TOPLLER FASHIONS INDIA PRIVATE LIMITED(AS SUCCESSOR COMPANY OF LOYAL APPARELAS PVT LTD),MUMBAI vs. THE DCIT, CIRCLE 3(3)(1), MUMBAI

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ITA 6303/MUM/2024Status: DisposedITAT Mumbai29 January 2025AY 2013-144 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal noted that the assessee's application filed under the Vivad se Vishwas Scheme had been accepted, and Form 2 was issued by the designated authority on 27.12.202. The assessee had also paid the due tax of Rs.4,18,480/- pursuant to the acceptance of the application. In light of these developments, the Learned Authorized Representative (AR) requested permission to withdraw the appeal. The Tribunal, in view of the above facts, dismissed the appeal of the assessee as withdrawn. No specific findings were made on the merits of the grounds of appeal as the appeal was withdrawn due to settlement under the Vivad se Vishwas Scheme. The operative direction was to dismiss the appeal as withdrawn.

What were the facts?

The assessee, Topller Fashions (India) Pvt. Ltd. (as successor to Loyal Apparels Pvt. Ltd.), filed an appeal before the Income-Tax Appellate Tribunal (ITAT) challenging the order of the CIT(A) dated 08.10.2024 for Assessment Year 2013-14. The appeal contested an Assessment Order dated 29.03.2016 passed by the Assessing Officer. The assessee raised five grounds of appeal concerning violations of natural justice, disallowance of expenses under Section 14A read with Rule 8D, disallowance of interest under Section 36(1)(iii), addition for book profit computation under Section 115JB, and initiation of penalty proceedings under Section 271(1)(c). However, at the outset of the hearing, the assessee's counsel submitted that the assessee's application under the Vivad se Vishwas Scheme was accepted, Form 2 was issued on 27.12.202, and the due tax of Rs.4,18,480/- was paid. Consequently, the assessee requested to withdraw the appeal.

What were the issues?

1. Whether the appeal proceedings before the CIT(A) were in violation of the principles of natural justice, as the assessee allegedly lacked access to the email address where compliance notices were sent, leading to the confirmation of the Assessment Order without adequate opportunity to be heard? 2. Whether the CIT(A) erred in confirming the additional disallowance of Rs.16,01,503/- under Section 14A read with Rule 8D, incurred in relation to exempt income (Long Term Capital Gains and Dividends), when the assessee had suo-moto disallowed Rs.8,28,994/-? 3. Whether the CIT(A) erred in confirming the disallowance of Rs.92,27,366/- as proportionate interest expenditure under Section 36(1)(iii), allegedly for non-interest bearing advances, when the assessee claimed the interest was for business purposes and sufficient own funds were available? 4. Whether the CIT(A) erred in confirming the addition of Rs.24,30,497/- for the computation of book profit under Section 115JB, which included the disallowance under Section 14A read with Rule 8D, when the assessee had already suo-moto disallowed Rs.8,28,994/-? 5. Whether the initiation of penalty proceedings under Section 271(1)(c) was valid, given the alleged violation of natural justice in the assessment proceedings? Assessee's Contentions: - The CIT(A) order violated natural justice as the assessee did not receive notices. - The additional disallowance under Section 14A r.w.r. 8D was unwarranted as the assessee had already made a suo-moto disallowance. - Interest expense under Section 36(1)(iii) was for business purposes and sufficient own funds were available for advances. - The addition for book profit computation under Section 115JB was incorrect due to the same reasons as the Section 14A disallowance. - Penalty proceedings were initiated without adequate opportunity. Revenue's Contentions: - No specific contentions are recorded for the revenue in the provided text.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(3),Section 14A,Section 36(1)(iii),Section 115JB,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Before: MS. KAVITHA RAJAGOPAL & SMT. RENU JAUHRI

For Appellant: Shri Hemant Joshi
For Respondent: Shri Hemanshu Joshi
Hearing: 28.01.2025Pronounced: 29.01.2025

Assessee by : Shri Hemant Joshi Revenue by : Shri Hemanshu Joshi Date of Hearing 28.01.2025 Date of Pronouncement 29.01.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Additional/Joint Commissioner of Income-tax (Appeals), Mumbai-10 Delhi/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 08.10.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2013-14.

2.

The assessee has raised the following grounds of appeal:

“1. GROUND NO. 1: APPELLATE PROCEEDINGS IN VIOLATION OF THE PRINCIPAL OF NATURAL JUSTICE: 1.1 On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in confirming, the Assessment Order dated 29/03/2016, passed by the Learned Assessing Officer, u/s 143(3) of the Income Tax Act, without providing sufficient and adequate opportunity of being heard to the Appellant and without considering the facts and submissions available on the records. 1.2 The Appellant humbly submits that it was not having any access to the E- mail Address, which was available on records, where the various compliance Notices were delivered by the Learned CIT(A), for response / reply, by the Appellant and therefore, the Appellant humbly prays that such Order dated 08/10/2024, of the Learned CIT(A), grounded on the violation of the principal of the natural justice, fair play and equity, may kindly be quashed and justice be done to the Appellant.

