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2023 (4) TMI 189 - AT - Income TaxAssessment u/s 153A - Addition u/s 14A pertaining to expenditure incurred for earning the exempt income - HELD THAT - Assessee had suo motu only made disallowance under section 14A of the Act to the extent of Rs.2,501/-. However, the assessee had earned exempt income during the year under consideration to the amount of R.20,19,580/- only. Under the circumstances, after following the decision of Hon ble Supreme Court in the case of State Bank of Patiala 2018 (11) TMI 1565 - SC ORDER and CIT vs Joint Investments Pvt Ltd 2015 (3) TMI 155 - DELHI HIGH COURT It is settled that the disallowance is to be restricted to the extent of exempt income earned by the assessee - we direct the Assessing Officer to restrict the disallowance to the extent of exempt income earned by the assessee, since assessee itself had not made disallowance more than the exempt income earned by it. Therefore, the ground of appeal of the Revenue stands dismissed and the cross objection filed by the assessee is partly allowed. Deduction u/s 80IB(10) - AO observed that assessee has violated the condition for claiming deduction under section 80IB(10) of the Act in respect of the said project since built up area of the flat was exceeding 1000 sq.ft. - CIT(A) has allowed the claim of deduction under section 80IB(10) on prorate basis - HELD THAT - As perused the decision of Models Construction Pvt Ltd 2020 (12) TMI 88 - BOMBAY HIGH COURT wherein allowing of deduction under section 80IB(10) on prorate basis was upheld - no infirmity in the decision of Ld.CIT(a). Accordingly, grounds 3 4 of the Revenue are dismissed. Disallowance u/s 14A - HELD THAT - Appeal of the assessee are partly allowed by directing the Assessing Officer to restrict the disallowance to the extent of exempt income earned by the assessee. Disallowance of Work-in- Progress (WIP) - HELD THAT - As the assessee has failed to provide relevant supporting evidence to substantiate that M/s Jitnat Infrastructure Pvt Ltd has provided project management services during the year. Even during the course of appellate proceedings before us, the assessee has not furnished any supporting evidences to demonstrate that the said party has rendered the project management services to justify the claim of payment. In this regard we further notice that co-ordinate bench of the ITAT in the case of assessee itself 2022 (11) TMI 413 - ITAT MUMBAI has also sustained the disallowance made by the Ld.CIT(A) for want of relevant supporting evidence for rendering of service to the assessee. Accordingly, this ground of appeal of the assessee stands dismissed. Disallowance u/s 40(a)(ia) - non compliance of TDS provisions in computation of income for A.Y. 2011-12 - HELD THAT - These facts were disclosed by the assessee in the original return of income. However, inadvertently, the same remained to be claimed in the revised return of income filed for A.Y. 2012-13. After following the decision of Hon ble Supreme Court in the case of NTPC 1996 (12) TMI 7 - SUPREME COURT as relied upon by the Ld.Counsel for the assessee, we restore this issue to the file of the Assessing Officer to allow the claim of the assessee after verification of the relevant materials and after affording due opportunity of being heard to the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purpose. Levying penalty under section 271(1)(c) - invalid notice issued u/s 274 - HELD THAT - On perusal of the copy of the notice under section 274 read with section 271(1)(c) of the Act it is clear that Assessing Officer has not specified whether the penalty is being levied on account of concealment of income or furnishing of inaccurate particulars of income. As relying in assessee s own case for A.Y. 2005-06 2022 (10) TMI 1160 - ITAT MUMBAI since the issue on hand being squarely covered, following the principle of consistency, we find merit in the submission of the assessee and direct the Assessing Officer to delete the penalty since the notice issued under section 274 read with section 271(1)(c) of the Act was bad in law.
Issues Involved:
1. Delay in filing cross objections by the assessee. 2. Disallowance under section 14A. 3. Deduction under section 80IB(10). 4. Disallowance of Work-in-Progress (WIP). 5. Disallowance under section 40(a)(ia). 6. Levying penalty under section 271(1)(c). Summary: 1. Delay in Filing Cross Objections by the Assessee: The assessee reported a delay of 843 days in filing cross objections due to wrong advice by the tax advisor. The Tribunal condoned the delay, referencing the Supreme Court judgment in Collector, Land Acquisition vs MST Kattiji & Others, which emphasized interpreting "sufficient cause" to ensure justice on merits. 2. Disallowance under Section 14A: The Assessing Officer disallowed Rs.40,25,86,078/- under section 14A, which was reduced to Rs.4,23,20,580/- by the Ld.CIT(A). The Tribunal, following the Supreme Court's decision in State Bank of Patiala and Delhi High Court's decision in CIT vs Joint Investments Pvt Ltd, directed the disallowance to be restricted to the extent of exempt income earned by the assessee, i.e., Rs.20,19,580/-. 3. Deduction under Section 80IB(10): The Assessing Officer disallowed the deduction of Rs.24,11,13,795/- under section 80IB(10) due to the built-up area exceeding 1000 sq.ft. for some flats. The Ld.CIT(A) allowed the deduction on a pro-rata basis for eligible units whose area was less than 1000 sq.ft., following judicial precedents like Viswas Promoters P Ltd vs ACIT and CIT vs Arun Excello Foundations P Ltd. The Tribunal upheld this decision, referencing the jurisdictional High Court's decision in Models Construction Pvt Ltd vs DCIT. 4. Disallowance of Work-in-Progress (WIP): The Assessing Officer disallowed Rs.5,51,637/- claimed as WIP due to lack of supporting evidence for services rendered by M/s Jitnat Infrastructure Pvt Ltd. The Tribunal upheld the disallowance as the assessee failed to provide relevant supporting evidence. 5. Disallowance under Section 40(a)(ia): The assessee claimed that the amount disallowed under section 40(a)(ia) for non-compliance with TDS provisions in A.Y. 2011-12 should be allowed in A.Y. 2012-13. The Tribunal restored the issue to the Assessing Officer for verification, following the Supreme Court's decision in National Thermal Power Corporation Ltd. 6. Levying Penalty under Section 271(1)(c): The Assessing Officer levied a penalty of Rs.1,62,50,600/- for concealment of income and furnishing inaccurate particulars. The Ld.CIT(A) restricted the penalty to Rs.27,68,349/- for sale of scrap. The Tribunal quashed the penalty, referencing the jurisdictional High Court's decision in Mohd Farhan A Shaikh vs DCIT, which held that a defect in the notice by not specifying the charge vitiates the penalty proceedings. Conclusion: The appeals filed by the Revenue were dismissed, and the cross objection filed by the assessee was partly allowed. The Tribunal directed the Assessing Officer to restrict disallowance under section 14A to the extent of exempt income and allowed the pro-rata deduction under section 80IB(10). The disallowance of WIP was upheld, and the issue under section 40(a)(ia) was remanded for verification. The penalty under section 271(1)(c) was quashed due to a defective notice.
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