The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) granted relief to Sahara India Financial Corporation Limited by deleting the addition of interest income. This action was taken due to the Assessing Officer ( AO )’s failure to properly appreciate the facts of the matter
The Revenue has filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 12.07.2019 for the assessment year 2016-17. The appeal encompasses six grounds of contention.
One of the issues raised by the Revenue pertains to the deletion of an addition of Rs. 2,72,76,707/-, attributed to interest income from Sahara India Commercial Corporation Ltd. The basis for this addition was the variance in interest amounts reported by Sahara India Commercial Corporation Ltd. and the assessee. While Sahara India Commercial Corporation Ltd. reported paying interest of Rs. 17,36,68,046/-, the assessee reported receiving Rs. 14,63,91,339/-.
During the assessment, the assessee explained to the Assessing Officer that Sahara India Commercial Corporation Ltd. had classified Rs. 2.73 crores as prior period expenses, with the remaining Rs. 14.63 crores being the relevant income for the fiscal year. However, the Assessing Officer rejected this explanation and proceeded to make the contested addition.
Upon appeal to the CIT(A), the assessee reiterated its claim. After scrutinizing the ledger account and verifying the entries and narrations, the CIT(A) concluded that the impugned addition lacked merit and therefore deleted it.
During the subsequent proceedings before the tribunal, the Department Representative (DR) failed to identify any factual errors in the findings of the CIT(A). Thus, the ITAT did not interfere the issue and dismissed accordingly.
Another issue raised by the reveune was related to the deletion of addition of Rs. 1,24,12,036/- on account of disallowance of claim of deduction under Section 35AC of the Income Tax Act, 1961.
Upon scrutinizing the income tax returns, the AO identified a deduction claimed by the assessee under section 35AC of the Income Tax Act, totaling Rs. 1,24,12,036/-. However, the Assessing Officer found that the necessary details and evidence to support this deduction were not provided by the assessee. Consequently, the assessee was issued a show cause notice to justify the claim.
In response, the assessee submitted a detailed explanation supporting their claim. However, the AO disregarded this explanation and proceeded to make an addition of Rs. 1,24,12,036/-. The assessee then appealed the decision to the CIT(A), asserting that no deduction under section 35AC of the income Tax Act had been claimed.
They clarified that the amount of Rs. 7,92,87,036/- comprised two components: provision no longer required on equity shares of Pipavav Defence & Offshore shares amounting to Rs. 6,68,75,000/-, and provision no longer required on long-term investments totaling Rs. 1,24,12,036/-.
Furthermore, the assessee explained that the Rs. 1,24,12,036/- represented provisions made in accordance with the Prudential Norms Direction of the RBI in previous years. These provisions were written back as they were in line with RBI guidelines and were never claimed as deductions from taxable income, thus not being offered for taxation.
After reviewing the facts, the CIT(A) concluded that no deduction under section 35AC of the Income Tax Act had been claimed by the assessee, and therefore, no disallowance or addition was warranted. During the subsequent proceedings before the tribunal, the DR failed to identify any factual errors or deficiencies in the findings of the CIT(A). Thus, this ground rasied by the revenue was also dismissed.
Upon thorough examination of the facts, the bench of Saktijit Dey (Judicial Member) and N. K. Billaiya (Accountant member) concurred with the view that the AO had not accurately understood the situation. Consequently, the tribunal declined to intervene, and the appeal of the revenue was dismissed accordingly.
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