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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 30/09/2019, passed under section 250, of the Income Tax Act, 1961 (‘the Act’) by the learned Commissioner of Income Tax (Appeals)-10, Mumbai [‘learned CIT(A)’], for the assessment year 2013–14.
When this appeal was called for hearing neither any one appeared on behalf of the assessee nor was any application seeking adjournment filed. On a perusal of the record, we noticed that this appeal was listed on 8
M/s. S.B. Data Systems Pvt. Ltd. ITA No.7175/Mum./2019 previous occasions and except on one hearing, no one appeared on behalf of the assessee. Considering the issues involved, we proceed to hear this appeal ex parte qua the assessee, after hearing the learned Departmental Representative (‘learned DR’) and on the basis of material available on record.
In this appeal, assessee has raised following grounds:
“1. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding addition of Rs. 3,36,571/ made to the returned income by disallowing the claim of interest expenditure by invoking provisions of section 14A r.w.r 8D of the Act and the reason assigned for doing so are wrong and contrary to the Provisions of Income Tax Act and rules made there under.
2. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding addition of Rs. 2,79,343/ made to the returned income by wrongly holding that there is unaccounted sales of the said amount and the reason assigned for doing so are wrong and contrary to the Provisions of Income Tax Act and rules made there under.”
The issue arising in ground No. 1, raised in assessee’s appeal is pertaining to disallowance of expenditure by invoking provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (‘the Rules’).
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a company and is mainly in the business of trading of IT equipments and peripherals. For the year under consideration, assessee filed its revised return of income on 30/09/2013 declaring total income of Rs. 8,66,050. During the course of assessment proceedings, it was observed from financial of the assessee that assessee has earned Page | 2
M/s. S.B. Data Systems Pvt. Ltd. ITA No.7175/Mum./2019 exempt dividend income of Rs. 62,929. Since, assessee has not disallowed any expenditure under section 14A of the Act, the assessee was issued show cause notice. In reply, assessee submitted that no expenses have been incurred to earn the exempt income. Assessing Officer vide order dated 22/03/2016, passed under section 143(3) of the Act did not agree with the submissions of the assessee and made the disallowance of Rs. 3,36,571, under section 14A of the Act read with Rule 8D of the Rules.
In appeal before the learned CIT(A), assessee submitted that assessee has made investment in shares of its associate concerns to have control over the company and also in private banks to acquire loan and overdraft facility and that the investment in shares of the subsidiary or associate concerns or a bank has made out of business expediency, no disallowance under section 14A read with Rule 8D should be made. The learned CIT(A) following the decision of Hon’ble Supreme Court in Maxopp Investment Ltd v/s CIT: [2018] 402 ITR 640 (SC), dismissed the appeal filed by the assessee on this issue. Being aggrieved, assessee is in appeal before us.
During the course of hearing, learned DR vehemently relied upon the orders passed by the lower authorities.
We have considered the submissions and perused the material available on record. It is evident from the record that the exempt dividend income earned by the assessee, during the year under consideration, is Rs. 62,929. In respect of same, the Assessing Officer made the disallowance Page | 3
M/s. S.B. Data Systems Pvt. Ltd. ITA No.7175/Mum./2019 under section 14A read with rule 8D of Rs. 3,36,571. We find that Hon’ble jurisdictional High Court in Nirved Traders (P.) Ltd. v/s Dy. CIT, IT Appeal No.149 of 2017, vide judgement dated 23-4-2019, has held that disallowance under section 14A of the Act cannot be more than exempt income.
Thus, respectfully following the aforesaid decision of Hon’ble jurisdictional High Court, we direct the Assessing Officer to restrict the disallowance made under section 14A of the Act to the extent of exempt dividend income earned by the assessee, during the year under consideration. As a result ground No. 1 raised in assessee’s appeal is partly allowed.
The issue arising in ground No.2, raised in assessee’s appeal, is pertaining to addition of Rs. 2,79,343, on the basis of unaccounted sales.
The brief facts of the case pertaining to this issue, as emanating from the record, are: As per the AIR information, it was observed that cash amounting to Rs.32,93,023, is credited in HDFC bank account of the assessee. During the assessment proceedings, the cash book of the assessee was called for, on examination of the same it is observed that only Rs. 30,12,680, cash has been deposited by the company into the HDFC bank account. Accordingly, assessee was asked to explain the difference of Rs. 2,79,343. In reply, assessee submitted that in some cases clients directly deposit cash in the assessee’s bank account hence the above difference. As, the assessee has not provided any documentary Page | 4
M/s. S.B. Data Systems Pvt. Ltd. ITA No.7175/Mum./2019 evidence such as client ledger, confirmation etc. to support its contention, the Assessing Officer vide order passed under section 143(3) of the Act treated the aforesaid difference of cash of Rs.2,79,343 as unaccounted sales and added the same to the total income of the assessee.
In appeal, learned CIT(A) dismissed the appeal filed by the assessee on this issue, by observing as under:
“7.3.2 is seen that the AO has made an addition of Rs 2.79.343/– on account of unaccounted sales as he found that the cash deposited in the bank account of the appellant as per the AIR information is more than the cash deposited to the bank account as per cash book maintained by the appellant it is a contention of the appellant that some of the parties to nor goods have been sold have deposited cash directly in the bank account of the appellant and instead of crediting the receipt of cash book the amount has directly gone to bank account, therefore, the appellant has already offered Rs.2,80,343, as sales hence the don made on account of unaccounted sales will lead to double taxation and to support the AR in his written submission stated to have enclosed the copy of the party Ledger account and reconciliation statement highlighting the transactions. However on perusal of the details submitted by the AR it is found that the AC has merely placed on record an extract of the bank statement and the copy of the party Ledger account and reconciliation statement highlighting the transactions, as mentioned in the written statement, have not been submitted to reconcile the difference brought on record by the AD. No ledger account was produced to demonstrate that the aforesaid amount has been offered to tax by the appellant within the year under consideration as sales receipts. Therefore, the order of the AO on this issue does not call for any interference, and the addition of Rs 2,79,343/- to the returned income of the appellant on account of unaccounted sales, is confined.”
During the course of hearing, learned DR submitted that in absence of details being furnished by the assessee, addition made by the lower authorities is justified.
We have considered the submissions and perused the material available on record. As per the assessee, some of the parties to whom the goods have been sold have deposited cash directly in the bank account of Page | 5
M/s. S.B. Data Systems Pvt. Ltd. ITA No.7175/Mum./2019 the assessee and instead of crediting the receipt of cash book, the amount was directly gone to bank account, therefore, the assessee has already offered the impugned difference as sales, hence the addition made on account of unaccounted sales would lead to double taxation. We find that the learned CIT(A) upheld the disallowance in absence of ledger account to demonstrate the fact that the differential amount has been offered to tax by the assessee as sales receipts during the year under consideration. In the larger interest of justice and to grant one more opportunity to the assessee to provide the necessary details in support of its claim, we deem it appropriate to remand this issue to the file of Assessing Officer for de novo adjudication. We further direct the assessee to produce all the details in support of its claim that the impugned differential amount has already been offered as sales, during the year under consideration. With the above directions, ground No. 2 raised in assessee’s appeal is allowed for statistical purpose.
In the result, appeal by the assessee is partly allowed for statistical purpose. Order pronounced in the open court on 11/08/2022