MESERS CONSTRUCTION ENGINEERS,JAMMU & KASHMIR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3, SRINAGAR

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ITA 129/ASR/2018Status: DisposedITAT Amritsar30 December 2019AY 2011-126 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal held that disallowance under Section 14A is not warranted if no exempt income is earned, and deleted the addition made on this account. However, disallowances for printing and stationery, and travelling expenses were upheld due to lack of proper evidence.

What were the facts?

The assessee filed an appeal with a delay of 185 days due to severe unrest in Jammu and Kashmir and personal injury. The tribunal condoned the delay subject to a cost of Rs. 10,000.

What were the issues?

Whether disallowance under Section 14A is permissible without exempt income, and whether disallowances for expenses lacking supporting evidence are justified.

Which sections of the Income-tax Act were involved?

Section 14A,Section 40(a)(ia)

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR

Before: SH. N.K.CHOUDHRY & DR. A.L.SAINI

Hearing: 28.11.2019Pronounced: 30.12.2019

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR

BEFORE SH. N.K.CHOUDHRY, JUDICIAL MEMBER AND DR. A.L.SAINI, ACCOUNTANT MEMBER ITA No.129/Asr/2018 Assessment Year: 2011-12

M/s. Construction Engineers, Asst. CIT, 54-IE, Baghat Barzullah, Circle-3, Srinagar. Vs. Sringar. [PAN:AABFC 7715P] (Appellant) (Respondent)

Appellant by: Sh. M.A. Mir (Ld. Cost Accountant) Respondent by: Sh. Charan Dass (Ld. DR)

Date of hearing: 28.11.2019 Date of pronouncement: 30.12.2019

ORDER PER N.K.CHOUDHRY, JM: The instant appeal has been preferred by the assessee against the impugned order dated 30.06.2016 passed by the ld. CIT(A)- Jammu u/s 250(6) of the I.T. Act, 1961 (hereinafter called as ‘the Act’).

2.

At the outset, it was observed that there is a delay of 185 days in filing of the instant appeal. The assessee has demonstrated that though the impugned order was received by the assessee on 06.07.2016 and the same was handed over to the ld. Counsel of the assessee on dated 07.07.2016, against which, advice was given for filing of appeal by 5th Sep. 2016, however, the situation in the Jammu and Kashmir become worst and a complete shutdown taken place and the assessee has also received grievous injuries in an unfortunate

ITA N0.129/Asr/ 2018 (A.Y.2011-12) 2 M/s. Construction Engineers Vs. ACIT

accident, for which the assessee has under gone operation in emergent situation and thereafter also remained on complete bed rest for around six month. Therefore, due to aforesaid circumstances the appeal could not be filed on time. The assessee at last submitted that considering the delay in filing of appeal, is ready to accept any condition including imposition of cost, if any as reasonable for the ends of justice.

3.

The Ld. DR on the other hand, though did not refute the claim of the assessee, however submitted that the delay may have occurred due to unavoidable circumstances but still condonation can be subjected to certain conditions.

4.

Having perused the application filed by the assessee and the reasons stated therein, as recoded by us in the aforesaid paras, it is not in controversy that in Jammu & Kashmir specifically in Srinagar any time complete shutdown can happen and the life is not normal as compared to peaceful places, therefore, reasons stated by the assessee seems to be quite reasonable, however, as a caution, we intends to put condition while condoning the delay for the ends of justice, consequently the delay of 185 days in filing of the instant appeal is condoned but subject to deposit of Rs.10,000/- in the Income Tax Department within 30 days of this order, as the assessee has voluntarily offered and agreed.

5.

The factual matrix of the case is that the assessee by way of this appeal challenged the impugned order on following grounds.” “1. The Ld. CIT(A) has erred in law & facts by disallowing Rs.7,00,000/- on account of section 40(a) (ia) of the Income Tax Act, 1961. The disallowance is bad in law and needs to be deleted. (Not Pressed)

ITA N0.129/Asr/ 2018 (A.Y.2011-12) 3 M/s. Construction Engineers Vs. ACIT

2.

The Ld. CIT(A) has erred in law and facts by making addition of Rs.20,26,445/- u/s 14A of Income Tax Act, 1961. The addition is bad in law and liability needs to be deleted. 3. The Ld. CIT(A) has erred in law and facts by disallowing Rs.10,50,630/- on account of printing and stationary. The disallowance is adhoc in nature and liability needs to be deleted. 4. The Ld. CIT(A) has erred in law and facts by disallowing Rs.2,29,930/- on account of travelling expenses. The disallowance is adhoc in nature and liability needs to be deleted. 5. The Appellant reserves all right to amend alter add and modify the grounds of appeal.”

