ANKUR POWER PROJECT PVT LTD,MUMBAI V. INCOME TAX OFFICER WARD 15(1)(1), MUMBAI, MUMBAI

ITA 4432/MUM/2025

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The case involves Ankur Power Project Pvt. Ltd., which appealed against the order of the Additional/Joint Commissioner of Income-tax, Patna, for the assessment year 2017-18. The primary contention was the disallowance of Rs.6,35,020 under Section 14A read with Rule 8D of the Income Tax Rules, 1962, which was upheld by the CIT(A). The appellant argued that no exempt income was earned during the year, thus making the provisions of Section 14A inapplicable. The Tribunal, after considering the submissions and the material on record, agreed with the appellant and set aside the disallowance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717246 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 08-07-2025
• Other Referred Cases: Cheminvest Ltd. v. CIT, PCIT v. Ballarpur Industries Ltd., New India Assurance Co. Ltd vs R. Srinivasan, The Commissioner of Income tax vs Gold Leaf Capital Corporation Ltd.
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL MATHEWS
• Keywords: Set aside; Additional evidence; Principle of natural justice; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 4432/MUM/2025 Assessment Year: 2017-18 Ankur Power Project Pvt. Ltd., Office No. 201, 2nd floor, Kailash Complex, A-2, Wing, Bhandup, West, S.O. Mumbai-400078. Vs. ITO Ward 15(1)(1), Aayakar Bhavan, Mumbai-400038. PAN NO. AAICA 9913 H Appellant Respondent Assessee by : None Revenue by : Mr. Sunil Mathews, Sr. DR Date of Hearing : 11/08/2025 Date of pronouncement : 12/08/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 12.11.2024, passed by the Ld. Additional/Joint Commissioner of Income-tax, Patna [hereinafter shall be referred as ‘the Ld. CIT(A)’] for assessment year 2017-18, raising following grounds: 1) That the Hon'ble CIT(A) erred in dismissing the appeal without providing adequate opportunity to the appellant to present its case, thereby violating principles of natural justice. Hence the appellate order passed be set aside. Printed from counselvise.com 2) For that the Hon'ble CIT(A) erred in facts and law by upholding the disallowance of Rs.6,35,020 under Section 14A read with Rule 8D of the Income Tax Rules, 1962, despite that, the a not earned any exempt income during the Assessment Year 2017 18, thereby making the provisions of Section 14A inapplicable. Hence, the disallowance of Rs.6,35,020 made u/s 14A of the Act be deleted. 3) For that the Hon'ble CIT(A) failed to app 14A(3) cannot be invoked mechanically merely on the basis of holding investments, especially when no exempt income has accrued or been received during the relevant previous year. Hence, the disallowance of Rs.6,35,020 made u/s 14A of t deleted. 4) For that the Id. AO erred in issuing notice u/s 143(2) of the Act dated 22.09.2019 without complying to the CBDT Instruction F.No.225/157/2017/ITA issued u/s 143(2) is not valid as per law and hen assessment order and the assessment proceedings under the Act is bad in law. 5) The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 2. Briefly stated, facts of the case are that assessee filed its return of income on 20.09.2017 declaring total income at Rs.69,030/-. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed, the Assessing Officer made disallowance u/s 14A of the Act invoking Rule 8D of the Income (in short ‘the Rules’) amounting to Rs.21,24,260/ restricted the same to the extent of expenses of Rs.6,35,020/ Ankur Power Project Pvt. Ltd ITA No. 4432/MUM/2025 2) For that the Hon'ble CIT(A) erred in facts and law by upholding the disallowance of Rs.6,35,020 under Section 14A read with Rule 8D of the Income Tax Rules, 1962, despite that, the appellant had not earned any exempt income during the Assessment Year 2017 18, thereby making the provisions of Section 14A inapplicable. Hence, the disallowance of Rs.6,35,020 made u/s 14A of the Act 3) For that the Hon'ble CIT(A) failed to appreciate that Section 14A(3) cannot be invoked mechanically merely on the basis of holding investments, especially when no exempt income has accrued or been received during the relevant previous year. Hence, the disallowance of Rs.6,35,020 made u/s 14A of t 4) For that the Id. AO erred in issuing notice u/s 143(2) of the Act dated 22.09.2019 without complying to the CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017 and so the notice issued u/s 143(2) is not valid as per law and hence the entire assessment order and the assessment proceedings under the Act is bad in law. 5) The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Rules 1963.