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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI G. MANJUNATHA
Date of Hearing – 02.11.2017 Date of Order – 10.11.2017 O R D E R PER SAKTIJIT DEY, J.M.
Aforesaid appeal has been filed by the assessee challenging the order dated 24th June 2016, passed by the learned Commissioner (Appeals)–24, Mumbai, for the assessment year 2010–11.
2. Ground no.1 is not pressed, hence, dismissed.
3. In grounds no.2 to 4, assessee has challenged the disallowance made under section 14A r/w rule 8D.
2 M/s. Print House India Pvt. Ltd.
Brief facts are, the assessee a company is engaged in the business of printing and publishing. For the assessment year under dispute, assessee filed its return of income on 24th September 2010, declaring loss of ` 3,38,54,100. During the assessment proceedings, on verifying the Balance Sheet of the company for the relevant financial year the Assessing Officer found that the assessee has invested an amount of ` 3,05,83,750, in the shares of Annakoot Properties Pvt. Ltd., income from which shall not form part of the total income. Therefore, he called upon the assessee to explain why disallowance of expenditure attributable to the investment made in exempt income yielding asset should not be disallowed. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer rejecting the submissions of the assessee proceeded to disallow an amount of ` 18,99,281, by applying rule 8D. Though, the assessee challenged the disallowance before the first appellate authority, however, it met with no success.
The specific contention of the learned Authorised Representative before us is, in the relevant previous year assessee has not earned any exempt income, therefore, the provisions of section 14A are not applicable, hence, no disallowance under the said provision can be made. He further submitted, in assessee’s own case for the 3 M/s. Print House India Pvt. Ltd.
assessment year 2011–12, the Tribunal on identical facts has deleted the disallowance made under section 14A r/w rule 8D.
Learned Departmental Representative relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals).
We have heard rival contentions and perused the material available on record. The specific plea of the assessee before us is, in the relevant previous year, the assessee has not earned any exempt income, hence, no disallowance under section 14A can be made. On careful reading of the assessment order as well as first appellate authority’s order, we are of the view that disallowance under section 14A r/w rule 8D has been made fundamentally on the basis that the assessee has made investment in shares of companies which would give rise to exempt income. There is nothing in the order of the Departmental Authorities to suggest that in the relevant previous year, the assessee had earned any exempt income. Therefore, prima–facie, the assessee’s claim that it has not earned any exempt income in the relevant previous year appears to be correct. Notably, while deciding assessee’s appeal against disallowance made under section 14A r/w rule 8D under identical facts and circumstances in the assessment year
4 M/s. Print House India Pvt. Ltd.
2011–12, the Co–ordinate Bench vide order dated 22nd March 2017, passed in ITA no.4161/Mum./2015, has held as under:–
“7. We have heard rival contentions of the parties and perused the material available on record. The specific contention of the learned Authorised Representative while challenging the disallowance under section 14A r/w rule 8D is, the assessee having not earned any dividend income during the previous year no disallowance can be made. As could be seen from the assessment order, the Assessing Officer has made the disallowance under section 14A on the reasoning that investment in shares by the assessee will give rise to exempt income. There is no specific finding of fact by the Assessing Officer that during the relevant previous year, assessee has earned any exempt income by way of dividend. Before the first appellate authority, though, the assessee has contended that no disallowance under section 14A can be made in the absence of any exempt income earned by the assessee during the previous year, learned Commissioner (Appeals) relying upon the decision of the Tribunal, Special Bench, in Cheminvest Ltd. v/s CIT, 317 ITR (AT) 86 (Del.) (SB) held that even if there is no exempt income earned during the previous, still disallowance can be made under section 14A r/w rule 8D The dr has also not brought any material before us to factually controvert the claim of the assessee that no exempt income was earned during the relevant previous year. Therefore, we have to proceed on the footing that during the relevant previous year, assessee has not earned any exempt income. Therefore, the issue before us is, whether in the absence of any exempt income earned in the particular previous year, disallowance can be made under section 14A of the Act. There is no need to deliberate on this issue at length as it stands settled, at least for the present, by the decision of Hon'ble Delhi High Court in Cheminvest v/s CIT, [2015] 378 ITR 33, wherein, the Hon'ble Delhi High Court reversing the decision of the Tribunal, Delhi, Special Bench (supra), held that if the assessee had not earned any exempt income in a particular assessment year no disallowance under section 14A can be made. Applying the aforesaid ratio laid down by the Hon'ble Delhi High Court, we hold that no disallowance under section 14A r/w rule 8D can be made. Accordingly, we delete the addition made by the Assessing Officer. In view of our aforesaid decision, there is no need to deliberate upon the other propositions raised in the ground on this issue.”
