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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals)- 20, Mumbai passed u/s 143(3) and 250 of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal:
Grounds for not admissible of additional evidence 1. On the facts and in the circumstances of the case and in law the learned CIT(A) failed to admit the additional evidences u/r 46A whereas the same is admissible as the appellant was prevented by sufficient cause from producing before the AD.
M/s. JSB Dream Homes Pvt Ltd, Mumbai - 2 - evidences which are relevant to Business advances and Donations. Thus order passed without considering evidences is bad in law and against the principal of natural justice. The Appellant prays that order passed is without considering the evidences filed and observance of principal of natural justice hence needs to be quashed". Grounds for Disallowance of Interest Rs.53,72,694/- u/s 36(1) (iii) 2. On the facts and in the circumstances of the case and in law the learned CIT(A) failed to admit the additional evidences submitted on 24/10/2019 whereas the same are admissible u/r 46A as the appellant was prevented by sufficient cause from producing before the AD evidences relevant to business advances. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the disallowance of interest expense of Rs.53,72,694/whereas the said interest expense is incurred wholly and exclusively for construction activities of the appellant.
3. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in estimating the notional & fictitious interest income of Rs.94,72,099/- worked out @ 12% on Business advance and thereby fully disallowed & compensating the actual interest expense of Rs.53,72,694/- against such notional income without verifying and appreciating the fact that the advances paid are business advance directly related to the appellants business. The Appellant prays that Interest of Rs 53,72,694/- shall be allowed and order passed is without considering the evidences filed and observance of principal of natural justice hence needs to be quashed". Grounds for Addition of Interest Income of Rs.7,22,097/- 4. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in making addition of Interest Income of Rs.7,22,097/- which is already shown in profit &
M/s. JSB Dream Homes Pvt Ltd, Mumbai - 3 - loss a/c of the appellant.
On the facts and in the circumstances of the case and in law the learned CIT(A) has wrongly estimated and guess that appellant had total interest income of Rs 14,44,194/- and out of which only 7,22,097/- was shown in profit & loss a/c and balance Rs 7,22,097/- not taken whereas the fact is the appellant has interest income only of RS 7,22,097/- which is also reported in 26AS. The learned CIT(A) has made this addition on assumption basis ignoring the clarification filed by Auditor dt. 09/10/2019 that "by mistake interest amount of Rs. 7,22,097/- mentioned in Tax Audit Report at Sr. no.16(d) and appellant has correctly shown interest income in company's P&L Account". The Appellant prays that Interest income of 7,22,097/- which is taxed twice shall be deleted Grounds for Allowance of Deduction u/s 80G of Rs.1,75,500/- 6 The learned CIT(A) erred in passing the order that appellant has not produced the copy of the donation receipt in Point No.8.4.2. The appellant has already submitted the copy of donation receipt in his submission dt. 28/12/2018 & 24/10/2019 before the AO and CIT(A) respectively.
7. The learned CIT(A) has erred in giving deduction under section 80G @ 50% on eligible donation of Rs.3,51,000/- which comes to Rs.1,75,500/- Grounds for deletion of Interest and Penalty 8 . On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in charging interest u/s 234A,B,C&D and initiated penalty u/s 271(1)(C) and 271(1)(b).
The Brief facts of the case are that, the assessee company is engaged in the business of construction activities. The assessee has filed the return of income for the A.Y 2016-17 on 17.10.2016 disclosing a total income
M/s. JSB Dream Homes Pvt Ltd, Mumbai - 4 - of Rs.26,78,160/-and the return of income was processed u/s 143(1) of the Act. Subsequently the A.O. has issued notice u/s 143(2) and 142(1) of the Act along with questionnaire. In compliance, the Ld. AR of the assessee furnished the details from time to time. The A.O on perusal of the financial statements found that the assessee has claimed the interest on loans in the profit and loss account and provided interest free loans to the related concerns out of the interest bearing loans. The A.O. has issued show cause notice for disallowance of claim and the assessee has filed explanations by letter dated 18-12-201 referred at Para 3.2 of the order. The A.O dealt on the provisions of Sec. 36(1)(iii) of the Act and the judicial decisions and calculated the proportionate disallowance u/s 36(1)(iii) of the Act by applying the rate @ 12% on interest free loans and advances and restricted disallowance to Rs.53,72,694/-.
