NISCHAY DISTRIBUTORS PVT. LTD,KOLKATA vs. DCIT, CC-4(3), KOL, KOLKATA

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ITSSA 80/KOL/2023Status: DisposedITAT Kolkata22 August 2023AY 2011-123 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that the assessee, based on the audited annual accounts filed, appeared not to have earned any exempt income. In the absence of exempt income, the invocation of Section 14A and the consequent disallowance of Rs. 3,89,010/- could not be sustained. The Tribunal referred to the decision of the Hon'ble Delhi High Court in Chem Invest Ltd. vs. CIT. However, to ascertain the fact of whether the assessee earned any exempt income, the issue was restored to the file of the AO. The AO was directed to examine this fact and decide accordingly, also providing an opportunity of hearing to the assessee. If no exempt income was received, the disallowance was to be deleted. The grounds raised were allowed for statistical purposes.

What were the facts?

The assessee, Nischay Distributors Pvt. Ltd., filed appeals against the orders of the Ld. Commissioner of Income Tax (Appeals)-21, Kolkata, for Assessment Years (AY) 2011-12 and 2012-13. The appeals were filed one day late, and the delay was condoned by the Tribunal due to the illness of the director. The core issue in both appeals pertains to the confirmation by the Ld. CIT(A) of an addition of Rs. 3,89,010/- made by the Assessing Officer (AO) under Section 14A of the Income Tax Act, 1961.

What were the issues?

1. Whether the disallowance of Rs. 3,89,010/- under Section 14A of the Income Tax Act, 1961, is sustainable when the assessee has not earned any exempt income during the assessment year? Assessee's Contention: The assessee argued that no disallowance under Section 14A is warranted if no exempt income has been earned during the year. They relied on audited annual accounts to demonstrate the absence of exempt income and cited decisions from various judicial forums supporting this position. Revenue's Contention: The Revenue contended that the appellate order did not clearly establish whether the assessee earned any exempt income. Therefore, they requested the issue be restored to the AO for examination.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH: KOLKATA

Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]

आयकर अपील�य अ�धकरण, कोलकाता पीठ “सी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA �ी राजेश कुमार, लेखा सद�य एवं �ी संजय शमा� �या�यक सद�य के सम� [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member] I.T.(SS)A. Nos. 80 & 81/Kol/2023 Assessment Years: 2011-12 &2012-13 Nischay Distributors Pvt. Ltd. Vs. DCIT, Central Circle-4(3), Kolkata (PAN: AACCN 2154 K)

Appellant / (अपीलाथ�) Respondent / ( !यथ�)

Date of Hearing / सुनवाई 02.08.2023

क$ �त&थ Date of Pronouncement/ 22.08.2023 आदेश उ)घोषणा क$ �त&थ For the Appellant/ Shri Sagar Jain, FCA Shri Ayush Jain, FCA �नधा�/रती क$ ओर से For the Respondent/ Shri Sunil Kr. Agarwala, CITDR राज�व क$ ओर से ORDER / आदेश Per Rajesh Kumar, AM: These are the appeals preferred by the assessee against the separate orders of the Ld. Commissioner of Income Tax (Appeals)-21, Kolkata (hereinafter referred to as the Ld. CIT(A)”] dated 16.03.2023 for the AY 2011-12 & 2012-13.

2.

At the outset we note that the appeal is delayed by one day. In the condonation petition , the delay is stated to be on account of illness of the director who used to attend the tax matters. Considering the facts , we are inclined to condone the delay by admitting the appeal.

2 I.T.(SS).A. Nos.80 & 81/Kol/2023 Assessment Year: 2011-12 &2012-13 Nischay Distributors Pvt. Ltd. 3. The only issue raised by the assessee in the grounds of appeal is against the order of Ld. CIT(A) confirming the addition of Rs. 3,89,010/- as made by the AO u/s 14A of the Act.

4.

The Ld. Counsel at the outset pointed out that during the year the assessee has not earned any exempt income during the year and therefore there is no question of disallowance u/s 14A of the Act. The Ld. A.R submitted that it is a settled position of law as has been held in decisions of various judicial forums holding that no disallowance is called for where there is no exempt income during the year. The Ld. A.R referred to audited annual accounts of the assessee to corroborate his submissions that the assessee has not had any exempt income during the year. The Ld. A.R therefore prayed that the addition made by the AO u/s 14A of the Act as confirmed by ld CIT(A) may kindly be deleted as the assessee is not having any exempt income.

5.

The Ld. D.R on the other hand stated that the fact whether the assessee has earned any exempt income or not during the assessment year is not clear in the appellate order and therefore the issue may be restored to the file of the AO to examine the issue accordingly.

6.

After having rival contentions of both the parties and perusing the material on record, we find that apparently the assessee is not having any exempt income on the basis of audited annual accounts filed before us. In absence of any exempt income being received by the assessee during the year, the invocation of provisions of Section 14A of the Act and consequent disallowance of Rs. 3,89,010/- cannot be sustained. The issue is squarely covered by the decision of Hon’ble Delhi High Court in the case of Chem Invest Ltd. vs. CIT in ITA 749/2014 dated 2.9.2015. However we are restoring this issue to the file of AO to ascertain this fact whether the assessee has earned any exempt income during the year or not and decide the issue accordingly. Needless to say in case the assessee has not received any exempt income during the year the disallowance of Rs. 3,89,010/- made u/s 14A of the Act has to be deleted. The

3 I.T.(SS).A. Nos.80 & 81/Kol/2023 Assessment Year: 2011-12 &2012-13 Nischay Distributors Pvt. Ltd. AO also directed to give opportunity of hearing to the assessee before deciding the issue. Accordingly grounds raised by the assessee is allowed for statistical purposes.

7.

Issue raised in IT(SS)A Nos. 81/Kol/2023 for AY 2012-13 is similar to one as decided by us in IT(SS)A No. 80/Kol/2023, therefore our decision in IT(SS)A No. 80/Kol/2023 would ,mutatis mutandis, apply to this appeal as well. Accordingly the appeal is allowed for statistical purposes.

8.

In the result, both the appeals of the assessee are allowed for statistical purposes.

Order is pronounced in the open court on 22nd August, 2023

Sd/- Sd/-

(Sonjoy Sarma /संजय शमा�) (Rajesh Kumar/राजेश कुमार) Judicial Member/�या�यक सद�य Accountant Member/लेखा सद�य Dated: 22nd August, 2023 SB, Sr. PS

Copy of the order forwarded to: 1. Appellant- Nischay Distributors Pvt. Ltd., BJ-311, Sector-II, Sech Bhawan, Salt Lake City, Kolkata-700091. 2. Respondent- DCIT, Central Circle-4(3), Kolkata 3. Ld. CIT(A)- 21, Kolkata 4. Ld. PCIT- 5. DR, Kolkata Benches, Kolkata (sent through e-mail)

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