SMT HANSA SHAH,JABALPUR vs. DCIT CIRCLE 2(1) JABALPUR, JABALPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (Through Virtual Mode) BEFORE SH. KUL BHARAT, VICE PRESIDENT AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.52/JAB/2025 A.Y. 2016-17 Smt. Hansa Shah, vs. DCIT, C/o Simplex Auto Industries, Nagpur Circle-2(1), Jabalpur Road, Madan Mahal Jabalpur, Madhya Pradesh-482001 PAN:AKJPS9102J (Appellant) (Respondent) Assessee by: Sh. Rahul Bardia, C.A. Revenue by: Sh. Alok Bhura, Sr. DR Date of hearing: 20.08.2025 Date of pronouncement: 30.09.2025 O R D E R PER NIKHIL CHOUDHARY, A.M. This is an appeal filed by the assessee against the order of the ld. Addl/JCIT(A)-4, Chennai under section 250 of the Income Tax Act, 1961 dismissing the appeals of the assessee filed against the orders of the ld. AO under section 143(3) of the Income Tax Act on 14.11.2018. The grounds of appeal are as under:- “1. The order passed by the Ld CIT (A) supporting the order of Ld AO is bad in law and facts, void ab initio and with jurisdiction. 2. That the Ld CIT (A) erred in law and facts of the case in not considering the written submission filed on 10.07.2021. The Ld CIT (A) has mentioned that no reply submitted and then proceeded to pass exparte order. 3. That the Ld CIT(A) erred in law and facts of the case in sustaining the addition of Rs 27,82,198 on account of disallowance u/s 14A of the Act even after giving detailed explanation of interest bearing funds have been utilized for the purpose of grant of interest bearing loans and not for the exempt income of Rs. 84,21,368. 4. The Ld CIT (A) erred in law and facts of the case while comparing interest rate @ 2.67% charged on loan given to one party with interest rate @ 12% on loan 1

ITA No.52/JAB/2025 A.Y. 2016-17 Smt. Hansa Shah taken from others without considering time period of interest payment as it was paid for only 2 month. 5. The appellant reserves the right to add or amend any ground of appeal.” 2. The facts of the case are that the assessee filed a return of income on 1.08.2016 declaring a total income of Rs. 29,49,930/-. The case was selected for limited scrutiny to examine whether the deduction against the income from other sources had been correctly shown in the return of income. Notices under section 143(2) and 142(1) were served upon the assessee, the details of which are recorded in the assessment order. During the course of assessment proceedings, the ld. AO noted that the assessee had incurred interest expenses for earning exempt income. She had shown investment to the tune of Rs. 2,29,71,470/- as on 31.03.2016 and earned exempt income of Rs. 84,21,368/-, in the financial year. He noted that the assessee had taken an unsecured loan of Rs. 3,58,30,885/- as on 31.03.2016 of which Rs.3,19,66,137/- had been taken from Sh. Nitin Shah, on which she was paying interest of Rs. 27,82,198/-. Therefore, she was asked to show cause as to why the interest paid to Sh. Nitin Shah should not be disallowed for diversion of interest bearing funds for non- business purposes. On perusal of the reply filed by the assessee, the ld. AO observed that she had given advances of Rs. 2,00,00,000/- to one Sh. Kekin Kunverji Chheda and charged interest at 2.67%, but she was paying interest @ 12% to her husband, Sh. Nitin Shah. He, therefore, asked the assessee to show cause as to why section 14A of the Act should not be invoked in her case for the A.Y. 2016-17. In response, the assessee filed a submission but the ld. AO observed that the order of the ITAT, Mumbai Special Bench in the case of ITO vs. Daga Capital Management Pvt. Ltd. in ITA No. 8057/MUM/2003 covered all the objections raised by the assessee, because the Hon’ble Bench had held that section 14A applies to all heads of income and aimed to disallow the expenditure incurred in relation to income not forming part of total income, even though such expenditure may be allowable under any other provision of 2

