Tribunal partly allows appeal, condones delay, dismisses evidence challenge, upholds deletion of disallowance.

Deputy Commissioner of Income Tax, Circle - 4 (1), Kolkata Versus M/s. Rav Dravya Private Limited

Deputy Commissioner of Income Tax, Circle - 4 (1), Kolkata Versus M/s. Rav Dravya Private Limited - TMI Issues Involved:
1. Condonation of delay in filing the appeal.
2. Admission of new documentary evidence by CIT(A) in violation of Rule 46A.
3. Deletion of addition on account of bogus loss claimed on sale of unquoted shares.
4. Allowance of the bogus loss claimed on sale of unquoted shares.
5. Deletion of disallowance under Section 14A of the Income Tax Act.

Detailed Analysis:

1. Condonation of Delay:
The revenue's appeal was time-barred by 198 days due to restrictions imposed by the Covid-19 pandemic. Both sides were heard, and it was found that there was reasonable cause for the delay. Hence, the delay was condoned, and the appeal was admitted for hearing.

2. Admission of New Documentary Evidence (Ground No. 1):
The revenue contested the CIT(A)'s action of admitting additional evidence during the appellate stage under Rule 46A. The assessee had claimed a loss on the sale of shares but did not furnish supporting documents initially. The CIT(A) accepted the documents during the appeal, stating that the Assessing Officer (AO) did not request these documents during the assessment. The Tribunal found no error in CIT(A)'s decision to admit the documents, dismissing this ground of appeal.

3. Deletion of Addition on Account of Bogus Loss (Ground Nos. 2, 3 & 4):
The revenue challenged the deletion of the addition of Rs. 3,02,57,500/- made by the AO due to lack of verification of transactions. The assessee claimed the loss as a bad debt written off under Section 36(1)(vii) and 36(2). The CIT(A) allowed the claim, but the Tribunal found that the transaction was not bona fide and related to the sale of immovable property rather than shares. The Tribunal noted that the assessee was not in the business of trading shares or property and suggested the transaction was structured to evade taxes. The Tribunal restored the issue to the AO for re-examination to determine the real nature of the transaction and whether the loss could be claimed as a short-term capital loss.

4. Allowance of Bogus Loss (Ground Nos. 2, 3 & 4):
The Tribunal found that the assessee's business did not involve trading in shares or property, and the transaction was likely a sham. The Tribunal highlighted that the transaction would be deemed speculative under Section 73, and the loss could not be set off against business income. The Tribunal directed the AO to re-examine the transaction and decide if the loss could be considered a short-term capital loss.

5. Deletion of Disallowance under Section 14A (Ground No. 5):
The revenue contested the deletion of disallowance made by the AO under Section 14A. The CIT(A) relied on various High Court decisions, which held that no disallowance is attracted if no tax-exempt income is derived. The Tribunal considered the newly inserted explanation to Section 14A, which the revenue argued was retrospective. However, the Tribunal followed the Delhi High Court's decision in PCIT Vs. Era Infrastructure (India) Ltd., which held the explanation to be prospective. Consequently, the Tribunal dismissed this ground of appeal.

Conclusion:
The appeal was partly allowed. The Tribunal condoned the delay, dismissed the ground on the admission of new evidence, and restored the issue of the bogus loss claim to the AO for re-examination. The Tribunal also upheld the deletion of disallowance under Section 14A, following the Delhi High Court's interpretation of the law.