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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, DCIT, Circle 25 (1), New Delhi (hereinafter referred to as the ‘Revenue’) by filing the present appeal sought to set aside the impugned order dated 29.01.2016 passed by the Commissioner of Income-tax (Appeals)-9, New Delhi qua the assessment year 2012-13 on the grounds inter alia that :-
“1. On the facts and in the circumstances of the case and in law the order passed by Ld. CIT(A) is erroneous and the learned CIT(A) has erred in deleting addition of Rs.5,10,000/- made by AO on account of advance from customers.
2. On the facts and in the circumstances of the case and in law the order passed by Ld.CIT(A) is erroneous and the learned CIT(A): i) has erred In deleting the addition of Rs.l,62,16,020/- made by AO on account of section 14A of the I.T. Act. ii) has failed to appreciate that the observations in the para 23 of Cheminvest regarding the question of law are in the context of facts and not applicable to the present case. iii) has erred in ignoring circular No.5/2014 dated 11.02.2014 issued by CBDT that disallowance of expenses u/s 14A in cases where corresponding exempt income has not been earned during the financial year.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee is into the business of resort hospitality services who has also earned rental income from Reliance Communication Ltd. during the year under assessment.
During the assessment proceedings, Assessing Officer (AO) called for the details of advances taken by the assessee from the customers as on 31.03.2012, which was filed by the assessee. On failure of the assessee to substantiate the amount of finance taken from Ankur Aggarwal, N.R. Ohri, Pawan Sharma and Sar Investments, AO treated the amount of Rs.1,00,000/- as concealment of income and balance amount of Rs.4,10,000/- shown as cessation of liability and thereby made addition of Rs.5,10,000/- to the total income of the assessee. AO also made addition of Rs.1,62,16,020/- on account of disallowance made u/s 14A of the Income-tax Act, 1961 (for short ‘the Act’) on the ground that no disallowance has been made by the assessee company qua the expenditure incurred in respect of income not forming part of the total income.
Assessee carried the matter by way of an appeal before the ld. CIT (A) who has deleted the addition by allowing the appeal.
Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO.1
Ld. DR for the Revenue contended that since no date of function for which alleged advance is disclosed by the assessee, addition is liable to be sustained and that ld. CIT (A) has admitted the additional evidence at the back of the AO.
However, on the other hand, ld. AR for the assessee to repel the arguments addressed by the ld. DR for the Revenue contended inter alia that advance booking from the customers was entertained by the assessee to provide banqueting facilities and they provided tentative date to organize the function; that the entire details have been provided to the AO qua the amount of advance of Rs.2,46,47,871/- and referred to findings returned by the ld. CIT (A) in the impugned order. Ld. AR for the assessee further contended that evidence for taking advance in the shape of copy of bills and ledger accounts of the parties is available at pages 53 to 57 of the paper book.
When we examine the impugned order passed by the ld. CIT (A), it is apparently clear that addition has been deleted on the basis of evidence brought on record by the assessee wherein it is proved that function of Ankur Aggarwal and H.R. Ohri took place on 27.06.2012 and 28.10.2012 respectively, copy of bills issued are available at pages 54 & 55 of the paper book. Assessee also proved from the ledger account, available at pages 56 & 57 of the paper book that unclaimed balance in case of Pawan Sharma and Sar Investments amounting to Rs.50,000/- and Rs.3,60,000/- respectively has been written off. Since the amount in question figured in the audited balance sheet and profit & loss account of the assessee is made available at pages 3 to 86 of the paper book and books of accounts have been accepted by the AO, the same cannot be disputed by the AO.
Moreover, when assessee has duly explained the advances received by way of bills and ledger accounts, available at pages 53 to 57 of the paper book, having been adjusted in the subsequent years which have been offered as income, the same cannot be treated as cessation of liability.
So far as question of entertaining additional evidence by the ld. CIT (A) under Rule 46A is concerned, the same has been admitted only after calling the remand report from the AO. So, the ld. CIT (A) has returned the factual findings on the basis of evidence brought on record, we find no ground to interfere into the deletion of addition made by the ld. CIT (A). Consequently, ground no.1 is determined against the Revenue.
GROUND NO.2 10. Ld. CIT (A) has deleted the addition of Rs.1,62,16,020/- made by the AO u/s 14A of the Act which has been challenged by the Revenue. Ld. DR for the Revenue in order to challenge the impugned addition made by the ld. CIT (A) relied upon the order passed by the AO. However, on the other hand, ld. AR for the assessee in order to repel the arguments addressed by the ld. DR for the Revenue contended that assessee’s case is covered by the order passed by the Tribunal in assessee’s own case for AYs 2009- 10 & 2010-11 confirmed by the Hon’ble High Court vide order dated 03.07.2015 in ITA 368/2015.
Undisputedly, the assessee company has made investment of Rs.40,88,90,244/- on 31.03.2012 out of interest free funds. It is also not in dispute that assessee has not earned any exempt income during the year under assessment.
In the backdrop of the aforesaid facts and circumstances of the case, we are of the considered view that when assessee has made entire investment out of his interest free funds and has not earned any exempt income during the year under assessment, section 14A is not attracted. AO proceeded to make disallowance of Rs.1,62,16,020/- merely on the basis of CBDT Circular No.5/2014 dated 11.02.2014 without looking into the fact that the assessee has made investment out of his interest free funds and more so, no exempt income has been earned during the year under assessment.
Hon’ble Delhi High Court in case of the Pr. CIT vs. IL&FS Energy Development Company Ltd. – (2017) 399 ITR 483 (Delhi) decided the identical issue in favour of the assessee and the ratio of the judgment (supra) for ready perusal is as under :-
“Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income (CBDT Circular v. rule 8D) - Assessment year 2011-12 - Whether CBDT Circular No.5/2014 dated 11-2-2014 cannot override express provisions of section 14A, read with rule 8D - Held, yes - Whether where no exempt income was earned in relevant assessment year, merely because tax auditor had suggested in tax audit report that there ought to be such disallowance, it could not be a ground to make disallowance in terms of section 14A, read with rule 8D - Held, yes [Para 23] [In favour of assessee]”
In view of what has been discussed above, we find no illegality or perversity in the deletion made by the ld. CIT (A), hence ground no.2 is also determined against the Revenue.
Resultantly, the appeal filed by the Revenue is hereby dismissed. Order pronounced in open court on this 25th day of July, 2019.