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I-T - When CIT(A) reduced quantum of disallownace u/s 14A and assessee accepted it, raking up same issue after four years is akin to raising dispute on stale issue: HC

By TIOL News Service

NEW DELHI, JAN 12, 2018: THE issue is - Whether when the CIT(A) reduced the quantum of disallowace made u/s 14A and the assessee did not file appeal against the same, raking up the same issue after four years when there is a favourable judicial decision on record, is akin to raising a dispute against a stale issue. YES is the answer.

Facts of the case

The assessees were subjected to disallowance u/s 14A of the Act. The CIT(A) granted limited relief but the same became the subject matter of appeal to the ITAT by the Revenue. During the pendency of those appeals, by judicial decision (in the judgment reported as CIT v. Holcim India (P) Ltd. 2014-TIOL-1586-HC-DEL-IT) the cross-objections were filed. The assessee contended that the exempt income for which disallowance was ordered under Section 14A of the Act was by way of investment in subsidiary for business purposes and not for investment purposes and therefore, the disallowance was not warranted.

Since the cross-objections were grossly delayed – to the extent of about 1400 days or so, the ITAT refused to condone the delay. In the application seeking condonation, the assessee contended that since the Revenue’s appeals were pending, it was entitled to prefer the cross-objection and urged the question of law, that it sought to. The assessee relied upon the authority of the Supreme Court in National Thermal Power Co. Ltd. v. CIT 2002-TIOL-279-SC-IT-LB and some other judgments of the High Courts. The ITAT, however, declined to grant relief and rejected the application for condonation of delay.

In its appeal before the HC the assessee urged that once a party enters the Appellate Court, the issues are at large and the appellate forum is entitled to consider the correct position in law. So viewed, the cross-objection preferred was sufficient for the ITAT to have examined the claim of applicability of Section 14A to the exempt income derived in the present case and whether that be brought to tax at all. It was submitted that in the larger interest of justice, once the appellate forum was seized of the cause in an appeal, it was under a duty to examine all dimensions including the upto date developments in law to grant relief or deny it, as the case may be.

Held that,

++ after the CIT(A) granted limited relief and reduced the quantum of the disallowance, the assessee was satisfied. It did not prefer either an appeal or a cross-objection within the time stipulated in this regard. This, in the opinion of the Court, meant that the issue of applicability of Section 14A attained finality. The assessee, in the light of CIT v. Holcim India (P) Ltd. decision, however, woke up and chose to approach the ITAT, the appeals pending before it by the Revenue. The appeals were preferred in 2011, by the Revenue. The CIT(A) had made the order on 27.10.2010. In the circumstances, the belated cross-objections - by over four years, in the opinion of the Court, meant that the appellants were seeking to rake up stale issues for which they had accepted the finality as regards their tax liability;

++ the reference to National Thermal Power Co. Ltd., in the opinion of the Court, is entirely irrelevant. In that case, the aggrieved assessee had already approached the appellate forum; it sought to urge the ground that became available to it during the pendency of the appeal. In the present case, however, the assessee did not approach the ITAT either in its own right as an appellant, if, it was at all aggrieved by the decision of the CIT(A), (who premised the liability on the basis that Section 14A applied) or even in the cross-objection. Likewise, the Court is of the opinion that the broad observations made in Turquoise Investment and Finance Ltd. by the Madhya Pradesh High Court, cannot in this case, obviate the essential fact that there was acceptance about the basic liability;

++ no question of law arises. The appeals are, accordingly, dismissed.

(See 2018-TIOL-75-HC-DEL-IT)