2015 (10) TMI 1483 - AT - Income Tax

ITAT rules for assessee, condones appeal delay, sets aside Rule 8D(2)(iii) addition.

The ITAT ruled in favor of the assessee, condoning the delay in filing the appeal against the order under section 154 due to a satisfactory explanation ... Validity of the notice issued under section 154 - disallowance u/s 14A - condonation of delay - Held that:- When the assessee has explained the facts and circumstances under which the assessee was having confusion in the mind for filing the separate appeal against the order passed u/s 154 on the issue of disallowance u/s 14A because the assessee had already filed an appeal before the CIT(A) raising the ground against the disallowance made u/s 14A by applying Rule 8D. Therefore, when there is no material or circumstances which suggest that the delay is deliberate or on account of culpable negligence and the assessee could not stand to benefit by resorting the alleged delay then the technical considerations should give the way to cause of substantial justice and, therefore, a liberal interpretation has to be given to the expression 'sufficient cause'. When the assessee was not going to take a benefit by filing the appeal belatedly then the explanation of the assessee has a sufficient cause cannot be doubted. Accordingly, we are satisfied that the assessee explained a sufficient cause for delay in filing the appeal before the CIT(A). Addition made under Rule 8D(2)(iii) being 0.5% of the average investment - Held that:- Rule 8D is not applicable for the A.Y. 2008-09 in view of the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT ]. Accordingly, the addition made by Assessing Officer while passing the order u/s 154 is not sustainable and the same is deleted. We make it clear that the issue of disallowance u/s 14A is pending in the appeal against the original assessment order passed u/s 143(3) and, therefore, our observation and finding in this matter shall have no bearing on the merits of the issue of disallowance u/s 14A de hors the Rule 8D of the Income Tax Rules. Accordingly, we set aside the order passed u/s 154 of the Income Tax Act. - Decided in favour of assessee. Issues:1. Delay in filing appeal against order under section 1542. Validity of notice issued under section 154 and addition made under Rule 8D(2)(iii)Analysis:Issue 1: Delay in filing appeal against order under section 154The appeal was against the order dated 25.4.2013 arising from the order passed under section 154 for A.Y. 2006-07. The Assessing Officer proposed an additional disallowance under section 14A r.w.r 8D, which the assessee contested. The assessee challenged the action before CIT(A), but there was a delay of 2 and half months in filing the appeal. The assessee explained that the delay was due to confusion regarding filing a separate appeal against the order passed under section 154 when the issue was already raised in the original assessment appeal. The CIT(A) rejected the condonation petition, but the ITAT found the explanation satisfactory. Referring to the Collector Land Acquisition case, the ITAT held that the delay was not deliberate or negligent, and the assessee had a sufficient cause. Thus, the delay of 2 and half months was condoned.Issue 2: Validity of notice issued under section 154 and addition made under Rule 8D(2)(iii)The Assessing Officer proposed an additional disallowance under Rule 8D(2)(iii) in the order passed under section 154. The assessee contended that Rule 8D was not applicable for A.Y. 2008-09, citing the decision of the Bombay High Court in the Godrej & Boyce case. The ITAT agreed that Rule 8D was not applicable for the relevant assessment year, thus rendering the addition made by the Assessing Officer unsustainable. The ITAT set aside the order passed under section 154, clarifying that their decision had no impact on the pending appeal against the original assessment order's disallowance under section 14A. Consequently, the ITAT allowed the appeal filed by the assessee.In conclusion, the ITAT ruled in favor of the assessee, condoning the delay in filing the appeal and setting aside the addition made under Rule 8D(2)(iii) as it was not applicable for the assessment year in question.