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Income Tax Appellate Tribunal, DELHI BENCH “SMC ”: NEW DELHI
Before: SHRI PRASHANT MAHARISHI & SHRI K.N.CHARY
O R D E R PER PRASHANT MAHARISHI, A. M.
This is an appeal filed by the filed by the assessee against the order of the ld CIT(A)-9, New Delhi dated 30.05.2018.
The assessee has raised the following grounds of appeal:- The appellant is a Closely held Private Limited Company carrying on the business of Book Binding Job Work. The appellant filed its’ Return of Income on 26.09.2014 by declaring the Total Income of Rs. 1,37,860.00 and paid the Tax due. The case was selected on limited parameters for Scrutiny and Scrutiny Notice was issued u/s 143(2) of the Income Tax Act. While assessing the Income of the appellant Company, the Ld. Assessing Officer assessed the Total Income of the assessee as Rs. 11,19,440.00 by making an addition of Rs. 9,81,579.00 on account of Section 14A of the Income Tax Act, 1961 read with Rule 8D and initiated Penalty proceedings u/s 271(1)© of the Income Tax Act, 1961. The Ld. Assessing Officer placed reliance on CBDT Circular No. 5 of 2014 dated 11.02.2014. The appellant filed the appeal before CIT(A)-9, New Delhi for deleting the addition made by the Ld. Assessing Officer and placed the judgements of various Hon’ble High Courts in its’ favour. The Ld. CIT(A)-9 relied on the judgements of Hon’ble High Courts and allowed the relief to the assesse.
Further the Ld. CIT(A)-9 made an addition of Rs. 9,30,408.00 on account of disallowing of Finance Cost stating the reason that the funds borrowed were deployed for Investment purpose. During the year under consideration, the appellant Company made Non- Current Investments of Rs. 17,50,000.00. The entire Investment was made out of Working Capital of the Company and Non-Interest bearing Loans. The Interest, which was added to the Income of the appellant, was fully repaid in the same Financial Year and was used for the business purposes only which resulted in 200% growth in the Revenue as well as Net Profit of the appellant. Grounds of Appeal
On the facts and in the circumstances of the case and in law the Ld. Commissioner of Income-Tax (Appeals)-9 erred in making the addition of Rs. 9,30,408.00 without appreciating the fact that the Revenue and Net Profit of the appellant increased by 200% by deploying the borrowed funds in business. Relief Prayed A prayer is hereby made for deletion of addition made by the Ld. CIT(A)-9, New Delhi. "The Appellant prays that the addition of Rs. 9,30,408.00 made in respect of disallowance of Finance Costs be deleted."
3. Brief facts of the case shows that assessee is a company engaged in the business of binding job work by employing labour at customer site. It filed its return of income on 26/9/2014 declaring an income of ₹ 1 37860. The case of the assessee was picked up for scrutiny only limited parameters under CAS S stating the reason that large interest expenses relatable to exempt income under section 14 A. AO noted that assessee has any expenditure of ₹ 9 25460 towards interest expenditure and therefore assessee was questioned on a liability of these some under section 14 A of the act. AO made an addition invoking the provisions of rule 8D of the income tax rules of ₹ 9 81579. Consequently the assessment under section 143 (three) of the act was passed on 14/12/2016 determining the total income of the assessee at rupees 1119440/- 4. assessee preferred appeal before the learned CIT – A. He deleted the disallowance under section 14 A of the act for the reason that during the year the assessee did not receive any exempt income. However he enhanced the assessment by disallowing the interest expenditure of ₹ 9 30408/– after giving opportunity to the assessee of hearing. Therefore assessee is in appeal before us.