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2021 (9) TMI 642 - AT - Income TaxDisallowance under section 14A of the Act r.w.r. 8D - Admission of additional evidences - HELD THAT - In the present Assessment Year, we find that the assessee has taken a specific plea before the AO that the investments were made out of surplus business funds and not out of any borrowed funds. This submission has not been referred to either by the AO or by the CIT(A). We are of the view that in the light of additional evidence now filed before us, the issue requires fresh consideration by the AO and we accordingly set aside the order of the AO and remand the issue to the AO for consideration afresh. The above directions will hold good for disallowance under section 14A of the Act r.w.r. 8D(2)(i) of the Rules. Disallowance under section 14A of the Act r.w.r. 8D(2)(iii) - Neither the assessee nor the AO have made any attempts to identify which are the expenses that can be said to be attributable to the earning of the said income. We therefore set aside the said disallowance also to the AO for fresh consideration with directions to the assessee to substantiate its case that none of the other expenses can be attributed to the earning of the exempt income. We accordingly allow the appeal of the assessee for statistical purpose.
Issues:
1. Condensation of delay in filing appeal. 2. Disallowance under section 14A of the Income Tax Act. Analysis: 1. Delay in Filing Appeal: The appeal was filed with a delay of 68 days, citing reasons related to the departure of the tax executive managing the representation, misplacement of files, and lack of communication about the impugned order. The Tribunal considered the explanations provided and found no willful act or negligence on the part of the assessee. Citing judicial precedents, the Tribunal condoned the delay, emphasizing the absence of deliberate intent. 2. Disallowance under Section 14A: The primary issue in the appeal pertained to the disallowance of ?18,11,700 under section 14A of the Act concerning interest and other expenses. The AO proposed the disallowance based on the provisions of section 14A r.w.r. 8D, noting dividend income earned by the assessee. The assessee contended that investments were made from surplus funds, not borrowed funds, and were liquidated as needed for operational expenses. However, the AO proceeded with the disallowance without considering the assessee's submissions. 3. Additional Evidence and Remand: The assessee sought to admit additional evidence related to the source of funds for investments, highlighting the lack of consideration by the AO and CIT(A). The Tribunal admitted the additional evidence and remanded the issue to the AO for fresh consideration, emphasizing the need to evaluate the plea that investments were made from surplus business funds, not borrowed funds. 4. Fresh Consideration and Directions: Regarding the disallowance under section 14A r.w.r. 8D(2)(iii), the Tribunal observed a lack of identification of expenses attributable to earning exempt income. Consequently, the disallowance was set aside to the AO for reevaluation, with directions for the assessee to substantiate that none of the other expenses could be linked to earning exempt income. The appeal was allowed for statistical purposes. In conclusion, the Tribunal addressed the delay in filing the appeal and the disallowance under section 14A meticulously, emphasizing the need for a fresh assessment based on the submissions and additional evidence provided by the assessee. The judgment highlighted the importance of substantiating claims and considering all relevant factors in tax assessments.
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