ITAT Delhi Allows Appeal After 808-Day Delay, Reduces Disallowance u/s 14A from Rs. 6,71,300 to Rs. 45,000.

The ITAT Delhi condoned an 808-day delay in filing the appeal under section 263, admitting the assessee's appeal. The Tribunal modified the disallowance under section 14A from Rs. 6,71,300 to Rs. 45,000, applying a 0.5% rate on an average investment of Rs. 18,00,000, as per Rule 8D(2)(iii). The appeal was allowed.

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Issues:
1. Jurisdiction of CIT under section 263
2. Disallowance under section 14A
3. Condonation of delay in filing appeal
4. Computation of disallowance under Rule 8D(2)(iii)

Jurisdiction of CIT under section 263:
The appeal was filed against the order of the ld. CIT, Faridabad, dated 31.03.2014. The delay in filing the appeal was 808 days, and it was contended that the ld. CIT (A) did not have jurisdiction to decide the appeal as the issue was already decided by the ld. CIT in the order under section 263. The Tribunal considered the sequence of events and condoned the delay in filing the appeal against the order under section 263, admitting the appeal of the assessee.

Disallowance under section 14A:
The ld. PCIT determined a disallowance of Rs. 6,71,300 under section 14A based on the investments made by the assessee. The assessee argued that only investments yielding exempt income should be considered for the computation of disallowance. The Tribunal, following the judgment in ACIT Vs. Vireet Investments Pvt. Ltd., held that the disallowance should be computed at 0.5% on the average investment of Rs. 18,00,000 made in a specific entity that yielded profits, modifying the disallowance to Rs. 45,000.

Condonation of delay in filing appeal:
The Tribunal condoned the delay in filing the appeal against the order under section 263, considering the confusion arising from the sequence of orders passed and the bonafide reasons of the assessee to prefer the appeal before the ld. CIT (A). The delay was condoned, and the appeal was admitted.

Computation of disallowance under Rule 8D(2)(iii):
The disallowance under Rule 8D(2)(iii) was initially determined at Rs. 6,71,300 by the ld. PCIT. However, based on the argument presented by the assessee and following the precedent set by the Special Bench of ITAT Delhi, the disallowance was modified to Rs. 45,000, computed at 0.5% on the average investment of Rs. 18,00,000 made in a specific entity that generated profits. As a result, the appeal of the assessee was treated as allowed.

This detailed analysis covers the issues related to jurisdiction under section 263, disallowance under section 14A, condonation of delay in filing appeal, and computation of disallowance under Rule 8D(2)(iii) as addressed in the judgment delivered by the Appellate Tribunal ITAT Delhi.

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