SARTAJ HOTELS APARTMENTS AND VILAS PRIVATE LIMITED,NEW DELHI V. INCOME TAX OFFICER, NEW DELHI

ITA 2055/DEL/2024

AI Insights

The case involves Sartaj Hotels Apartments and Vilas Private Limited, which appealed against the order of the Commissioner of Income Tax Appeals/National e-Assessment Centre, Delhi, for the Assessment Year 2018-19. The primary contention was the disallowance of Rs. 19,59,420 under section 14A of the Income Tax Act, which the assessee argued was unjustified as they had no borrowed funds and had not made fresh investments in mutual funds during the financial year in question. The Income Tax Officer had disallowed the amount based on the exempt interest expenses claimed by the assessee. The Tribunal found that the CIT(A) had not considered the detailed submissions made by the assessee and thus restored the matter for re-evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 22940 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: MADHUR AGGARWAL
• Keywords: Opportunity of being heard; Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

" 1 ITA No. 02055/Del/2024 Sartaj Hotels Apartments and Vilas(P). Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI BENCH ‘G’ NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 2055/DEL/2024 (A.Y. 2018-19) Sartaj Hotels Apartments and Vilas Private Limited Celebration Garden, NH- 8, Village RangpuriAdj to Shiv Murti, Mahipalpur South West Delhi, PAN: AABCS1580P Vs. Income Tax Officer National E-Assessment Centre, Delhi Appellant Respondent Assessee by Sh. Madhur Aggarwal, Adv Revenue by Sh. Sahil Kumar Bansal, Sr. DR Date of Hearing 17/02/2025 Date of Pronouncement 19/03/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of the Commissioner of Income Tax Appeal/national e-Assessment Centre, Delhi, dated29/03/2024 for the Assessment Year 2018-19. 2. The Grounds of appeal are as under:- “1. That the learned CIT Appeal are not justified in confirming the addition of RS. 1959420 under section 14Aof the Income Tax Act. 2 ITA No. 02055/Del/2024 Sartaj Hotels Apartments and Vilas(P). Ltd. 2. That the asseessee had No Borrowed Funds as he had FDR in Bank on which he earned an interest of Rs.14028573 during the Financial Year 17-18 and for the purpose of business he had taken loan against FDR that is his own funds and as such the learned CIT are not justified in invoking section 14A of the income tax act which is illegal arbitrary and against the facts of the case. 3. That the appeal was fixed and partial response was given and required further reply by the learned CIT Appeal did not give time and completed e proceedings without giving further opportunity to the asseessee and as such order passed by learned CIT Appeal is arbitrary, illegal. 4. That no fresh investment was made in F.Y. 17-18, in mutual funds, as it is old investment of previous years, and as such section 14A is not applicable and the disallowance of Rs. 1959420 for A.Y. 18-19 is wrong, unjustified and is illegal.” 3. Brief facts of the case are that, the Assessee filed return of NIL income claiming current year loss of Rs. 1,27,39,983/-. The assessment was completed u/s 143(3) of the Act, wherein the Ld. A.O. disallowed an amount of Rs. 19,59,420/- u/s 14A of the Act against the exempt interest expenses claimed by the Assessee amounting to Rs. 32,38,215/-. Aggrieved by the order of the A.O, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 29/03/2024, dismissed the Appeal filed by the Assessee. 3 ITA No. 02055/Del/2024 Sartaj Hotels Apartments and Vilas(P). Ltd. 4. The Ld. Counsel for the Assessee vehemently submitted that the present case is pertaining to Assessment Year 2018-19 and the amended Sub rule (2) of Rule 8D is applicable, which is applicable with effect from 02/06/2016 however, the Lower Authorities have not considered the said fact that and erroneously disallowance of interest at 12% of the investment so made,which is contrary to the statute, therefore, sought for deleting the disallowance made u/s 14A of the Act. 5. Per contra, the Ld. Departmental Representative submitted that the Assessee has not produced any submission/documentary evidence in support of the Grounds of Appeal before the Ld. CIT(A), therefore, the Appeal of the Assessee has been rightly dismissed by the Ld. CIT(A). Therefore, relying on the orders of the Lower Authorities, sought for dismissal of the Appeal. 6. We have heard both the parties and perused the material available on record. The Ld. A.O. while making the addition found that the Assessee received exempt income of Rs. 32, 83,808/- for investment made in mutual funds/equity shares and incurred financial expenses for investment made in theses funds. After considering the reply filed by the Assessee, the A.O. observed that the Assessee had not taken into account regarding certain investment while computing average 4 ITA No. 02055/Del/2024 Sartaj Hotels Apartments and Vilas(P). Ltd. investment for the year under consideration for the purpose of Rule 8D of the Income Tax Rules, accordingly, A.O. computed interest @12% on the amount invested in the instrument resulting to tax free income amounting to Rs. 17,71,720/-. Further, A.O. computed at 1% of the average investment as per Rule 8D with Rule 14A of the Act at Rs. 1,87,700/-, accordingly, made addition of Rs. 19,59,420/-. In the ordere of the Ld. CIT(A) it has been observed that the Assessee had not filed any submission/documentary evidence in support of Grounds of Appeal. It was the case of the Assessee regarding disallowance ofRs. 19,59,420/- made by the A.O. u/s 14A r.w. Rule 8D of the Income Tax, that no investment was made during the year and the investment was made in the earlier years. The Ld. Counsel appearing for the Assessee submitted that detailed submission have been made before the Lower Authorities which have not been considered. Considering the above facts and circumstances, without commenting on the merits of the case, we restore the issue involved in the present Appeal to the file of the Ld. CIT(A) with a direction to the Assessee to substantiate its claim by producing cogent evidence. The Ld. CIT(A) is also directed to decide the issue on merits by invoking applicable provision of law i.e. Rule 8D of Income Tax Rules as substituted by Income Tax (14th Amendment) Rules, 2016, which is applicable w.e.f. 02/06/2016. Needless to say, the Ld. CIT(A) shall 5 ITA No. 02055/Del/2024 Sartaj Hotels Apartments and Vilas(P). Ltd. provide opportunity of being heard to the Assessee. All the contentions are left open. 7. In the result, appeal filed by the Assessee is partly allowed for statistical purposes. Order pronounced in the open court on 19th March, 2025 Sd/- Sd/- (S. RIFAUR RAHMAN) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 19 .03.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "