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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & Ms. SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This appeal is filed by assessee against the order dated 09.05.2016 passed by the CIT(A)-2, Vadodara for the Assessment Year 2012-13.
The assessee has raised the following grounds of appeal :-
“1. The Ld. CIT(Appeals) has erred in partly confirming disallowance under Section 14A without applying law correctly. Entire disallowance u/s.14A is unwarranted and be deleted.
2. The Ld. CIT(Appeals) has erred in confirming disallowance of Rs.22.00 Lakhs on account of withdrawal of right which is otherwise allowable expenditure under the Act. Ld. A.O., without verifying the evidences and documents submitted during the course of assessment, made addition which is bad in law and unwarranted and be deleted.
3.. The CIT(Appeals) has totally ignored factual position as regards to payment of Brokerage and is not correct in disallowing and confirming addition of Rs.7,70,000/- on account of Brokerage expenses and therefore bad in law and unwarranted and be deleted.”
Page 2 of 5 3. The assessee is engaged in the business of Land Estate & Construction. The assessee filed its return of income on 30.09.2010 declaring total income of Rs.73,34,160/- and book profit under Section 115JB amounting to Rs.66,88,817/-. The case was selected for scrutiny, notice under Section 143(2) of the Income Tax Act, 1961 was issued on 08.08.2013 and assessment was completed under Section 143(3) vide order dated 05.03.2015. The Assessing Officer made the following additions:
1 Total income as per return of Rs.73,34,156/- income Additions: (a) Disallowance under section 14A Rs.5,90,932/- (b) On account of withdrawal of Right Rs.22,00,000/- (c) Loss on sale of asset Rs.10,730/- (d) On account of difference in Rs.97,101/- depreciation (e) On account of Brokerage Rs.7,70,000/- Expenses (f) Prior Period Expenses Rs.4,890/- Rs.36,73,653/- Total Income Assessed Rs.1,10,07,810/-
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. AR submitted that there is a delay of 165 days in filing the present appeal which was explained by the assessee thereby filing affidavit to that extent submitting therein that during the period the concerned employee relating to audit/income tax and service tax has left the service due to his personal problems and, therefore, the statutory limit was not noticed by the other staff before filing the appeal.
The Ld. DR objected to condone the delay.
As the delay was properly explained and it was not on the part of the assessee and hence delay of 165 days is condoned.
Page 3 of 5 8. As regards ground no.1, Ld. AR submitted that the assessee company claimed exempt dividend income amounting to Rs.14,67,873/-. Ld. AR submitted that during the year under consideration, the assessee has claimed exempt dividend income on mutual fund investment made out of surplus fund with the assessee and the same was claimed as tax-free income. Ld. AR submitted that there was no expenses incurred by the assessee for earning such exempt income and, therefore, the assessee worked out disallowance under Section 14A of Rs.1,50,934/-. The Ld. AR submitted that the Assessing Officer as well as the CIT(A) ignored the fact that Rule 8D is not at all applicable since the assessee has not incurred any expenses for earning exempt income.
The Ld. DR submitted that there is a categorical observation by the CIT(A) that the assessee has not objected to the applicability of provisions of Section 14A read with Rule 8D. Thus, the CIT(A) has rightly directed the Assessing Officer to make the disallowance to the extent of Rs.3,57,399/- on account of administrative expenses and allowed the consequential relief.
We have heard both the parties and perused all the relevant material available on record. As per the applicability of Rule 8D the component of administrative expenses were rightly disallowed by the CIT(A) and, therefore, there is no need to interfere with the same. Ground no.1 of the assessee’s appeal is dismissed.
As regards ground no.2, relating to disallowance of Rs.22,00,000/- on account of withdrawal of Right which is otherwise allowable expenditure under the Act, Ld. AR submitted that the Assessing Officer without verifying the evidences and documents submitted during the assessment proceedings made the addition which is bad in law and unwarranted.
The Ld. AR submitted that the disallowance of Rs.22,00,000/- was incorrect as the said expenditure was incurred while getting the land vacated on behalf of the purchaser. Ld. AR submitted that the assessee has submitted all the agreements along with confirmations from the parties.
Page 4 of 5 13. The Ld. DR relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has categorically observed that out of Rs.22,00,000/-, Rs.20,00,000/- were paid in cash to 11 members of a family which is contrary to the provisions of Section 40A(3) of the Act. The expenditure claimed at Rs.22,00,000/- was duly confirmed by the parties as per the documentary evidences produced by the assessee before the Assessing Officer as well as before the CIT(A) but from the perusal of the land agreement the responsibility of getting the title cleared was that of Shri Sanjay M. Patel, the original seller of the land, and not that of the assessee. There is no evidence shown by the assessee during the course of hearing before us that there was minutes of understanding (MOU) made between the original seller and the purchaser. The assessee being the purchaser has not given any other valid explanation to that extent as to why the cash deposits were made. Thus, the Assessing Officer as well as the CIT(A) has rightly made the disallowance of Rs.22,00,000/- being expenditure claimed on getting the land vacated. Ground no.2 is dismissed.
As regards ground no.3 relating to payment of Brokerage Expenses amounting to Rs.7,70,000/-, the Ld. AR submitted that the brokerage was in respect of purchase and sale of land at village Ampad. Ld. AR submitted that the assessee has given all the details as to the amount of Rs.7,70,000/- which was claimed towards business procurement in the nature of booking 5 flats in project namely “Lotus Residency” Project.
Ld. DR relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the amount of brokerage claimed is towards booking of five flats in the project namely “Lotus Residency Project”. The assessee has given details of rest of the payment and brokerage but for the amount of Rs.7,70,000/- the assessee has not given details before the Assessing Officer as well as before the CIT(A). Hence, ground no.3 is dismissed.
Page 5 of 5 18. In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on this 13th day of July, 2022.