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Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: Shri Sanjay Garg & Shri Girish Agrawal
आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the Revenue against the order dated 12.06.2018 of the Commissioner of Income Tax (Appeals)-2, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The Revenue in this appeal has taken the following grounds of appeal: “
1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in directing the A.O to delete the disallowance u/s 68 instead of the fact that the claim of the assessee could not be substantiated.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in directing the A.O to delete the disallowance u/s 14A though the disallowance was made relying on CBDT’s circular No.5/2014 dated 11.02.2014.
Assessment Year: 2009-10 M/s Basil Tracom Pvt. Ltd.
3. That the appellant craves for leave to add, delete, amend or modify any ground before or at the time of appellate proceedings.” Ground No.1: - At the outset, the ld. Counsel for the assessee has 2. brought our attention to the impugned order of the Assessing Officer to submit that in this case the assessment was framed by the Assessing Officer ex parte of the assessee u/s 144 of the Income Tax Act as due to certain reasons, the assessee could not furnish the required details before the Assessing Officer. The ld. Counsel has further invited our attention to the impugned order of the CIT(A) to submit that however, during the appellate proceedings before the CIT(A), the assessee furnished the required documents and evidences to prove the identity and creditworthiness of the creditors and genuineness of the transaction. The ld. Counsel has further submitted that the ld. CIT(A) had called for remand report from the Assessing Officer on the basis of submissions made by the assessee before the CIT(A) and the ld. Assessing Officer after making necessary enquiries reported, “based on the evidences and explanation, the criterion of establishing identity, creditworthiness and genuineness of the transaction is not doubted”. The CIT(A) based on the remand report of the Assessing Officer deleted the impugned additions made by the Assessing Officer u/s 68 of the Act.
The ld. Counsel for the assessee has further relied upon the decision of the Hon’ble Madras High Court in the case of Smt. B. Jayalakshmi vs. ACIT, Chennai reported in [2018] 96 taxmann.com 486 (Madras) wherein, the Hon’ble High court has held that where Commissioner (Appeals) on basis of remand report of Assessing Officer, allowed claim of assessee, revenue was not entitled to maintain an appeal before Tribunal against said order of Commissioner(Appeals). The ld. Counsel for the assessee has further relied upon the decision of Assessment Year: 2009-10 M/s Basil Tracom Pvt. Ltd. Jurisdictional Calcutta High Court in the case of PCIT vs. Ambition Agencies (P) Ltd. reported in [2022] 134 taxmann.com 5 (Calcutta), wherein, the Jurisdictional Calcutta High Court has held that where entire sum of share capital along with share premium was added back as unexplained cash credit u/s 68, on remand report by CIT(A), Assessing Officer had concluded that transactions with all shareholders were duly cross-verified and were in order, Commissioner (Appeals) was fully justified in deleting addition.
The ld. DR has fairly agreed that the Assessing Officer in the remand report has reported that the assessee has duly established the identity, creditworthiness of the creditors and genuineness of the transaction and he has also fairly agreed that the issue is also squarely covered by the aforesaid decision of the Hon’ble High Court of Madras and Jurisdictional High Court of Calcutta (supra).
In view of this, we do not find any merit in Ground No.1 of the appeal of the Revenue and the same is accordingly dismissed. Ground No.2 – The revenue vide this ground has contested the 6. action of the ld. CIT(A) in deleting the disallowance made by the Assessing Officer u/s 14A of the Act on account of expenditure incurred towards tax exempted income.
We find that the ld. CIT(A), in this case has deleted the disallowance made by the Assessing Officer by relying upon the following decisions of the various Hon’ble High Courts of the country:- Cheminvest Ltd. vs. CIT 378 ITR 33 (Del). CIT vs. M/s. Holcim India Pvt. Ltd. in and ITA no. 299/2014; Judgment dt. 5-9-2014 CIT v. Shivam Motors (P.) Ltd. [2015] 230 Taxman 63 Assessment Year: 2009-10 M/s Basil Tracom Pvt. Ltd. CIT vs. Ashika Global Securities Ltd. (G.A. No. 2122 of 2014) dt. 11/06/2018 In these case laws, Hon’ble High Courts have been unanimous to hold that where the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A of the Act.
The ld. D/R, however, has relied upon the newly inserted explanations to Section 14A of the Act, which is extracted for the sake of ready reference:- “14A. [(1)] [Notwithstanding anything to the contrary contained in this Act, for the purposes of] computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] ************************ *********************** [Explanation.—For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income.]”
The ld. D/R has further relied on the decision of the Co-ordinate Bench of ITAT Guwahati in the case of ACIT vs. Williamson Financial Services Ltd. reported in [2022] 140 taxmann.com 164 (Guwahati - Trib.). (Judicial Member herein being party to the said decision), to submit that the said explanation to Section 14A of the Act is retrospectively applicable.