M/S. KANKOO PAINTS PVT. LTD.,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

The appeal is time barred by 318 days. The assessee has filed an application seeking condonation of delay supported by an affidavit. We have examined the application and the affidavit filed by the assessee/appellant seeking condonation of delay. A perusal of the affidavit shows that the delay in filing of the appeal by the assessee is not intentional and is for the reasons stated therein. The Hon’ble Supreme Court of India in the case of Ram Nath Sao @ Ram Nath Sahu and Others Vs. Gobardhan Sao and Others reported as 2002 AIR 1201 has held that acceptance of explanation furnished seeking condonation of delay should be the rule and refusal an exception, more so when no negligence or inaction or want of bonafide can be imputed to the defaulting parties. Taking a pedantic and hyper technical view of the matter, the explanation furnished should not be rejected when stakes are high and/or arguable points of facts and law are involved in the case, causing enormous loss and irreparable injury to the party against whom the lis terminates either by default or inaction. The Hon’ble Apex Court in various other decisions has taken similar view in accepting the explanation furnished by the assessee for condoning the delay in filing of appeal. Thus, in view of the law laid down by the Hon’ble Apex Court and the reasons furnished by the assessee/appellant, the delay of 318 days in filing of appeal is condoned. The appeal is admitted to be heard and disposed of on merits.

In appeal the assessee has raised 3 grounds. In first ground of appeal the assessee has challenged reopening of assessment in the absence of any tangible material. The ld. Counsel for the assessee stated at the Bar that she is not pressing ground No. 1. Thus, in view of the

In ground No. 2 of the appeal the assessee has assailed addition of Rs.4,49,800/- on account of purchases disclosed by the assessee in revised return of income. The ld. Counsel for the assessee stated at the Bar that she is not pressing ground No. 2 of the appeal. Thus, in view of the statement made by the ld. Counsel for the assessee ground No. 2 of the appeal is also dismissed as not pressed.

In ground No. 3 the assessee has assailed disallowance of Rs.1,21,114/- u/s. 14A r.w. Rule 8D of the Act. The ld. Counsel for the assessee submitted that the assessee is engaged in manufacturing of industrial paints and thinners. During the year relevant to assessment year under appeal, the assessee earned dividend income of Rs.2,12,618/-. The Assessing Officer invoked the provisions of Rule 8D and made disallowance of Rs.1,21,114/-. Out of the aforesaid amount Rs.68,138/- was disallowed under Rule 8D(2)(ii) and amount of Rs.52,976/- was disallowed under Rule 8D(2)(iii) as 1/2 % of the average value investments. The ld. Counsel for the assessee referred to the Balance sheet of assessee company at page 57 of the paper book. The ld. Counsel for the assessee pointed that own funds of assessee are much more than the investments made. The own funds of assessee including reserves share capital and profits for the year are to the tune of Rs.4,06,74,047/-. Whereas, the investments made by assessee are only to the tune of Rs.89,70,292/-. Thus, no disallowance is warranted in respect of interest. To support her contentions the ld. Counsel for the assessee placed reliance on the decision

On the other hand Ms. Shabana Parveen representing the Department vehemently defended the impugned order and prayed for confirming the disallowance made u/s. 14A r.w. Rule 8D of the Act.

Both sides heard. Orders of the authorities below perused. The assessee has earned dividend income of Rs.2,12,618/-, exempt from tax. No suo-moto disallowance has been made by the assessee on such exempt income earned. The Assessing Officer has made disallowance under Rule 8D(2) as under :

The contention of the assessee is that the assessee is having own funds much more than the investments made. The ld. Counsel for the assessee has drawn our attention to the Balance sheet at page 57 of the paper book. A perusal of same shows that the own funds of assessee are sufficient to cover the investments made. It is a well settled law that where own funds of assessee are much more than the investment made, it shall be presumed that the investments are made by utilizing own funds. Thus, in view of law laid down by the Hon’ble Jurisdictional High Court in the

However, disallowance under Rule 8D(2)(iii) i.e. 1/2 % of average value of investments is mandatory. The ld. Counsel for the assessee has not been able to controvert such disallowance made. Accordingly, the disallowance of Rs.52,976/- u/s. 14A r.w. Rule 8D(2)(iii) is confirmed. Consequently, ground No. 3 is partly allowed in the terms aforesaid.

In the result, the appeal of assessee is partly allowed.