Watsal Buildcon Pvt Ltd, New Delhi V. ITO WARD - 27(2), New Delhi

ITA 6279/DEL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0965 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 24-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Set aside
• Section: 14A

Judgement Text

I.T.A.No.6279/Del/2019 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER आ.अ.स ं /.I.T.A No.6279/Del/2019 /Assessment Year: 2016-17 Watsal Buildcon Pvt. Ltd. 207, 2 nd Floor, DDA Market, No. 11, CR Park, New Delhi. ब म Vs. ITO, Ward 27(2) New Delhi. PAN No. AAACW7587M अ Appellant /Respondent िनधा रतीक ओरसे /Assessee by None राज वक ओरसे /Revenue by Shri Om Prakash, Sr. DR स ु नवाईक तारीख/ Date of hearing: 17.05.2022 उ ोषणाक तारीख/Pronouncement on 27.05.2022 आदेश /O R D E R This appeal is filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-9, New Delhi dated 27.05.2019 for the AY 2016-17. The assessee in its appeal raised the following grounds: - 1. “That the CIT(A)-9, New Delhi has erred in law and on facts by confirming the addition of Rs.18,35,838/- u/s 36(1)(iii) of the Income Tax Act, 1961 out of the amount of interest paid on borrowings utilized for the purpose of business of the appellant. 2. That the appellant craves leave to add, amend and delete any ground of appeal.” I.T.A.No.6279/Del/2019 2 2. In spite of issue of notice, none appeared on behalf of the assessee nor any adjournment was sought. The notice sent through speed post with acknowledgement due returned un-served with the endorsement of postal authorities with the remarks that incomplete address/adhura putta. Since notice returned un-served this appeal is disposed off on hearing the Ld. DR on merits. 3. The Ld. DR submits that while completing the assessment the Assessing Officer noticed that assessee was having opening and closing investment in unlisted shares amounting to Rs.1,52,98,649/- and at the same time the assessee debited interest of Rs.1,62,98,077/- on borrowed capital @12% p.a. Therefore, the Assessing Officer held that interest expenditure amounting to Rs.18,35,838/- @12% is not an allowable expenditure for the purpose of business and the same is disallowed u/s 36(1)(iii) of the Act. Ld. DR submits that on appeal the Ld. CIT(Appeals) sustained the disallowance. 4. Heard the Ld. DR perused the orders of the authorities below. 5. On perusal of the assessment order it is noticed that the Assessing Officer has given a finding that the opening and closing value of investment in unlisted shares by the assessee company is I.T.A.No.6279/Del/2019 3 Rs.1,52,98,649/- and, therefore, interest expenditure amounting to Rs.18,35,838/- @12% p.a. is being treated as direct expenditure incurred by the assessee company to earn exempt income from investment in shares. It is also noticed that the Assessing Officer has given a finding that interest paid on borrowed capital is not an allowable expenditure for the purpose of business and, therefore, Rs.18,35,838/- is added back u/s 36(1)(iii) of the Act. Both these findings of the AO appear to be contradictory. It is not clear as to under which provision the AO made the disallowance i.e. either u/s 36(1)(iii) or 14A of the Act especially when the finding by the AO that interest expenditure amounting to Rs.18,35,838/- @12% p.a. is treated as direct expenditure incurred by the assessee to earn exempt income. Before the Ld. CIT(Appeals) the assessee contended that AO has wrongly disallowed interest of Rs.18,35,838/- u/s 14A of the Act. However, the Ld. CIT(Appeals) after considering the submissions of the assessee came to the conclusion that disallowance was made u/s 36(1)(iii) of the Act and not u/s 14A though the assessee relied on various case laws relating to the provisions of section 14A of the Act. On plain reading of the assessment order there are two contradictory findings by the AO and there is no clarity in the approach of the AO i.e. under which I.T.A.No.6279/Del/2019 4 provision the disallowance was made. Therefore, I am of the opinion that this issue should go back to the file of the Assessing Officer for denovo examination in accordance with law after providing adequate opportunity of being heard to the assessee. Thus, the order of the Ld. CIT(Appeals) is set aside and the appeal is restored back to the file of the Assessing Officer for denovo adjudication of the issue in appeal in accordance with law after providing adequate opportunity of being heard to the assessee. 6. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 27/05/2022 Sd/- (C.N. PRASAD) JUDICIAL MEMBER Dated: 27.05.2022 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi