RUSHABH RAMESHBHAI PRAJAPATI,GANDHINAGAR V. THE DY. CIT, GANDHINAGAR CIRCLE, GANDHINAGAR

ITA 2091/AHD/2024

AI Insights

The case involves two appeals by Rushabh Rameshbhai Prajapati against orders from the Commissioner of Income Tax (Appeals) regarding the assessment year 2014-15. The first appeal contested the disallowance of interest expenses under Section 40(a)(ia) of the Income Tax Act, 1961, which was incorrectly applied as the expenses were related to rental income, not business income. The second appeal challenged the penalty imposed under Section 271(1)(c) following the disallowance. The Tribunal found procedural errors in the notification process of the CIT(A) and ruled in favor of the assessee, allowing both appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705247 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARGOVIND SINGH
• Assessee Lawyers: JAIMIN SHAH
• Keywords: Condonation of delay; Set aside; Business income; Principle of natural justice; CHAPTER IV
• Section: 147; 271(1)(c); 44AD; 234B; 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./I.T.A. Nos. 2090 & 2091/Ahd/2024 (िनधा[रण वष[ / Assessment Year : 2014-15) Rushabh Rameshbhai Prajapati Plot No.242/2, Sector 1 C, Gandhinagar - 382001 बनाम/ Vs. DCIT Gandhinagar Circle, Gandhinagar Öथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AUWPP4367P (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri Jaimin Shah, A.R. Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Hargovind Singh, Sr. DR Date of Hearing 18/06/2025 Date of Pronouncement 30/06/2025 (आदेश)/ORDER PER SMT. ANNAPURNA GUPTA, AM: Both the appeals relate to the same assessee and pertaining to Assessment Year (A.Y.) 2015-16; while one is against the order passed by the Ld. Commissioner of Income Tax (Appeals)(in short “CIT(A)”) in quantum proceedings in assessment order passed under Section 147 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), while the other appeal lies against order of the Ld. CIT(A) confirming the levy of penalty under Section 271(1)(c) of the Act on the addition made to the income of the assessee in the quantum proceedings. ITA Nos.2090 & 2091/Ahd/2024 [Rushabh Rameshbhai Prajapati vs. DCIT] A.Y. 2014-15 - 2 – 2. Issues involved in both the appeals being interrelated they were taken up together for hearing and are being disposed of by this common order for the sake of convenience. 3. Both the appeals have been marked by the Registry as delayed for filing by 102 days & 72 days respectively. Ld. Counsel for the assessee has filed an application seeking condonation of delay stating that the assessee was unaware of both, the proceedings conducted before the Ld. CIT(A) as also passing of the order by the Ld. CIT(A), since notices of hearing were not issued to him on the email address mentioned in the form of filing of appeal to the Ld. CIT(A) i.e. in Form No.35 but on some other address. And it was only when notice for recovery of demand was served on the assessee that he became aware of the passing of the orders by the Ld.CIT(A) and immediately thereafter filed appeal before us belatedly. The assessee in his application has pointed out the email ID mentioned in Form No.35 ([e-mail]) and also the email ID on which the notices were sent by the Ld. CIT(A) ([e-mail]). All the above facts have been stated on oath in a duly notarized affidavit filed before us. 4. He, therefore, pleaded for the delay in the present case to be condoned pointing out that the assessee had adduced sufficient cause for the delay. ITA Nos.2090 & 2091/Ahd/2024 [Rushabh Rameshbhai Prajapati vs. DCIT] A.Y. 2014-15 - 3 – 5. The Ld. DR though objected to the condonation of delay, however, was unable to point out any inaccuracy in the fact mentioned by the assessee regarding furnishing notices of hearing by the Ld. CIT(A) to the wrong email address of the assessee. 6. In the light of the above, we are inclined to condone the delay of 124 & 72 days in the filing of both the present appeals. The assessee had adduced sufficient cause for the delay, the same being attributed to uncontroverted fact of the notices of hearing before the Ld. CIT(A) as also the order passed being served on the wrong email ID of the assessee. 7. We shall first deal with the assesses appeal in quantum proceedings in ITA No. 2090/Ahd/24. 8. The grounds raised by the assessee read as under: “01. That the Ld. CIT(A), NFAC has erred both in law and on facts while dismissed the appeal on grounds of limitation and hence it will be set-aside. 02. That the Ld. CIT(A), NFAC has sent notices on E-mail id other than mentioned in Form no. 35, and hence the appeal dismissed on limitation is against the Principal of Natural Justice. 