\" Briefly stated, facts of the case are that assessee filed its return of income on 20.09.2017 declaring total income at . The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income n short ‘the Act’) were issued and complied with. In the assessment completed, the Assessing Officer made disallowance u/s 14A of the Act invoking Rule 8D of the Income- (in short ‘the Rules’) amounting to Rs.21,24,260/ he same to the extent of expenses of Rs.6,35,020/ Ankur Power Project Pvt. Ltd 2 ITA No. 4432/MUM/2025 2) For that the Hon'ble CIT(A) erred in facts and law by upholding the disallowance of Rs.6,35,020 under Section 14A read with Rule 8D of the Income Tax Rules, 1962, despite that, the appellant had not earned any exempt income during the Assessment Year 2017- 18, thereby making the provisions of Section 14A inapplicable. Hence, the disallowance of Rs.6,35,020 made u/s 14A of the Act reciate that Section 14A(3) cannot be invoked mechanically merely on the basis of holding investments, especially when no exempt income has accrued or been received during the relevant previous year. Hence, the disallowance of Rs.6,35,020 made u/s 14A of the Act be 4) For that the Id. AO erred in issuing notice u/s 143(2) of the Act dated 22.09.2019 without complying to the CBDT Instruction II dated 23.06.2017 and so the notice ce the entire assessment order and the assessment proceedings under the Act 5) The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Briefly stated, facts of the case are that assessee filed its return of income on 20.09.2017 declaring total income at . The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax n short ‘the Act’) were issued and complied with. In the assessment completed, the Assessing Officer made disallowance -tax Rules, 1962 (in short ‘the Rules’) amounting to Rs.21,24,260/- however he same to the extent of expenses of Rs.6,35,020/- Printed from counselvise.com claimed in the profit and loss account. On further appeal, the Ld. CIT(A) upheld the disallowance observing as under: “6.5 Despite being given multiple opportunities, the appellant had not submitted any do There is nothing on record to show any inaccuracies in the findings of the ld assessing officer. 6.6 Hon’ble Delhi High Court in its decision in the case of The Commissioner of Income taxvs Gold Leaf Capital C 02.09.2011 (ITA No. 798 of 2009) had clearly held, “We fail to understand that when such a conduct of the assessee was noted by the Tribunal itself, where was the occasion to give another opportunity to the assessee. Interestingly, the conscious of this fact, which is clear from the reading of Para 35 of the impugned order. In this para, the Tribunal noticed that there were two coursed open to it. First course was to draw an adverse inference against the assesseeand second c matter back to the AO. It chose second course only on the ground that the quantum of amount involved was high, that is hardly a ground or justification for restoring and giving premium to the assessee for its negligence. In fact, i inference should have been drawn. When the Tribunal itself concluded that the assessee was non be safely concluded that the assessee did not want to produce evidence, as it would have exposed th question were not genuine and fraudulent. Therefore, we are of the opinion that there is a legal error committed by the Tribunal, as in a case like this, only one course of action is presumed, viz., to draw adverse inference.” 6.7 Similarly, Hon’ble Supreme Court of India in its order dated 28/02/2000 in the case of New India Assurance Co. Ltd vs R. Srinivasan (Appeal (civil) 11439 of 1996) had clearly stated, “Every court or judicial body or authority, which has a duty to decide a lis between two parties, inherently possesses the power to dismiss a case in default. Where a case is called up for hearing and the party is not present, the court or the judicial or quasi body is under no obligation to keep the matter pending bef to pursue the matter on behalf of the complainant who had instituted the proceedings. That is not the function of the court or, for that matter, of judicial or quasi the complainant, therefore, the court will be w jurisdiction to dismiss the complaint for non Ankur Power Project Pvt. Ltd ITA No. 4432/MUM/2025 claimed in the profit and loss account. On further appeal, the Ld. CIT(A) upheld the disallowance observing as under: 6.5 Despite being given multiple opportunities, the appellant had not submitted any documentary evidences in support of its claims. There is nothing on record to show any inaccuracies in the findings of the ld assessing officer. 6.6 Hon’ble Delhi High Court in its decision in the case of The Commissioner of Income taxvs Gold Leaf Capital Corporation Ltd. on 02.09.2011 (ITA No. 798 of 2009) had clearly held, “We fail to understand that when such a conduct of the assessee was noted by the Tribunal itself, where was the occasion to give another opportunity to the assessee. Interestingly, the conscious of this fact, which is clear from the reading of Para 35 of the impugned order. In this para, the Tribunal noticed that there were two coursed open to it. First course was to draw an adverse inference against the assesseeand second course was to restore the matter back to the AO. It chose second course only on the ground that the quantum of amount involved was high, that is hardly a ground or justification for restoring and giving premium to the assessee for its negligence. In fact, it is a clear case where adverse inference should have been drawn. When the Tribunal itself concluded that the assessee was non-cooperative, it can naturally be safely concluded that the assessee did not want to produce evidence, as it would have exposed