ITA No.52/JAB/2025 A.Y. 2016-17 Smt. Hansa Shah the Act. The ld. AO also referred to the decision of the Hon’ble Mumbai High Court in the case of M/s Godrej and Boyce MFG. Co. Ltd vs. DCIT 328 ITR 81 (Bom) which held, that even before assessment year 2008-09, when Rule 8D was not applicable, the ld. AO had to enforce the provisions of sub section (1) of section 14A. He, therefore, computed the value of the disallowance in Rule 8D r.w.s. 14A of the Act at Rs. 35,68,753/- but thereafter noted that the disallowance was being restricted to Rs.27,82,198/-, as this was the amount spent by the assessee. Accordingly, he made disallowance to this extent and initiated the penalty proceedings. 3. Aggrieved with the same, the assessee filed an appeal with the ld. CIT(A)-2, Bhopal which was subsequently migrated to the e-Appeal Scheme 2023. The ld. Addl/JCIT(A) notes that following the same, three notices of hearing were issued to the assessee on 28.10.2023, 17.10.2024 and 13.11.2024 but no response was received in response to any of these. On one occasion, a response was received but the same was blank. From the same, the ld. Addl/JCIT(A) concluded that the assessee was not interested in pursuing the appeal and therefore, he decided the appeal based on the materials on record. He noted that the assessee had not submitted any explanation / document in support of the grounds of appeal and therefore, he held that on the given facts of the case, the ld. AO had rightly invoked the provisions of section 14A as the assessee had earned exempt income. Accordingly, the appeal of the assessee was rejected and stood dismissed. 4. The assessee is aggrieved at this summary dismissal of his appeal. Sh. Rahul Bardia, C.A. (hereinafter referred to as the ld. AR) appearing before us submitted a paper book which contained proof of the submission of the reply before the ld. CIT(A) dated 10.07.2021 in page no. 1 of his paper book and thereafter the detailed written submissions before the ld. CIT(A) on pages 2 to 54 of the paper book. It was submitted that e-proceedings response

ITA No.52/JAB/2025 A.Y. 2016-17 Smt. Hansa Shah Acknowledgment No.142188721100721 was proof of the fact that the submissions had been made and therefore, the ld. Addl/JCIT(A) was unjustified in not considering them while passing the order. 5. On the other hand, Sh. Alok Bhura, Sr. DR (hereinafter referred to as the ld. DR) submitted that the submissions were clearly not visible to the ld. Addl/JCIT(A) on his screen and therefore, he had mentioned the same in his order. However, he had no objection to the matter being restored to the file of the ld. Addl/JCIT(A) for consideration of the issue on its merits. 6. We have duly considered the facts and circumstances of the case. It is fairly apparent from a perusal of the e-proceedings response acknowledgment numbered 142188721100721, that has been attached by the ld. AR in his paper book, that the assesee did file responses and written submissions to the notice under section 250. However, it seems that these have not been considered by the ld. Addl/JCIT(A) for the reason that they were not visible to the ld. Addl/JCIT(A) at the time. Thus, the assessee has not been heard on the issue and the orders have been passed simply on the basis of the findings of the ld. AO. Therefore, in the interest of justice, we deem it appropriate to restore this matter back to the file of the ld. Addl/JCIT(A), so that the written submissions can be considered and we allow the same to be re-furnished if they are not visible due to some technical problem and thereafter the ld. Addl/JCIT(A) may decide the issue in accordance with law. 7. In the result, the appeal of the assessee is allowed statistical purposes. Order pronounced on 30.09.2025 in the open Court. Sd/- Sd/- [KUL BHARAT] [NIKHIL CHOUDHARY] VICE PRESIDENT ACCOUNTANT MEMBER DATED:30/09/2025 Sh 4

ITA No.52/JAB/2025 A.Y. 2016-17 Smt. Hansa Shah Copy forwarded to: 1. Appellant – 2. Respondent – 3. CITDR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S.