2. GROUND NO. 2: DISALLOWANCE OF RS. 16,01,503/- U/S.14A R.W.R. 8D: 2.1 On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming, the additional disallowance of Rs. 16,01,503/-, computed u/s. 14A r.w.r. 8D incurred, allegedly in relation to the exempt income, in the form of Long Term Capital Gains on the sale of the Listed Equity shares and Dividends received from the Listed Equity shares, duly computed, by the Learned ACIT, CIRCLE, 12(3)(2), MUMBAI, vide his Assessment Order dated 29/03/2016, under regular/normal provisions of the Income Tax Act. 2.2 The Learned CIT(A) failed to appreciate and ought to have considered the facts of the Case and submissions available on the records, that, Appellant had suo-moto disallowed, the expenditure of Rs. 8,28,994/-, u/s 14A of the Income Tax Act, while computing "Returned Loss", under the regular /normal provisions of the Income Tax Act and therefore, any additional computation of disallowance of Rs. 16,01,503/-, under the pretext of the applicability of rule 8D, was unwarranted and was not in accordance with the law. 2.3 The Appellant prays that the disallowance of Rs. 16,01,503/- made u/s: 14A r.w.r. 8D be deleted, while computing "Returned Loss", under the regular /normal provisions of the Income Tax Act and justice be done to the Appellant.

3. GROUND NO. 3: DISALLOWANCE OF INTEREST OF RS. 92,27,366/- U/S. 36(1)(iii): 3.1 On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming, the disallowance of the proportionate Interest expenditure of Rs. 92,27,366/- u/s. 36(1)(iii), incurred, allegedly in relation to the funds utilised for giving non-interest bearing advances, duly computed, by the Learned ACIT, CIRCLE, 12(3)(2), MUMBAI, vide his Assessment Order dated 29/03/2016, under regular / normal provisions of the Income Tax Act. 3.2 The Learned CIT (A) failed to appreciate and ought to have considered, the facts of the Case and submissions available on the records, that, the interest expense was incurred by the Appellant, for the utilisation of funds for giving advances for the purpose of its business and the Appellant also had sufficient non-interest bearing funds / own funds, for making such advances and therefore, such interest expenses ought to have been allowed. 3.3 The Appellant prays that the disallowance of interest expenses of Rs. 92,27,366/- made u/s. 36(1)(iii) be deleted, while computing "Returned Loss", under the regular / normal provisions of the Income Tax Act and justice be done to the Appellant.

4.

GROUND NO. 4: ADDITION OF RS. 24,30,497/- WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT: 4.1 On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming, the addition of Rs. 24,30,497/-, computed u/s. 14A r.w.r. 8D incurred, allegedly in relation to the exempt income, in the form of Long Term Capital Gains on the sale of the Listed Equity shares and Dividends received from the Listed Equity shares, duly computed, by the Learned ACIT, CIRCLE, 12(3)(2), MUMBAI, vide his Assessment Order dated 29/03/2016, for the computation of "Book Profits" u/s 115JB of the Income Tax Act. 4.2 The Learned CIT(A) failed to appreciate and ought to have considered, the facts of the Case and submissions available on the records, that, the Appellant had suo-moto disallowed/ added, the expenditure of Rs. 8,28,994/-, u/s 14A of the Income Tax Act, while computing its "Book Profits of Rs. 36,30,691/-, u/s 115JB of the Income Tax Act, which was available on the records and therefore, the addition of the same amount of Rs. 8,28,994/-again and any additional computation of disallowance / addition of Rs. 16,01,503/-, under the pretext of the applicability of rule 8D, both such additions was unwarranted and was not in accordance with the law, while computing the "Book Profits" u/s 115JB of the Income Tax Act. 4.3 The Appellant prays that the disallowance / addition of Rs. 24,30,497/- (Rs. 8,28,994/- 16,01,503/-) made u/s. 14A r.w.r. 8D, be deleted, while computing the "Book Profits" u/s 115JB of the Income Tax Act and justice be done to the Appellant.

5.

GROUND NO. 5: INITIATION OF PENALTY U/S 271 (1) (C)OF THE ACT: 5.1 On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in confirming, the Assessment Order dated 29/03/2016, passed by the Learned Assessing Officer, u/s 143(3) of the Income Tax Act, initiating Penalty proceedings u/s 271 (1) (c) of the Act, without providing sufficient and adequate opportunity of being heard to the Appellant and without considering the facts and submissions available on the records. 5.2 The Appellant prays that, such initiating of Penalty proceedings u/s 271 (1) (c) of the Act, may kindly be quashed and justice be done to the Appellant.”

3.

At the outset, Ld. AR has submitted that the assessee’s application filed under Vivad se Vishwas Scheme has been accepted and Form 2 has also been issued by the designated authority on 27.12.202. The assessee has also paid the due tax of Rs. 4,18,480/- pursuant to the acceptance of his application. Accordingly, Ld. AR has requested permission to withdraw the appeal.

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