DCIT, CIRCLE - 19(1), NEW DELHI vs. PRIME COMFORT PRODUCTS PVT. LTD., DELHI

This Revenue’s appeal for Assessment Year 2017-18, arises against the CIT(A)/NFAC, Delhi’s DIN & order No. ITBA/NFAC/S/250/2024-25/1065534126(1) dated 11.06.2024, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”).

Heard both the parties at length. Case file perused.

This Revenue’s appeal raises the following substantive grounds: “(i) Whether in facts and circumstances of the case, the ld. CIT(A) has erred in allowing the appeal of the assessee on the fact that the assessee could not Prime Comfort Products Pvt. Ltd. establish the creditworthiness of the creditors and genuineness of transaction in respect of credit of Rs.1,89,00,000/- on account of loan/advances received back by the assessee in its financial statement as required under section 68 of the Income Tax Act, 1961? (ii) Whether in facts and circumstances of the case, the ld. CIT(A) has erred in fact in directing in deleting the disallowance of Rs.13,87,500/- may by the AO u/s 14A without appreciating the facts that the CBDT clarify that the Rule 8D r.w.s. 14A provides that the disallowance of the expenditure has to be made even if taxpayer has earned any exempt income.”

Coming to the Revenue’s former substantive ground seeking to revive section 68 addition of Rs.1,89,00,000/- made in the assessment order dated 24.12.20219; a perusal of the case records indicates that the learned Assessing Officer had primarily relied on his findings in assessment year 2015-16 on the very issue (page 7 para 4) whilst holding the loans/advances in question as unexplained cash credits u/s 68 of the Act.

That being the case, learned counsel representing assessee takes us to page 3 in the paper book wherein this tribunal has already accepted it’s case in (A.Y. 2015- 16) decided on 04.10.2019. We are further informed that the corresponding creditors also happen to be almost the same in both these assessment years. All these clinching intervening developments have gone un-rebutted from the Revenue side.

So far as the Revenue’s latter substantive ground on the issue of section 14A r.w. Rule 8D disallowance of Rs.13,87,500/- is concerned, there is hardly any dispute between the parties that the assessee had not derived any exempt income in the relevant previous year. That being the case, we quote Cheminvest Limited vs. CIT (2015) 61 taxmann.com 118 (Delhi) that the impugned disallowance does not apply in absence of any such exempt income. This is indeed coupled with the fact that the legislature has recently amended section 14A by inserting explanation thereto vide Finance Act, 2022 w.e.f. 01.04.2022 that such a disallowance could indeed by made even in absence of exempt income. We reiterate that we are in A.Y. 2017-18 and the foregoing amendment does not carry any retrospective effect as per PCIT Vs. Era Infrastructure India Ltd. (2024) 448 ITR 674 (Del.). Rejected accordingly.

No other ground or argument has been pressed before us.