ITAT Ahmedabad: Appeal allowed for government company on disallowance & interest, penalty proceedings dismissed

The ITAT, Ahmedabad, allowed the appeal in favor of the government company assessee regarding disallowance under section 14A, restricting it to Rs. 58,07,020/- based on precedent. The ITAT remanded the case to the Assessing Officer for fresh examination on the addition of interest under section 244A, as the claim of non-receipt of interest was not verified. The appeal on the initiation of penalty proceedings under section 271(c) was dismissed as premature, with the overall appeal partly allowed for statistical purposes, providing relief on specific issues while maintaining the dismissal of penalty proceedings.

---

---

Issues:
1. Disallowance u/s. 14A of Rs. 57,07,020/-
2. Addition on account of interest u/s. 244A of Rs. 30,00,964/-
3. Initiation of penalty proceedings u/s. 271(c)

Issue 1: Disallowance u/s. 14A of Rs. 57,07,020/-

The assessee, a government company, received dividend income and disallowed an amount for earning exempt income. The Assessing Officer disallowed a larger sum under section 14A. The CIT(A) restricted the disallowance to Rs. 58,07,020/- based on the decision of the predecessor. The assessee contended no new investments were made during the year. The ITAT, Ahmedabad, referred to a Co-ordinate Bench decision in favor of the assessee on a similar issue. Relying on the precedent, the ITAT allowed the appeal in favor of the assessee.

Issue 2: Addition on account of interest u/s. 244A of Rs. 30,00,964/-

The Assessing Officer added the interest amount received u/s. 244A for specific assessment years to the total income of the assessee. The CIT(A) upheld the addition. The assessee argued they did not receive any refund or intimation for the relevant years. The ITAT observed that the claim of non-receipt of interest was not verified by the lower authorities. Therefore, the case was remanded to the Assessing Officer for fresh examination and verification, allowing the ground of the assessee for statistical purposes.

Issue 3: Initiation of penalty proceedings u/s. 271(c)

The appeal on the initiation of penalty proceedings u/s. 271(c) was deemed premature at that stage and was dismissed. The overall appeal of the assessee was partly allowed for statistical purposes. The ITAT pronounced the order on 04-05-2021, providing relief to the assessee on specific issues while maintaining the dismissal of the penalty proceedings at that stage.

---