Kavita Gupta Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, allowed the assessee’s appeal after condoning a delay of 217 days in filing the appeal. The Tribunal accepted the assessee’s explanation that the delay occurred because legal advice to challenge the quantum order was received only after a penalty order under Section 271(1) of the Income-tax Act was passed. As the Revenue did not seriously oppose the condonation request, the delay was condoned and the appeal was heard on merits.
The assessee had filed the return of income for Assessment Year 2016-17 declaring a loss. The case was selected for limited scrutiny under Section 143(2) solely to examine the large deduction claimed under Section 57 under the head “Income from Other Sources.” During assessment proceedings, however, the Assessing Officer (AO) made a disallowance of ₹16,97,698 under Section 14A read with Rule 8D. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the disallowance on a substantive basis while deleting the protective addition.
Before the Tribunal, the assessee raised additional legal grounds contending that the disallowance under Section 14A was beyond the scope of the limited scrutiny for which the case had been selected. It was argued that the AO exceeded the jurisdiction permitted under the CBDT instructions governing limited scrutiny assessments, as the case had never been converted into complete scrutiny. The assessee also challenged the invocation of Rule 8D, the absence of satisfaction under Section 14A(2), and asserted that sufficient own funds and higher interest income existed.