that the transactions in question were not genuine and fraudulent. Therefore, we are of the opinion that there is a legal error committed by the Tribunal, as in a case like this, only one course of action is presumed, viz., to draw adverse inference.” imilarly, Hon’ble Supreme Court of India in its order dated 28/02/2000 in the case of New India Assurance Co. Ltd vs R. Srinivasan (Appeal (civil) 11439 of 1996) had clearly stated, “Every court or judicial body or authority, which has a duty to lis between two parties, inherently possesses the power to dismiss a case in default. Where a case is called up for hearing and the party is not present, the court or the judicial or quasi body is under no obligation to keep the matter pending bef to pursue the matter on behalf of the complainant who had instituted the proceedings. That is not the function of the court or, for that matter, of judicial or quasi-judicial body. In the absence of the complainant, therefore, the court will be well within its jurisdiction to dismiss the complaint for non- prosecution” Ankur Power Project Pvt. Ltd 3 ITA No. 4432/MUM/2025 claimed in the profit and loss account. On further appeal, the Ld. 6.5 Despite being given multiple opportunities, the appellant had cumentary evidences in support of its claims. There is nothing on record to show any inaccuracies in the findings 6.6 Hon’ble Delhi High Court in its decision in the case of The orporation Ltd. on “We fail to understand that when such a conduct of the assessee was noted by the Tribunal itself, where was the occasion to give another opportunity to the assessee. Interestingly, the Tribunal was conscious of this fact, which is clear from the reading of Para 35 of the impugned order. In this para, the Tribunal noticed that there were two coursed open to it. First course was to draw an adverse ourse was to restore the matter back to the AO. It chose second course only on the ground that the quantum of amount involved was high, that is hardly a ground or justification for restoring and giving premium to the t is a clear case where adverse inference should have been drawn. When the Tribunal itself cooperative, it can naturally be safely concluded that the assessee did not want to produce at the transactions in question were not genuine and fraudulent. Therefore, we are of the opinion that there is a legal error committed by the Tribunal, as in a case like this, only one course of action is presumed, viz., to draw imilarly, Hon’ble Supreme Court of India in its order dated 28/02/2000 in the case of New India Assurance Co. Ltd vs R. Srinivasan (Appeal (civil) 11439 of 1996) had clearly stated, “Every court or judicial body or authority, which has a duty to lis between two parties, inherently possesses the power to dismiss a case in default. Where a case is called up for hearing and the party is not present, the court or the judicial or quasi-judicial body is under no obligation to keep the matter pending before it or to pursue the matter on behalf of the complainant who had instituted the proceedings. That is not the function of the court or, judicial body. In the absence of ell within its prosecution” Printed from counselvise.com 6.8 Respectfully relying upon the above judicial pronouncements, and on the fact that despite being giving multiple opportunities, no documentary evidence, had been brought on reco to prove that the facts and the findings of the Assessing Officer were incorrect, grounds no. 1 dismissed.” 2.1 When the matter came up for hearing before us, none appeared on behalf of the assessee no adjournment petition was filed. Accordingly, we proceed to dispose of the appeal ex parte qua the assessee, after hearing the Ld. Departmental Representative (DR) and perusing the material available on record. 3. We have considered the orders of the lower authorities and submissions of the Ld. DR. It is noted from the impugned order of the Ld. CIT(A) that the assessee had not earned any exempt income during the year under consideration. 3.1 The issue whether disallowanc can be made in the absence of exempt income is no longer integra. The Hon’ble Delhi High Court in [(2015) 378 ITR 33 (Del)] has held that no disallowance under section 14A is warranted where no exe the relevant assessment year. Similar view has been taken by the Hon’ble Bombay High Court in No. 51 of 2016, judgment dated 13.10.2016), holding that section 14A cannot be invoked when no receivable during the year. Ankur Power Project Pvt. Ltd ITA No. 4432/MUM/2025 6.8 Respectfully relying upon the above judicial pronouncements, and on the fact that despite being giving multiple opportunities, no documentary evidence, had been brought on record by the appellant to prove that the facts and the findings of the Assessing Officer were incorrect, grounds no. 1-3 taken by the appellant are hereby When the matter came up for hearing before us, none appeared on behalf of the assessee despite due service of notice and no adjournment petition was filed. Accordingly, we proceed to dispose of the appeal ex parte qua the assessee, after hearing the Ld. Departmental Representative (DR) and perusing the material ve considered the orders of the