ADAAB HOTELS LTD,NEW DELHI vs. DCIT CIRCLE-1(2), NEW DELHI

This appeal filed by the assessee is preferred against the order of the CIT(A)-1, New Delhi dated 28.08.2019 pertaining to A.Y.2013-14.

“1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding a disallowance of Rs.

2,68,537/- out of interest paid on loans raised for business purposes and eligible for deduction u/s 36(l)(iii) of the Act.

2. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts and otherwise too act without jurisdiction in holding that “interest free loans given to directors are perquisites u/s 17 of the Income Tax Act read with Rule 3(7)(i) of the Income Tax Rules’ 1962 and also directing the learned Assessing Officer to take appropriate action so as to tax the perquisites under section 17 of the Act read with Rule 3(7)(i) of the Income Tax Rules in the hands of the directors in respect of interest free loans given to directors.

3. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts and acted without jurisdiction in directing the learned Assessing Officer to take appropriate action for not deducting TDS from the perquisites in respect of interest free loans given to directors.

4. That the learned Commissioner of Income Tax (Appeals) has framed the impugned order without granting any opportunity to the appellant and therefore the same is contrary to principles of natural justice and hence vitiated. Prayer - It is therefore, prayed that, it be held that disallowance made and sustained by the learned Commissioner of Income Tax (Appeals) be deleted and appeal of the appellant company be allowed and directions issued by the learned Commissioner of Income Tax (Appeals) are without jurisdiction and therefore may kindly be deleted.”

M. Krishnamurthy 7 SCC 123 held as under :-

“It must be remembered that in very case of delay, there can be some lapse on the part of the litigant concerned.

That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of dilatory strategy, the court must show utmost consideration to the suitor.

But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time, then the court should lean against acceptance of the explanation. While condoning the delay, the court should not forget the opposite party altogether. It must be borne in mind that he is a loser and he too would have incurred quite large litigation expenses” [Emphasis Supplied]”

2. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts and otherwise too act without jurisdiction in holding that “interest free loans given to directors are perquisites u/s 17 of the Income Tax Act read with Rule 3(7)(i) of the Income Tax Rules’ 1962 and also directing the learned Assessing Officer to take appropriate action so as to tax the perquisites under section 17 of the Act read with Rule 3(7)(i) of the Income Tax Rules in the hands of the directors in respect of interest free loans given to directors.

3. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts and acted without jurisdiction in directing the learned Assessing Officer to take appropriate action for not deducting TDS from the perquisites in respect of interest free loans given to directors.

13. Per contra the DR read the provisions of section 251 of the Act and pointed out that the directions of the CIT(A) are well within the explanation appended to provision of section 251 of the Act. Hence, there is not error or infirmity in the directions of the CIT(A).

(1) “In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;

(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; in an appeal against an order imposing a penalty, he may (b) confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; in any other case, he may pass such orders in the appeal as (c) he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.”

Order pronounced in the open court on 29.05.2023.