6.

Ground No.1 At the time of hearing, the assessee did not raise the ground No.1, hence, does not require any adjudication.

7.

Ground No.2:- By way of Ground No.2, the assessee has challenged the addition of Rs.20,26,445/- u/s 14A of the Act. The contention of the Asseeee is that the assessee during the year relevant year did not earn any exempt income therefore no disallowance u/s 14A is warranted. The Ld. AR has submitted that as per balance sheet, the Asseeee had total current assets of Rs.30,20,56,533/-in the Asst. Year 2011-12, liabilities (Creditors) of Rs.1,18,69,507/-, Net Current Assets of Rs.29,01,87,026/-, Bank Finance of Rs.10,82,43,456/- and Own Contribution of Rs.18,19,43,570/-.

We have given our thoughtful consideration to the determination qua instant issue by the Ld. CIT(A) . Various High Court including Delhi High Court in Cheminvest Ltd. vs. CIT [2015] 378 ITR 33 (Delhi) has held that Sec.14A will not apply, if no exempt income

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is received or receivable during the relevant previous year. The Ld. DR relied upon the order dated 12.04.2018 passed by the Co-ordinate Bench in ITA No.218/Asr/2017 in the case of Lally Motors India (P.) Ltd. vs. Pr. CIT-2, Jalandhar and submitted that even if no exempt income is earned still the addition can be made u/s 14A of the Act. It is fact that order relied upon by the Ld. DR is under challenge in Misc. Application No.17/Asr/2018 and has not attained finality and even otherwise there are many judgments of the Hon’ble Supreme Court and the Hon’ble High Courts on the same issue in favour of the assessee.

Recently the Hon’ble Apex Court in the case of Principal Commissioner of Income Tax vs. G.V. K Protect & Technical Services Ltd. [2019] 106 taxmann.com 181 (SC) affirmed the view of the Hon’ble High Court to the effect that in the absence of any exempt income, disallowance was impermissible . Hence, in our view as the assessee did not earn any exempt income, no disallowance is called for. Consequently the addition of Rs.20,26,445/- made u/s 14A of the Act stands deleted. Resultantly ground No.2 stands allowed.

8.

Ground No.3, By way of ground No.3 the assessee has challenged the disallowance of Rs.10,50,630/- on account of printing and stationary charges. The Assessing Officer has observed that during the assessment proceedings, the assessee’s counsel filed reply and vouchers in support of the expenditure, however, it could not produce the evidence/supporting expenditure vouchers to the tune of Rs.10,50,630/-. Consequently, the Assessing Officer disallowed the expenditure of Rs.10,50,630/- under the Act. On appeal, the Ld.

ITA N0.129/Asr/ 2018 (A.Y.2011-12) 5 M/s. Construction Engineers Vs. ACIT

CIT(A) affirmed the said disallowance on the same footing as of the AO. We observe that the Asseeee could not produce the evidence/supporting expenditure vouchers to the tune of Rs.10,50,630/-, consequently, the Assessing Officer disallowed the expenditure of Rs.10,50,630/- which stands affirmed by the Ld. CIT(A). We do not find any infirmity or impropriety in the decision of the issue in hand, hence the same does not requires any inference. Consequently ground No.3 stands dismissed.

9.

Ground No.4. By way of Ground No.4 the assessee has challenged the addition of Rs.2,29,930/- on account of travelling expenses out of total expenditure of Rs.15,32,873/-. Both the authorities below have observed that the assessee has failed to produce all the bills and some of them were self generated. We observe that the authorities below have pointed out that though the assessee has produced some bills but the same were self generated, however, the assessee could not be produce all the bills, therefore, travel by the partners of the firm cannot be ruled out. In our considered opinion, the authorities below have adopted the usual approach and disallowed the expenditure @ 15% which is quite reasonable. As the assessee has failed to provide all the bills, hence, in our considered view the issue under consideration does not warrant any interference of this Court. Consequently ground No.4 stands dismissed.

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10.

In the result, the appeal filed by the assessee stands partly allowed.

Order pronounced in the open Court on 30/12/2019.

Sd/- Sd/- (DR. A.L.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30/12/2019. /PK/ Ps. Copy forwarded to: 1. The Appellant 2. The Respondent 3. The CIT 4. Then CIT(Appeals) 5. SR DR, I.T.A.T. Amritsar 6. Guard File True Copy By Order

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