowed by the Appellant.

(b) The CIT(A) has erred in passing ex-parte order without giving sufficient opportunity of being heard. The Appellant submits that it has not incurred any expenditure in excess of Rs. 55,591/- towards earning of an exempt income; hence, AO shall be directed to restrict the disallowance to Rs. 55,591/-.

(c) The CIT(A) erred in upholding the action of the AO to invoke section 14A of the Act r.w. Rule 8D of the Rules without recording his dis-satisfaction with respect to accounts of the Appellant. Further, The AO erred in (d) In alternative and without prejudice, the AO erred in not considering only those investment on which exempt income is earned for making the disallowance under Rule 8D(2)(ii) of the Rules.

(e) In the alternative and without prejudice to the above, disallowance under section 14A of the Act is excessive and unreasonable.

Accordingly, the Appellant prays that the order passed by the CIT(A) under section 250 of the Act is bad in law and ought to be quashed.

3. The CIT(A) erred to upheld addition made of Rs. 28,69,251 being disallowarice of expenses related to exempt income while computing Book Profit under section 115JB of the Act in addition to Rs. 55,591/-, disallowed suo motto by the assessee.

The Appellant submits it has not incurred any expenditure in excess of Rs. 55,591/- in relation to exempt income. Hence, no further adjustment is required to be made while computing the Book Profits under section 115JB of the Act.

Accordingly, the Appellant prays that the order passed by the CIT(A) under section 250 of the Act is bad in law and ought to be quashed.

4. It refers to initiating penalty proceedings under Sec 270A of the Act. The appellant submits that it has not furnished any inaccurate particulars of income or concealed any income (as alleged by the learned AO) to justify levy of penalty. The Appellant prays that on the facts and circumstances of the case, no penalty is leviable, and the penalty initiated under section 270A of the Act shall be deleted.

M/s. Edelweiss Rural & Corporate Services Limited The Appellant craves leave to add to, alter, amend or withdraw all or any of the grounds of appeal herein above and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of this appeal as per law.

5.

We have heard Ld. AR and Ld. DR and examined the record. At the very outset, Ld. AR submitted on behalf of the assessee that the impugned order has been passed ex-parte and the Ld. CIT(A) has failed to offer effective opportunity of hearing to the assessee and has dismissed the appeal in a hurried manner and as such the assessee was prevented from presenting its case before the Ld. CIT(A). Therefore, the impugned order suffers from illegality and miscarriage of justice and liable to be set aside. Ld. AR further submitted that the assessee be given proper opportunity of hearing and the matter be restored to the file of Ld. CIT(A) for fresh adjudication of the case. The Ld. DR on the other hand supported the judgment of the Ld. CIT(A) stating that there is no merit in the appeal and same is liable to be dismissed.

6.

We have considered the rival submissions and examined the record. We notice that Ld. CIT(A) in para no. 6.4 of the impugned order has observed as under:-

M/s. Edelweiss Rural & Corporate Services Limited “6.4 Despite being given multiple opportunities of hearing as detailed in para 5, no written submission nor documentary evidences had been uploaded by the appellant in support of the grounds raised by it and to prove that the facts and the findings of the ld Assessing Officer were incorrect. In fact there is nothing on record to justify the claims made by the appellant in the grounds of appeals raised by it.”

7.

We have considered section 250 sub section 2(a) of "the Act" which provides as under:

Section 250 (2) The following shall have the right to be heard at the hearing of the appeal: - a. The appellant, either in person or by an authorised representative;

8.

It is evident from the provision that the hearing to be given is not a formality but an effective hearing is sine qua non for the purpose of upholding the principal of natural justice. It is thus evident from the contents of the impugned order extracted above that no effective opportunity of hearing has been given by the Ld. CIT(A) while passing the impugned order.

9.

For these reasons, we are of the considered opinion that matter needs to be restored to the file of the Ld. CIT (A) for giving effective hearing to the assessee who shall present its case before the Ld. CIT(A) within 60 days.

10.

In the result, appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 15.05.2025.

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