NCL HOMES LIMITED,HYDERABAD vs. ITO WARD-16(1), HYDERABAD

Brief facts of the case are that the assessee filed its return of income for the assessment year 2016-17 on 17/10/2016 declaring an income of Rs. 3,70,270/- and accepting the same, an order under section 143(3) of the Income Tax Act, 1961 (for short “the Act”) was passed on 13/12/2018. Subsequently, on a perusal of the assessment order, Ld. PCIT noticed from the Balance Sheet for the year ending on 31/3/2016 that the assessee company made investment in listed and unlisted equities to the extent of Rs. 5,27,33,933/- and earned dividend income of Rs. 26,29,981/- which is exempt under section 10 (34) of the Act and claimed interest expenditure of Rs. 5,72,80,691/- which was debited to the P&L account, but no disallowance was made either in the computation of total income or in the assessment order under section 14A of the Act read with Rule 8D of the Income Tax Rules1962 (“the Rules”). Ld. PCIT recorded that the learned Assessing Officer overlooked the examination of the issue relating to the disallowance under section 14A of the Act read with Rule 8D of the Rules. Ld. PCIT, therefore, returned a finding that the assessment order was erroneous insofar as it is prejudicial to the interest of Revenue and therefore, while setting aside the same he directed the learned Assessing Officer to cause necessary verification of disallowance under section 14A of the Act read with Rule 8D of the Rules.

Assessee is, therefore, before us in this appeal with a delay of 337 days. It could be seen from the record that there is a delay of 351 days in preferring these appeals and the reason attributed for the delay in filing the appeals to the pandemic. As a matter of fact, though the learned DR does not concede to condone the delay, there is no denial of the fact that the Hon'ble Supreme Court in the Suo Motu proceedings in the case of

It is submitted by the learned AR that the learned Assessing Officer took a conscious decision of accepting the returned income after examining the information furnished by the assessee and the details filed along with the return of income. Ld. AR submitted that interest free funds are available in excess of the investment yielding exempted income with the assessee and therefore there is no prejudice caused to the Revenue.

Per contra, Ld. DR submitted that whether or not the assessee is possessing the interest-free funds for investments was to be verified by the learned Assessing Officer. So also the learned Assessing Officer should have verified the disallowance of the administrative charges. Assessment order is very cryptic and it does not reflect any information sought by the learned Assessing Officer in respect of the disallowance under section 14A of the Act read with Rule 8D of the Rules, or the satisfaction of the learned Assessing Officer to accept that the returned income was proper.

We have gone through the record in the light of the submissions made on either side. For the sake of ready reference and convenience, we deem it just and necessary to refer to the contents of the assessment order, which is very brief, hereunder,-

In the circumstances, we are satisfied that it is a fit case where the Ld. PCIT rightly exercised jurisdiction under section 263 of the Act and directed the learned Assessing Officer to cause necessary verification with assessee’s submission as per the provisions of section 14A of the Act read with Rule 8D of the Rules. We find no merit in the grounds of appeal and therefore, while upholding the findings of the Ld. PCIT, we dismiss the appeal.

In the result, appeal of the assessee is dismissed.