2020 (11) TMI 299 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on disallowance under section 14A and deletion of addition. Detailed judgment on legal principles. (A)

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions regarding the disallowance u/s 14A and the deletion of the addition of ... Disallowance u/s 14A r.w.r 8D - AO noticed that assessee had invested huge amount in shares but had not disallowed any expenditure u/s 14A - As per assessee no exempt income has been earned by the assessee and therefore no disallowance u/s 14A is called for - HELD THAT:- Submissions of the assessee have not been controverted by the Revenue. We find that in the case of PCIT vs. GVK Project and Technical Services Ltd. [2019 (5) TMI 725 - SUPREME COURT] upheld the Tribunal’s order holding that in the absence of any exempt income reported by the assessee, no disallowance u/s 14A can be made. We are of the view that the ratio of decision of Hon’ble Apex Court relied upon by Revenue is not applicable to the present facts. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A). Thus the ground of Revenue is dismissed. Miscellaneous income - assessee submitted in assessment proceedings in the absence of the Accountant of the assessee, assessee had voluntarily surrendered the income to avoid any litigation - CIT(A) after examination of the facts has given partial relief to the assessee - HELD THAT:- CIT(A) after noting and considering the fact that the amount which was agreed by the assessee for addition before the AO included ₹ 17,13,716/- which was already added back to the income of earlier years. He accordingly granted the relief of ₹ 17,13,716/- and upheld the addition of the balance amount of ₹ 14,61,414/-. Before us, no fallacy in the findings of CIT(A) has been pointed out by the Revenue. Considering the aforesaid facts, we find no reason to interfere with the order of CIT(A) thus the ground of Revenue is dismissed. Issues:1. Disallowance u/s 14A read with rule 8D of the Income Tax Rules.2. Deletion of addition of &8377; 17,13,716/-.Issue 1: Disallowance u/s 14A read with rule 8D of the Income Tax Rules:The appeal concerns the disallowance u/s 14A r.w.r 8D of the Income Tax Rules. The Revenue challenged the CIT(A)'s decision to delete the disallowance amounting to &8377; 3,78,15,444/-. The AO contended that the provisions of section 14A are mandatory, irrespective of whether the assessee earned exempt income during the financial year. The AO computed the disallowance u/s 14A at &8377; 3,78,15,444/- due to investments made in equity likely to yield exempt income. However, the CIT(A) ruled in favor of the assessee, citing the absence of dividend income and relied on a High Court decision. The Tribunal upheld the CIT(A)'s decision, emphasizing that in the absence of exempt income, no disallowance u/s 14A can be made. The Tribunal dismissed the Revenue's appeal, citing the inapplicability of the Apex Court's decision relied upon by the Revenue.Issue 2: Deletion of addition of &8377; 17,13,716/-:The second issue pertains to the deletion of an addition of &8377; 17,13,716/-. The AO added this amount as miscellaneous income, which the assessee later admitted was inadvertently reduced from income. The CIT(A) granted partial relief, noting that a portion of the amount had already been added back in previous years. The CIT(A) upheld the addition of the remaining balance. The Revenue sought a remittance to the AO for further examination, while the assessee supported the CIT(A)'s decision. The Tribunal found no fault in the CIT(A)'s findings and dismissed the Revenue's appeal, upholding the relief granted by the CIT(A).In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions regarding the disallowance u/s 14A and the deletion of the addition of &8377; 17,13,716/-. The judgment provides detailed reasoning for each issue, emphasizing the legal principles and precedents governing the matters in dispute.