5 M/s. Print House India Pvt. Ltd.
It is also relevant to observe, the Hon'ble Jurisdictional High Court has also expressed similar view in case of PCCIF–3, Civil Lines, Nagpur v/s Ballarpur Industries Ltd., dated 13th October 2016. Therefore, applying the ratio laid down in the decisions referred to above, we delete the disallowance made by the Assessing Officer and sustained by the first appellate authority. These grounds are allowed.
In view of our decision in grounds no.2 to 4, ground no.5, has become infructuous, hence, dismissed.
In ground no.6 to 8, assessee has challenged the addition made on account of alleged bogus purchase.
Brief facts are, on the basis of information obtained from Sales Tax Department, it was found by the Assessing Officer that the purchases worth ` 1,56,68,212, claimed to have been made by the assessee in the relevant previous year are not genuine as they are in the nature of accommodation entries obtained from hawala operators. The Assessing Officer called upon the assessee to prove the genuineness of such purchases. Though, the assessee by producing some documentary evidences tried to prove the genuineness of purchases, however, the Assessing Officer rejecting the claim of the 6 M/s. Print House India Pvt. Ltd.
assessee added back the amount of ` 1,56,68,242 by treating it as bogus.
The learned Commissioner (Appeals) also confirmed the addition.
Learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted that the purchases made are genuine as the Department has not doubted the sales effected by the assessee. He further submitted, the Assessing Officer has not conducted any independent enquiry and merely relying upon the information obtained from Sales Tax Department has made the addition. He submitted, under identical facts and circumstances, in assessee’s own case for assessment year 2011–12, the Tribunal has restricted the disallowance to 12.5% of the bogus purchase. He, therefore, submitted, in the impugned year also the disallowance can be restricted to 12.5%.
Learned Departmental Representative relying upon the order of the learned Commissioner (Appeals) submitted, the assessee has not furnished transportation bills / delivery challan to prove the delivery of goods, therefore, addition made is justified.
We have heard rival contentions and perused the material available on record. From the facts on record, it is evident that the 7 M/s. Print House India Pvt. Ltd.
Assessing Officer has made the addition on account of bogus purchase by entirely relying upon the information obtained from the Sales Tax Department. As it appears, the Assessing Officer has not made any independent enquiry or investigation to find out the existence of the concerned parties or the genuineness of purchases. It is also a fact on record that the Assessing Officer has not doubted the sales effected by the assessee in the relevant previous year. Moreover, on identical facts and circumstances, addition made on account of bogus purchase in assessee’s own case for assessment year 2011–12 was reduced to 12.5% of the bogus purchase by the Co–ordinate Bench in ITA no.4161/Mum./2015 dated 22nd March 2017. Respectfully following the aforesaid decision of the Co–ordinate Bench in assessee’s own case, we direct the Assessing Officer to disallow 12.5% of the alleged bogus purchase. Consequential relief should be given to the assessee accordingly. These grounds are partly allowed.
In ground no.9, the assessee has challenged the disallowance of deduction claimed on account of payment made towards employee’s contribution to PF/ESIC.
Brief facts are, during the assessment proceedings, the Assessing Officer on verifying the audit report found that employee’s contribution to PF/ESIC were not paid within the due date provided under 8 M/s. Print House India Pvt. Ltd.
Explanation to section 36(1)(va) of the Act. Accordingly, he disallowed an amount of ` 3,746.
The learned Commissioner (Appeals) also confirmed the disallowance.
We have heard rival contentions and perused the material available on record. As could be seen from the facts on record, employee’s contribution to PF/ESIC were paid by the assessee much before the due date of filing of return of income as provided under section 139(1) of the Act. That being the case, as per ratio laid down by the Hon'ble Jurisdictional High Court in CIT v/s Hindustan Chemicals Organics Ltd., 366 ITR 001 (Bom.), no disallowance can be made keeping in view the amendment brought to section 43B of the Act. In view of the aforesaid, we delete the addition made by the Assessing Officer. This ground is allowed.
In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 10.11.2017