Similarly, on perusal of the Tax Audit report the A.O found that the assessee has not disclosed the interest income and the A.O is of the opinion that the income is not offered for taxation and made addition of Rs. 7,22,097/-. Further, the A.O. made the disallowance of donations claimed as business expenditure as the assessee has failed to submit original receipts of Rs. 4,51,000/- and assessed the total income of Rs.
M/s. JSB Dream Homes Pvt Ltd, Mumbai - 5 - 93,99,450/- and passed the order u/s 143(3) of the Act dated 28.12.2018.
Aggrieved by the order the assessee has filed an appeal before the CIT(A). In the appellate proceedings the CIT(A) considered the grounds of appeal, findings of the A.O and the submissions. Whereas in respect of the disallowance of interest u/s 36(1)(iii) of the Act, the CIT(A) has confirmed the addition as the assessee could not file the satisfactory explanations. Further, in respect of interest income the CIT(A) has confirmed the action of the A.O. Whereas, with respect to disallowance of donations, the CIT(A) has granted the partial relief. Further the CIT(A) has rejected the additional evidence filed in the course of appellate proceedings as the evidences were not filed explaning the sufficient and reasonable cause and partly allowed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal.
5. At the time of hearing, the Ld. AR made submissions on the admission of the additional evidence which was rejected by the CIT(A). The contention of the Ld. AR that the CIT(A) has erred in not admitting the additional evidence u/r 46A of I T Rules. Further the assessee was prevented by a sufficient cause in submitting the M/s. JSB Dream Homes Pvt Ltd, Mumbai - 6 - information before the A.O in respect of business advances, interest income and donations due to medical emergencies. The Ld. AR made submissions on the merits of the case and prayed for an opportunity of hearing to substantiate the case with the evidences before the lower Authorities. Contra, the Ld. DR relied on the order of the CIT(A).
6. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue is in respect of admission of additional evidence which was rejected by the CIT(A) for various reasons.The contentions of the Ld. AR are that the additional evidence play a vital role in decision making and in the assessment proceedings, the assessee could not submit the details in respect of the interest payments, loans and advances, interest free loans and the donations receipts as the assessee Legal representative (LR) could not appear on particular day before the assessing officer(A.O) in the scrutiny proceedings as his father was hospitalized and was expired on 28.12.2018. Further there was a GST survey operations in the assessee’s office on 11.12.2018 to 31.12.2018 and the accountant of the assessee has attended before the A.O and submitted the information and the A.O.has passed the Asst order on 28-12-2018.The CIT(A) has called for the assessment records and found
M/s. JSB Dream Homes Pvt Ltd, Mumbai - 7 - that the assessee has not submitted the details in the course of assessment proceedings. The assessee has filed the additional evidences before the CIT(A) but were not accepted by the CIT(A). The contentions of the Ld.AR that the evidences filed u/r 46A of the I T Rules are in respect of Business loans and advances and donations which are relevant and play a vital role in decision making.
We considered the facts, circumstances, additional evidences and the paper book filed in support of non submission of the evidence due to reasons beyond the control of the assessee. We find the reasonable cause explained by the assessee in respect of the death of the father of the CA/ AR who appeared before the Assessing officer cannot be overruled. Accordingly we are of the opinion that the assessee should not suffer for non filing of material information, as the evidences played vital role and we admit the additional evidence. Accordingly, to meet the ends of justice and considering the principles of natural justice, we set aside the order of the CIT(A) and restore the entire disputed issue along with the additional evidence to the file of the CIT(A) to adjudicate fresh on merits and the assessee should be provided adequate opportunity of hearing. The assessee should cooperate in filling the information for early disposal of the appeal and M/s. JSB Dream Homes Pvt Ltd, Mumbai - 8 - allow the grounds of appeal of the assessee for statistical purposes.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 17.09.2021.