lower authorities and submissions of the Ld. DR. It is noted from the impugned order of the Ld. CIT(A) that the assessee had not earned any exempt income during the year under consideration. The issue whether disallowance under section 14A of the Act can be made in the absence of exempt income is no longer . The Hon’ble Delhi High Court in Cheminvest Ltd. v. CIT [(2015) 378 ITR 33 (Del)] has held that no disallowance under section 14A is warranted where no exempt income is earned during the relevant assessment year. Similar view has been taken by the Hon’ble Bombay High Court in PCIT v. Ballarpur Industries Ltd. No. 51 of 2016, judgment dated 13.10.2016), holding that section 14A cannot be invoked when no exempt income is received or receivable during the year. Ankur Power Project Pvt. Ltd 4 ITA No. 4432/MUM/2025 6.8 Respectfully relying upon the above judicial pronouncements, and on the fact that despite being giving multiple opportunities, no rd by the appellant to prove that the facts and the findings of the Assessing Officer 3 taken by the appellant are hereby When the matter came up for hearing before us, none despite due service of notice and no adjournment petition was filed. Accordingly, we proceed to dispose of the appeal ex parte qua the assessee, after hearing the Ld. Departmental Representative (DR) and perusing the material ve considered the orders of the lower authorities and submissions of the Ld. DR. It is noted from the impugned order of the Ld. CIT(A) that the assessee had not earned any exempt income e under section 14A of the Act can be made in the absence of exempt income is no longer res- Cheminvest Ltd. v. CIT [(2015) 378 ITR 33 (Del)] has held that no disallowance under mpt income is earned during the relevant assessment year. Similar view has been taken by the PCIT v. Ballarpur Industries Ltd. (ITA No. 51 of 2016, judgment dated 13.10.2016), holding that section exempt income is received or Printed from counselvise.com 3.2 Further, we note that the Explanation inserted to section 14A by the Finance Act, 2022, which deems that section 14A shall apply even if no exempt income has accrued or arisen, is prospective in nature and cannot be applied to the assessment year under consideration. This position has been clarified in several judicial pronouncements, including [(2022) 448 ITR 674 (Del)]. 3.3 In view of the above settled leg fact that no exempt income was earned by the assessee during the relevant previous year, the disallowance made under section 14A of the Act and sustained by the Ld. CIT(A) is unsustainable in law. Conclusion 4. We, therefore, set aside the findings of the lower authorities on this issue and direct the deletion of the disallowance made under section 14A of the Act. The grounds of the appeal of the assessee are accordingly allowed. 5. In the result, the appeal of the assessee is Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 12/08/2025 Ankur Power Project Pvt. Ltd ITA No. 4432/MUM/2025 Further, we note that the Explanation inserted to section 14A by the Finance Act, 2022, which deems that section 14A shall apply even if no exempt income has accrued or arisen, is prospective in nature and cannot be applied to the assessment year under consideration. This position has been clarified in several judicial pronouncements, including PCIT v. Era Infrastructure (India) Ltd. [(2022) 448 ITR 674 (Del)]. In view of the above settled legal position, and the admitted fact that no exempt income was earned by the assessee during the relevant previous year, the disallowance made under section 14A of the Act and sustained by the Ld. CIT(A) is unsustainable in law. set aside the findings of the lower authorities on this issue and direct the deletion of the disallowance made under section 14A of the Act. The grounds of the appeal of the assessee are accordingly allowed. In the result, the appeal of the assessee is allowed. nounced in the open Court on 12/08/2025. Sd/- Sd/ (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Ankur Power Project Pvt. Ltd 5 ITA No. 4432/MUM/2025 Further, we note that the Explanation inserted to section 14A by the Finance Act, 2022, which deems that section 14A shall apply even if no exempt income has accrued or arisen, is prospective in nature and cannot be applied to the assessment year under consideration. This position has been clarified in several judicial PCIT v. Era Infrastructure (India) Ltd. al position, and the admitted fact that no exempt income was earned by the assessee during the relevant previous year, the disallowance made under section 14A of the Act and sustained by the Ld. CIT(A) is unsustainable in law. set aside the findings of the lower authorities on this issue and direct the deletion of the disallowance made under section 14A of the Act. The grounds of the appeal of the assessee allowed. /08/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER Printed from counselvise.com Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Ankur Power Project Pvt. Ltd ITA No. 4432/MUM/2025 Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Ankur Power Project Pvt. Ltd 6 ITA No. 4432/MUM/2025 BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "