ASSISTANT COMMISSIONER OF INCOME TAX (CENTRAL) , JABALPUR vs. M/S.TIRUPATI CONSTRUCTION (PAN AACFT8104E), OPP. RAILWAY STATION, BURHAR, DIST.- SHAHDOL (M.P.)

Briefly stated facts, as culled out from the record, are that assessee is a partnership firm engaged in civil construction work. Return of income was filed on 29.09.2012 showing income of Rs.28,01,030/-. Case selected for scrutiny and notices under Section 143(2)/142(1) were served upon the assessee. Assessee was unable to comply with the notices for the reason that search was conducted on 16.10.2014 in the entire Singhania Group which also included assessee’s firm M/s. Tirupati Construction. However, learned Assessing Officer, on going through the panchnama copy dated 02.02.2015 showing the warrant of search, observed that the name of the assessee-firm was not there and he accordingly concluded that the assessment

Appeal of the assessee before the ld. CIT(A) brought part relief. Against the addition deleted by the ld. CIT(A), the Revenue is now in appeal before the Tribunal raising following ground:-

Learned Departmental Representative vehemently argued supporting the order of the learned Assessing Officer in relation to the impugned three additions deleted by the ld. CIT(A). On the other hand, learned Counsel for the assessee, so far as merits of the case are concerned, supported the findings of the learned CIT(A). However, learned Counsel for the assessee also raised the issue by quoting Rule 27 of the Income-Tax (Appellate Tribunal) Rules challenging the validity of assessment passed under Section 144 of the Act by taking a plea that during the course of assessment proceedings the assessee was subject to search under Section 132 of the Act and therefore assessment order framed by the Assessing Officer is not valid.

We have heard the rival contentions and perused the material placed before us. Revenue is in appeal against the deletion of addition of

Now, coming to the merits of the case; apropos issue no.1 relating to disallowance of interest of Rs.26,71,657/-, we observe that the Assessing Officer has made a disallowance under Section 14A of the Act read with Rule 8D of IT Rules. There is no finding of Assessing Officer about the investment in the shares and securities or investment of assets fetching the exempt income. Even there is no evidence as to whether there is any exempt income earned by the assessee. Learned Departmental Representative also could not throw any light on the various limbs which needs to be fulfilled before making the disallowance under Section 14A of the Act. Therefore, respectfully following various judgments relied on by the ld. CIT(A) in its appellate order and also in the given facts and circumstances of the case where the assessee has not earned any exempt income during the year, we find no justification in the order of the learned Assessing Officer making disallowance under Section 14A of the Act at Rs.26,71,657/-. We accordingly uphold the view taken by the learned CIT(A) and dismiss this issue raised by the Revenue in Ground No.1 of the appeal.

Apropos issue no.2 relating to disallowance of 0.5% of exempted investment at Rs.1,13,425/-, we find that this disallowance is also with regard to Section 14A of the Act read with Rule 8D. In the preceding paragraph we have already decided that as there was no exempt income earned by the assessee, no disallowance was called for under Section 14A of the Act as held by various Hon’ble Courts. We, therefore, taking the same view, find no reason to interfere in the findings of the ld. CIT(A) deleting

Apropos issue no.3 which is arisen on account of estimated disallowance of expenses of Rs.34,72,050/- being 5% of the total expenses, we observe that the Assessing Officer has merely made an ad-hoc disallowance while completing the assessment under Section 144 of the Act. We further find that when the issue came up before the ld. CIT(A), assessee submitted copies of ledger account of the purchases, rent, repairs of machinery, salary and wages and other expenses totaling to Rs.6,94,40,999/- Learned Assessing Officer had made an ad-hoc disallowance of 5% on this amount. We further observe that books of accounts of the assessee are duly audited under Section 44AB of the Act and all the impugned expenses and purchases have been examined by the ld. CIT(A) and no mistake has been pointed out by the First Appellate Authority. Learned Departmental Representative has also been unable to prove any distinguishing fact to show that in the past such disallowances have been made which have been confirmed by the higher appellate authorities. We, therefore, in the given facts and circumstances of the case as well as appreciating the fact that the assessee is maintaining regular books of accounts which are audited by a qualified Chartered Accountant, find no reason to interfere in the findings of the ld. CIT(A) sustaining the addition. In the result, issue no.3 raised by the Revenue in ground no.1 regarding disallowance of Rs.33,68,698/- is also dismissed.

During the course of hearing before us, learned Counsel for the assessee has also raised a plea referring to Rule 27 of Income-Tax (Appellate Tribunal) Rules. Rule 27 of Income-Tax (Appellate Tribunal) Rules says the “the respondent, though he may not have appealed, may support the order appealed

We observe that while adjudicating the merits of the case, we have confirmed the view taken by the ld. CIT(A) deleting all the additions and therefore, dealing with the legal issue raised by the ld. Counsel for the assessee referring to Rule 27 of Income-tax (Appellate Tribunal) Rules is merely academic in nature and thus we decline to decide on this legal issue.

In the result, appeal of the Revenue is dismissed.