03. That the assessee Ld. CIT(A), NFAC has not decide the appeal on merits and therefore it requires to be set aside. 04. That the Ld. A.O. and CIT(A) both have erred in law and on facts while making addition u/s 40(a)(ia) r.w.s. 1941(b), which is not applicable to the appellant and as such the addition made U/s 40(a)(ia) r.w.s. 1941(b) of Rs. 15,91,452/- requires to be deleted. 05. That the A.O. has made disallowed U/s 40(a)(ia) r.w.s. 1941(b) does not amount to concealment as defined u/s 271(1)(c) of the ITA Nos.2090 & 2091/Ahd/2024 [Rushabh Rameshbhai Prajapati vs. DCIT] A.Y. 2014-15 - 4 – Income Tax Act, 1961 and therefore the penalty imposed of Rs. 4,91,759/- may please be deletes. 06. That the appellant has neither committed default of Sec. 210 nor made any default in payment of advance tax and therefore unwanted interest charged u/s 234A 234B and 234C requires to be deleted.” 9. The solitary issue in the present appeal relates to the disallowance of interest expenses u/s 40(a)(ia) of the Act. 10. Ld.Counsel for the assessee contended that the addition /disallowance made to its income was grossly unjustified and blatantly against the provisions of law. He pointed out that the AO had disallowed an expense which had not been claimed by the assessee for computing its income from business, by invoking provisions of law applicable to computation of income from business and profession. He pointed out that the assessment order itself revealed the fact that the assessee had shown business income on presumptive basis u/s.44AD of the Act and had also returned rental income and claimed interest expenditure against the same. The AO, he pointed out, though noted the fact that the rental income was not part of the business income returned by the assessee, he, however disallowed the interest expenditure claimed by the assessee against the same by invoking the provisions of Section 40(a)(ia) of the Act which Section, he pointed out, related to disallowances to be made while computing income under the head ‘Income from business & profession’. He contended that the disallowance clearly was not sustainable in law and pleaded deletion of the same. ITA Nos.2090 & 2091/Ahd/2024 [Rushabh Rameshbhai Prajapati vs. DCIT] A.Y. 2014-15 - 5 – 11. Ld.DR was unable to controvert the contention of the Ld.Counsel for the assessee as above. 12. We have heard both the parties. It is a fact on record that the AO had invoked the provisions of Section 40(a)(ia) of the Act for disallowing interest expenses incurred by the assessee in the present case amounting to Rs.15,91,452/-. The said provision of law is applicable for the purposes of computing income under the head ‘business & profession’. There is no dispute with regard to the same, the impugned Section being included in chapter IV-D of the Act which deals with the computation of income under the head ‘Income from Business & Profession’. It is also a fact on record that the expense disallowed by the AO was not claimed by the assessee against his business income, which the assessee had returned on presumptive basis u/s 44AD of the Act. The order of the AO reveals that the impugned expense had been claimed by the assessee against rental income returned to tax separate from the business income of the assessee. Therefore, it is crystal clear that the disallowance made by the AO in the present case is grossly unjustified and is not sustainable in the eyes of law. 13. Accordingly, we direct deletion of the disallowance of interest expenses of Rs.15,91,452/-. 14. Ground of appeal of the assessee is allowed. 15. In effect, the appeal of the assessee is allowed. ITA Nos.2090 & 2091/Ahd/2024 [Rushabh Rameshbhai Prajapati vs. DCIT] A.Y. 2014-15 - 6 – 16. Taking up the appeal of the assessee filed in penalty proceeding in ITA No.2091/Ahd/2024, the penalty was levied for concealment /furnishing of inaccurate particulars of income in terms of Section 271(1)(c) of the Act in relation to the disallowance made by the AO u/s.40(a)(ia) of the Act in the order passed in quantum proceedings. Since, we have directed the deletion of the disallowance made by the AO in our order above at para 12 in the assessee’s appeal in ITA No.2090/Ahd/2024, the penalty has no legs to stand upon and is, accordingly, deleted. 17. In effect, the appeal of the assessee is allowed. 18. In the combined result, both the appeals are allowed. This Order pronounced on 30/06/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 30/06/2025 S. K. SINHA True Copy आदेश कȧ Ĥितिलǒप अĒेǒषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंिधत आयकर आयुƠ / Concerned CIT 4. आयकर आयुƠ(अपील) / The CIT(A)- 5. ǒवभागीय Ĥितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad "