RUSHABH RAMESHBHAI PRAJAPATI,GANDHINAGAR vs. THE DY. CIT, GANDHINAGAR CIRCLE, GANDHINAGAR

He, therefore, pleaded for the delay in the present case to be condoned pointing out that the assessee had adduced sufficient cause for the delay.

In the light of the above, we are inclined to condone the delay of 124 & 72 days in the filing of both the present appeals. The assessee had adduced sufficient cause for the delay, the same being attributed to uncontroverted fact of the notices of hearing before the Ld. CIT(A) as also the order passed being served on the wrong email ID of the assessee.

We shall first deal with the assesses appeal in quantum proceedings in ITA No. 2090/Ahd/24.

The grounds raised by the assessee read as under:

That the Ld. CIT(A), NFAC has sent notices on E-mail id other than mentioned in Form no. 35, and hence the appeal dismissed on limitation is against the Principal of Natural Justice.

That the assessee Ld. CIT(A), NFAC has not decide the appeal on merits and therefore it requires to be set aside.

That the A.O. has made disallowed U/s 40(a)(ia) r.w.s. 1941(b) does not amount to concealment as defined u/s 271(1)(c) of the & 2091/Ahd/2024 [Rushabh Rameshbhai Prajapati vs. DCIT] A.Y. 2014-15 - 4 –

Ld.Counsel for the assessee contended that the addition /disallowance made to its income was grossly unjustified and blatantly against the provisions of law. He pointed out that the AO had disallowed an expense which had not been claimed by the assessee for computing its income from business, by invoking provisions of law applicable to computation of income from business and profession. He pointed out that the assessment order itself revealed the fact that the assessee had shown business income on presumptive basis u/s.44AD of the Act and had also returned rental income and claimed interest expenditure against the same. The AO, he pointed out, though noted the fact that the rental income was not part of the business income returned by the assessee, he, however disallowed the interest expenditure claimed by the assessee against the same by invoking the provisions of Section 40(a)(ia) of the Act which Section, he pointed out, related to disallowances to be made while computing income under the head ‘Income from business & profession’. He contended that the disallowance clearly was not sustainable in law and pleaded deletion of the same.

We have heard both the parties. It is a fact on record that the AO had invoked the provisions of Section 40(a)(ia) of the Act for disallowing interest expenses incurred by the assessee in the present case amounting to Rs.15,91,452/-. The said provision of law is applicable for the purposes of computing income under the head ‘business & profession’. There is no dispute with regard to the same, the impugned Section being included in chapter IV-D of the Act which deals with the computation of income under the head ‘Income from Business & Profession’. It is also a fact on record that the expense disallowed by the AO was not claimed by the assessee against his business income, which the assessee had returned on presumptive basis u/s 44AD of the Act. The order of the AO reveals that the impugned expense had been claimed by the assessee against rental income returned to tax separate from the business income of the assessee. Therefore, it is crystal clear that the disallowance made by the AO in the present case is grossly unjustified and is not sustainable in the eyes of law.

Accordingly, we direct deletion of the disallowance of interest expenses of Rs.15,91,452/-.

Ground of appeal of the assessee is allowed.

In effect, the appeal of the assessee is allowed.

Taking up the appeal of the assessee filed in penalty proceeding in Section 271(1)(c) of the Act in relation to the disallowance made by the AO u/s.40(a)(ia) of the Act in the order passed in quantum proceedings. Since, we have directed the deletion of the disallowance made by the AO in our order above at para 12 in the assessee’s appeal in the penalty has no legs to stand upon and is, accordingly, deleted.

In effect, the appeal of the assessee is allowed.

In the combined result, both the appeals are allowed.