DCIT, NEW DELHI vs. M/S. MATIN REALTECH PVT. LTD., DELHI

At the outset, we may like to mention that neither anyone represented on behalf of the assessee nor any adjournment was sought despite notifying the date of hearing. In the circumstances, we were of the opinion that the assessee is not interested in prosecuting the appeal and accordingly we heard the appeal ex-parte qua the assessee, after hearing the arguments of the Revenue.

Briefly stated facts of the case are that the assessee e-filed its return of income on 29/09/2012 declaring nil income. The case was selected for a scrutiny and assessment under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was completed on 14/03/2015. In the assessment, the Assessing Officer made disallowance under section 14A of the Act amounting to Rs.3,67,68,492/-. Before the Assessing Officer, the assessee claimed that income of the company did not include any exempted income and therefore, no question of disallowance arises. However, before the Ld. CIT(A), the assessee submitted that income of the assessee include long-term capital gain of Rs.62,48,509/- and dividend income of Rs.15,66,500/-. Regarding the expenditure, the assessee claimed that in the books of accounts there was total loss of Rs.2,88,68,482/- but same was not claimed in the return of income and income was declared at Nil. According to the assessee in view of no expenditure claimed, disallowance of expenditure under 14A towards earning exempt income was not justified and amounted to double disallowance. The Ld. CIT(A) accepted the contention of the assessee and deleted the disallowance, observing as under: “5.2 Coming to the remaining grounds of appeal [grounds at (b) and (c)] therefrom these ground converge on the disallowance made in the impugned order u/s 14A of the Act. In fact, the disallowance is restricted to Rs.3,67,68,492/-. It is observed from the impugned order that while the first sentence reads, “The return of income was e-filed by the assessee on 29/09/2012 declaring an income of Rs. NIL", the recomputation of income of the appellant at the end of the assessment begins with a net loss of Rs.3,66,83,492/- stated to be "as declared by assessee". All these despite the appellant’s communication vide letter dated 4/03/2015 to the AO stating inter alia as under- “...The assessee Ms. Matin Realtech Pvt. Ltd. holding PAN: AAFCM-9533-L filed its return of income electronically for the assessment year 2012-13 vide acknowledgment no. 50351071290912 dated 29/09/2012 declaring NIL income. As per audited balance sheet the assessee company has booked total revenue amounting to Rs. 79,00,009.99 and incurred total expenses for Rs.3,67,68,492.22 therefore the assessee company has incurred business loss of Rs.2,88,68,482.23 for the above mentioned year. As above return of income was filed NIL income the assessee company had not claimed business losses in its ITR... .. .3. At the time of filing return of income for the assessment year 2012-13 the assessee company has not claimed deduction under chapter Vl-A, U/sec 57, u/s 54 and no claimed relief u/s 90/91 of IT Act, 1961. Hence as required by your honour justification of claiming deduction and relief is not applicable to assessee company... ”

Before us, the ld. DR submitted that mere mentioning nil income in the return of income is not sufficient and it needs verification, whether the assessee has claimed carry forward of the losses of the year under consideration, then only it can be ascertained that assessee has not claimed any expenditure in the return of income filed.

We have heard the submission of the ld. DR and perused the relevant material on record. There is no dispute as far as the principle that disallowance under section 14A can be made towards expenditure on exempted income, only out of the expenses claimed in the return of income filed. If the assessee has not claimed any expenditure in the return of income filed, there is no scope for disallowance towards exempted income under section 14A of the Act. The issue in the instant case is that according to the assessee in view of the NIL return of income filed no expenditure has been claimed by the assessee. Before us, no copy of return of income has been filed, on the basis of which it could be ascertained whether the assessee has claimed any expenditure in the return of income filed. This fact can be ascertained from the claim of carry forward of the losses in the return of income filed for subsequent years also. As the matter needs verification at the level of the Assessing Officer, we set aside the order of the ld. CIT(A) and restore the matter to the file of Assessing Officer for deciding afresh in accordance with law after providing adequate opportunity of being heard to the assessee. The grounds of the Revenue are accordingly allowed for the statistical purposes 6. In the result, the appeal of the Revenue is allowed for the statistical properties. Order is pronounced in the open court on 10th January, 2020.