MR FIROZ A NADIADWALA,MUMBAI vs. ASST CIT 16(1), MUMBAI

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ITA 881/MUM/2020Status: DisposedITAT Mumbai09 February 2022AY 2013-144 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) confirmed the disallowances without proper application of mind and without giving the assessee a proper opportunity to be heard. The Tribunal noted deficiencies in the Assessing Officer's satisfaction and the CIT(A)'s reasoning.

What were the facts?

The assessee, a film producer, appealed against disallowances made by the Assessing Officer and confirmed by the CIT(A). The disallowances pertained to Section 14A expenses, an unsecured loan, and interest on funds diverted to a sister concern.

What were the issues?

Whether the CIT(A) erred in confirming disallowances without proper opportunity and adequate reasoning, and whether the Assessing Officer's satisfaction for disallowances under Section 14A and Section 68 was sufficient.

Which sections of the Income-tax Act were involved?

Section 14A,Section 68

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “F” Bench, Mumbai

For Appellant: Shri Abijraj Ranawat
For Respondent: Shri S.N. Kabra
Hearing: 02.02.2022Pronounced: 09.02.2022

This is in appeal by the assessee against order of Leonard CIT(A) dated 5.11.2019 and pertains to assessment year 2013-14.

2.

Brief facts of the case are that assessee in this case is a famous film producer. In the assessment order assessing officer made following disallowances.

Disallowance under section 14A

3.

This disallowance was made by the assessing officer despite noting the submission of the assessee that the said investment is in a sister concern made in earlier year. That it is coming from earlier years and assessee does not incur any administrative expense for the purpose of this investment and that that assessee has not earned any exempt income. The assessing officer did not record cogent satisfaction as to how the assessee plea that it has not incurred any has expense in this regard is not sustainable. He also rejected the 2 Mr. Firoz A. Nadiadwala proposition that when no exempt income is earned no disallowance under section 14A is permissible.

Disallowance of unsecured loan

4.

In this regard the assessing officer made disallowance of unsecured loan of rupees 10 lakhs by simply observing that the assessee has not proved the same. The assessing officer did not bring about anything with regard to the enquiry made by him in this regard.

Disallowance of interest

5.

This disallowance was made by the assessing officer for diversion of funds to giving interest-free loan to sister concern. In this regard assessing officer disregarded the assessee's contention that assessee has sufficient interest free funds. The assessing officer also held that there cannot be any commercial expediency in granting interest-free funds to the sister concern.

6.

Against the order assessee appeal before the learned CIT(A). Learned CIT appeals confirmed the order of assessing officer by emphasizing that assessee has not made proper representation before him. He did not address the issue that there is lack of satisfaction by the assessing officer that no expenses have been incurred for earning the exempt income. He did not bother to refer to any of the higher court decision which are on the proposition that the no exempt income is earned no disallowance is to be done. He also confirmed the disallowance of unsecured loan. He also held that in absence of one-to-one nexus assessee's plea of having advanced funds to sister concern out of interest free funds cannot be accepted.

7.

Against the above order assessee has filed appeal before us.

8.

Assessee has raised following grounds :- 1. On the facts and circumstances of the case and in law the Ld. Commissioner of Income-Tax (Appeals) erred in passing an ex party order without giving proper opportunity of being heard.

3 Mr. Firoz A. Nadiadwala

2. On the facts and circumstances of the case and in law the Ld. Commissioner of Income-Tax (Appeals) erred in confirming disallowance of interest amounting Rs. 76,92,547/- 3. On the facts and circumstances of the case and in law the Ld. Commissioner of Income-Tax (Appeals) erred in confirming addition of unsecured loan amounting Rs. 10,00,000/- u/s 68 of the Income-tax Act, 1961. 4. The order is bad in law and on facts. 5. Appellant craves leaves to add, alter, amend or vary all or any of the aforesaid grounds of appeal

9. We have heard both the parties and perused the records. Learned Counsel of the assessee submitted that assessee is primarily aggrieved by the lack of proper opportunity granted by the learned CIT appeals. We note that learned CIT(A) has confirmed the addition without proper application of mind. Lack of presentations by the assessee do not dilute the facts available on record which clearly demonstrate that there is no satisfaction by the assessing officer in rejecting the assessee’s plea that no expenditure has actually been incurred warranting disallowance under section 14A. That there is no enquiry brought on record by the assessing officer regarding the unsecured loan. That no one to one nexus is required between interest free funds and sum advanced in terms of the decision of honourable Bombay High Court decision in the case of HDFC Bank Ltd. (410 ITR 247) (Bom) and Reliance Petro Products Pvt. Ltd. (322 ITR 158).

10.

In these circumstances, in the substantial interest of justice we deem it appropriate to remit the issue the file of learned CIT(appeals).Learned CIT(appeals) is directed to decide the issue on merits after giving the assessee proper opportunity of being heard.

11.

In the result appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in 9.2.2022.

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