M/s Mfar Developers Pvt Ltd , Bangalore V. The Deputy Commissioner of Income Tax Circle-4(1)(2), Bangalore

ITA 334/BANG/2023

AI Insights

The case involves MFAR Developers Private Limited, which appealed against the orders of the CIT(Appeals), National Faceless Appeal Centre, Delhi, for the assessment year 2018-19. The appeals were related to disallowances made under various sections of the Income Tax Act, including sections 40A(3), 43B, and 36(1)(va), as well as issues related to the interest on delayed payment of taxes. The CIT(Appeals) had dismissed some of the grounds on the basis that there was no adjustment to the total income, which led to the current appeals. The tribunal found merit in the assessee's arguments and remitted the issues back to the CIT(Appeals) for a detailed examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124942 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-08-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 24-04-2023
• Other Referred Cases: Collector, Land Acquisition Vs. MST. Katiji and Others, PCIT v. Tally Solutions (P) Ltd., SMS Demag (P) Ltd. v. DCIT, Checkmate Service P. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital expenditure; TDS
• Section: 43B; 40A(3); 143(3); 40(a)(ia); 37(1); 143(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., VICE PRESIDENT AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA Nos.334 & 335/Bang/2023 Assessment year : 2018-19 MFAR Developers Private Limited, # 3, Lavelle Road, Bangalore – 560 001. PAN : AAFCM 6271M Vs. The Deputy Commissioner of Income Tax, Circle 4(1)(3), Bangalore. APPELLANT RESPONDENT Appellant by : S/Shri C.R. Krishna & Sachin Mehta, CAs Respondent by : Shri Mehere Yogesh Prabhakara Rao, Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 10.08.2023 Date of Pronouncement : 24.08.2023 O R D E R Per Laxmi Prasad Sahu, Accountant Member These two appeals by the assessee are against the DIN & Order No.ITBA/NFAC/S/250/2022-23/1050221940(1) dated 28.02.203 passed u/s. 250 r.w.s. 143(3) and DIN & Order No.ITBA/NFAC/S/250/2022-23/1045703489(1) dated 20.09.2022 passed u/s. 250 r.w.s. 154 of the Act by the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC] for the AY 2018-19 respectively. ITA Nos.334 & 335/Bang/2023 Page 2 of 7 2. There is a delay of 157 days in filing the appeal in ITA No.335/Bang/2023. The assessee has filed application for condonation of delay and affidavit stating that the CIT(Appeals) in the order dated 20.09.2022 in Appeal No. CIT(A),Bengaluru- 4/10779/2019-20 observed that the original 154 intimation order now stands merged with the assessment order u/s. 143(3) dated 19.04.2021 and therefore dismissed the appeal against the order u/s. 154 as infructuous. The assessee was waiting for the order of the CIT(Appeals) against the appeal preferred u/s. 143(3) order and hence no appeal was filed against 154 order. The appeal against the 143(3) order was also dismissed by the CIT(A) on the ground that there was no adjustment to total income and accordingly the assessee preferred an appeal against CIT(A)’s order dated 20.09.2022 resulting in delay in filing the appeal. The ld. AR submitted that there was sufficient cause as explained above for belated filing of appeal and prayed for condonation of delay. 3. After hearing both the parties, from the submissions made by the assessee, we are of the view that there are sufficient reasons for the delay in filing the appeal and respectfully following the judgment of the Hon'ble Apex Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471, delay of 157 days in filing the appeal before the Tribunal is condoned. 4. The brief facts are that the assessee is engaged in the business of construction and leasing out of commercial premises. It filed the original return of income on 29.10.2018 declaring loss of ITA Nos.334 & 335/Bang/2023 Page 3 of 7 Rs.3,57,94,338. Subsequently revised return was filed on 29.03.2019 declaring loss of Rs.3,87,25,391. The return was processed u/s. 143(1) on 22.12.2019 and following disallowance were made:- Disallowance u/s. 40A(3) Rs.1,43,000 Disallowance u/s. 43B Rs.3,80,192 Disallowance of late payment of employees contribution to Provident Fund u/s. 36(1)(va) r.w.s. 43B Rs. 42,162 5. The case was selected for complete scrutiny under CASS and notice u/s. 143(2) was issued on 22.09.2019. The AO noted that the assessee has debited a sum of Rs.48,25,03,848 in the Profit & Loss account towards finance cost which included interest cost of Rs.13,00,541 paid on delayed payment of taxes. The AO noted that this expenditure of Rs.13,00,541 is penal in nature and not allowable u/s. 37(1) and therefore made addition to the total income. 6. Aggrieved, the assessee filed appeal before the CIT(Appeals) against this addition as well as the disallowances made by the CPC in the intimation order u/s. 143(1) as stated above. The CIT(Appeals) after considering the submissions of the assessee allowed interest paid on service tax of Rs.3,,11,017 and Interest on GST of Rs.6,45,015 and sustained interest on TDS of Rs.3,44,509. 