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Before: SHRI H.S. SIDHU
Date of Hearing : 29-10-2015 Date of Order : 29-10-2015
O R D E R
PER H.S. SIDHU, JM
This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-I, New Delhi dated 15.5.2015 pertaining to assessment year 2010-11.
The grounds of appeal read as under:-
i) The Ld. CIT(A) has erred in law and on facts in deleting addition made on account of disallowance of expenses u/s. 14A read with Rule 8D. (ii) The Ld. CIT(A) has erred in law and on facts, in not apprecaiting the fact that the assessee has earned dividend income during the year which does not form part of taxable income u/s. 10 of the Income Tax Act and thus section 14A is squarely applicable in the case. (iii) The Ld. CIT(A) has erred in placing reliance on the decision of Hon’ble Delhi High Court in Holicam India Ltd., facts of which case are different from the facts of instant case. (iv) The Ld. CITA(A) has erred on facts and in law in deleting the addition of Rs. 8,30,000/- made on accoutn of unverifiable purchases, relyong on his own decision in AY 2009-10 which decision has already been set aside by ITAT. (v) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
The brief facts of the case are that the Return of income declaring loss of Rs. (-) 2046768/- was filed through e-filing on 24.9.2010 and the same was processed u/s. 143(1) of the I.T. Act, 1961 at the returned income itself. The case was selected for scrutiny on the basis of CASS list for selection of cases for AY 2011-12. Notice u/s. 143(2) dated 25.8.2011 was issued and served upon the assessee. This has been followed up with notice u/s. 142(1) thereafter. In response to the notice, Sh. Amit Mathur, CA of the assessee company attended the proceeding from time to time and explained the case and furnished the details, as required. The assessee company has shown income from software services and income from other source. Bank statement were produced and examined. Necessary details and information as called for have been filed and place on record. Books of accounts consisting of cash book, bank book, ledger etc. were called for an examined on test check basis.
3.1 In the assessment order the AO applied Rule 8D read with section 14A for working out disallowance of Rs. 3,71,95,803/-. On perusal of profit and loss account AO was observed that the assessee has debited Rs. 21,58,387/- towards various expense as per Schedule 10 & 11 of Balance Sheet. As the assessee has incurred some statutory expenses with regard the company AO excluded from the disallowances. The statutory expenses such as audit fee, tax audit fee, filing fees etc. comes to Rs. 25,000/-. The total expenses excluding statutory expenses comes Rs. (2158387 – 25000) = Rs. 21,33,387/-. As the disallowances cannot be more than the expenses claimed in profit and loss account therefore disallowances restricted to Rs. 21,33,387/- and the same has been added u/s. 14A of the Income Tax Act, 1961 and completed the assessment vide order dated 11.3.2014 u/s. 143(3) of the Act.
Aggrieved with the aforesaid assessment order, assessee appealed before the Ld. CIT(A), who vide impugned order dated 15.5.2015 deleted the addition in dispute and partly allowed the appeal of the assessee.
Against the above mentioned impugned order dated 15.5.2015, the Revenue is in appeal before the Tribunal.
Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal.
7. On the other hand, Ld. Counsel of the assessee relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.
8. I have heard both the parties and perused the records, especially the orders of the revenue authorities. With regard to ground No.1 relating to disallowance u/s 14A, read with Rule 8D is concerned, I find force in the assessee’s contention that in terms of the provisions of section 14A(2), prescribed method u/r. 8D can be applied only where the AO is not satisfied with the correctness of the claim of the assessee, regarding the expenses incurred for earning exempt income. However, from perusal of the record, I find that AO has not given any finding as to why he was not satisfied with the correctness of the account. I further find that the Ld. CIT(A) has rightly referred the judgment of the Jurisdictional High Court in the case of CIT vs. Holcim India Pvt. Ltd. In their judgment dated 5.9.2014 in and in ITA No. 299/2014 wherein, it has been held that an assesse had to incur expenses for the business in the form of investment in shares and to further expand and consolidate their business. Expenditure had to be also incurred to protect the investment made. The genuineness of the said expenditure and the fact that it was incurred for the business activities was not doubted by the AO and therefore, the expenditure was allowed. I further find that Hon’ble Punjab and Haryana High Court in the case of CIT vs. Lakhani Marketing in ITA No. 970/2008 decided on 2.4.2004 made reference to two earlier decisions of the same Court in CIT vs. Hero Cycles Limited 323 ITR 518 and CIT vs. Winsome Textile Industries Ltd. 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. I note that the Ld. CIT(A) has rightly observed that in the assessee’s case there was no exempt income earning during the year. Respectfully following the decision of the Jurisdictional High Court in the case of CIT vs. Holcim Pvt. Ltd. (Supra), Ld. CIT(A) has rightly held that the AO was not justified in making the disallowance and therefore, the same was rightly deleted. Hence, I do not see any reason to interfere with the well reasoned order of the Ld. CIT(A), therefore, I uphold the same and dismiss the ground No. 1 , 2 & 3 raised by the Revenue.
9. With regard to ground No. 4 relating to deletion of addition of Rs. 8,30,000/- made on account of unverifiable purchases, relying on his own 4 decision in AY 2009-10 which decision has already been set aside by ITAT. At the time of hearing, Ld. Counsel of the assessee has stated that the ITAT vide order dated 17.4.2015 in assessee’s own case for the asstt. Year 2009-10 vide in Department Appeal has set aside the issue to the AO. The relevant para no. 12 is reproduced as under:-
“12. Under facts and circumstances as noted above, we are inclined to hold that the revenue authorities below has not properly considered submissions, details, explanation and other relevant documentary evidence and related bills and vouchers audited books of accounts of the Assessee and the AO proceeded to make additions without bringing out any adverse material or facts against the assessee and without rejecting audited books of account of the assessee. At the same time we also note that the CIT(A) granted relief for the assessee by passing a slip short and cryptic order by making only short deliberations on the issue of purchase and sales and without any conclusion on other two issues and therefore, orders of the authorities below suffers ambiguity, perversity and the same are not a sustainable. Under above noted facts and circumstances, we find a just and proper to restore the assessment to the file of Assessing Officer for framing a fresh assessment, after affording few opportunity of hearing for assessee and without being prejudiced from the earlier assessment order and impugned order. Accordingly, the main ground of the revenue is deem to be allowed for statistical purposes.”
9.1 Keeping in view of the aforesaid decision of the ITAT, I am of the view that in the assessment year 2009-10, the Bench has held that the Revenue Authority below has not properly considered the submissions, details, explanation and other relevant documentary evidence and related bills and vouchers, audited books of accounts of the assesse and the AO has made the addition without making any adverse material or facts against the assessee and without rejecting the audited books of account of the assessee. In the present case all the details and submissions of the assessee has been considered by the AO and AO has made the addition only on the basis of similar addition made in the assessment year 2009-10. Therefore, in the present case the AO is directed to decide the issue on the basis of already documentary evidence filed and verified by him at the time of completion of assessment.