7. The CIT(Appeals) dismissed the other grounds No.2 to 5 raised before him relating to disallowances made u/s. 143(1) order by observing as under:- ITA Nos.334 & 335/Bang/2023 Page 4 of 7 “The assessment in case of the appellant has been completed u/s. 143(3) r.w.s. 144B vide order dated 19.04.2021; on perusal of assessment order it is seen that there is no adjustment to the total income of the appellant, on account of Grounds 2 to 5 as raised by the appellant. Hence, the Grounds 2 to 5 are DISMISSED.” 8. Aggrieved by the order of the CIT(Appeals), the assessee is in appeals before the Tribunal involving similar issues. 9. The ld. AR submitted that the CIT(Appeals) has completely ignored the grounds raised by the assessee and the details filed. The assessee has made suo motu disallowance on certain issues while computing the income and the CPC has made the disallowance on the same, which clearly shows that it is double disallowance. The CIT(A) did not adjudicate the appeal filed against the 143(1) order and the very same issue was not decided in the appeal against the 143(3) order. 10. The ld. AR submitted that the interest on TDS of Rs.3,44,509 and the disallowance u/s. 40A(3) of Rs.1,43,000 have already been disallowed by the assessee while computing the income. Regarding disallowance u/s. 40(a)(ia), he submitted that this section will not apply on the capital expenditure incurred by the assessee and these details were filed before the CIT(A). He relied on the following judgments:- (i) PCIT v. Tally Solutions (P) Ltd. p2021] 123 taxmann.com 21 (Karnataka) (ii) SMS Demag (P) Ltd. v. DCIT [2010] 38 SOT 496 (Delhi Trib) ITA Nos.334 & 335/Bang/2023 Page 5 of 7 11. Regarding disallowance of Rs.42,162 u/s. 36(1)(va), he further submitted that the assessee deposited the PF/ESI contribution before the due date for filing of return. 12. In view of the above submissions, the ld. AR requested that the matter may be sent back to the CIT(Appeals) for fresh consideration. 13. The ld. DR relied on the orders of lower authorities. He further submitted that the CIT(A) has rightly passed the order dated 28.02.2023 and the assessee should have filed separate appeal. The interest on TDS cannot be allowed as business expenditure u/s. 37(1) as it does not satisfy the conditions laid down. The Hon’ble Supreme Court has decided the issue of disallowance u/s. 36(1)(va) in favour of the revenue in the case of Checkmate Service P. Ltd. [2022] 143 taxmann.com 178 [SC]. He submitted that the orders of lower authorities should be upheld. 14. Considering the rival submissions and written synopsis filed by the assessee, we note that assessee has itself disallowed the interest on TDS of Rs.3,44,509 and disallowance u/s. 40A(3) of Rs.1,43,000 while computing the income and it has not been examined by the CIT(A). Accordingly, this issue is remitted back to the CIT(A) for verification. 15. Further, the issue of disallowance towards provision for gratuity of Rs.3,80,192 has also not been examined by the CIT(A), therefore this issue is also remitted back to the CIT(A). ITA Nos.334 & 335/Bang/2023 Page 6 of 7 16. In case of disallowance u/s. 40(a)(ia) of Rs.27,82,524, we note from the submission of assessee the above amount of disallowance of 30% of capital expenditure of Rs.92,75,243 was capitalized during the year (expenditure incurred at page 25 to 29 of PB filed before CIT(A). He relied on the judgments cited supra. This issue has also not been decided by the CIT(A), therefore the issue is remitted back to the CIT(A). 17. The next issue is disallowance u/s. 36(1)(va) of Rs.42,162 for late remittance of ESI contribution received from employees for the month of May, 2017 and March, 2018. In this regard, we note from the submissions of the assessee that there is wrong reporting in Form 3CD and the details have been filed at page No.13 & 14 of PB. Accordingly, this issue is also remitted back to the CIT(A) for verification and fresh consideration. 18. To sum up, we have sent back the issues to the CIT(A) for fresh consideration and decision as per law. The CIT(A) is directed to give reasonable opportunity of hearing to the assessee and assessee is directed to file necessary documents for substantiating its case and avoid unnecessary adjournment for early disposal of the case. ITA Nos.334 & 335/Bang/2023 Page 7 of 7 19. In the result, both the appeals are allowed for statistical purposes. A common order passed shall be kept in respective case files. Pronounced in the open court on this 24 th day of August, 2023. Sd/- Sd/- ( GEORGE GEORGE K.) (LAXMI PRASAD SAHU ) VICE PRESIDENT ACCOUNTANT MEMBER Bangalore, Dated, the 24 th August, 2023. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.