Tribunal upholds CIT(A) decision on Section 69C; Revenue's appeals dismissed for assessment years 2012-13 to 2018-19.

The Tribunal upheld the CIT(A)'s decision to delete additions under Section 69C for unaccounted cash payments, citing lack of corroborative evidence and retracted statements. It also affirmed the deletion of disallowance under Section 14A, as no exempt income was earned during the relevant assessment years, and the amendment was not retrospective. The Revenue's appeals were dismissed for the assessment years 2012-13 to 2018-19.

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Issues Involved:
1. Addition on account of unaccounted cash payments under Section 69C of the Income-tax Act, 1961.
2. Disallowance under Section 14A of the Income-tax Act, 1961 read with Rule 8D.

Detailed Analysis:

1. Addition on Account of Unaccounted Cash Payments under Section 69C:

The Revenue appealed against the deletion of the addition made by the AO under Section 69C of the Act, based on statements recorded during a search operation under Section 132(4). The AO had added Rs. 4,80,00,000/- as unexplained expenditure for each assessment year from 2012-13 to 2018-19, relying on the statements of four senior employees of the assessee company, who initially admitted to cash payments for liaison work but later retracted their statements, claiming they were made under duress.

The Tribunal noted that the statements were recorded over several days, and the employees later retracted their statements, which were supported by affidavits sworn before a Notary Public. The AO cross-examined these employees, who stood by their retraction. The Tribunal observed that the initial statements lacked specific details and were inconsistent, and there was no corroborative evidence found during the search to support the AO's addition. The Tribunal emphasized that a statement under Section 132(4) is an important piece of evidence but not conclusive, especially when retracted and unsupported by corroborative evidence. The Tribunal also referred to CBDT Instructions advising against making additions solely based on confessions obtained during search operations without credible evidence.

In the absence of corroborative evidence and considering the retraction, the Tribunal upheld the CIT(A)'s decision to delete the addition under Section 69C, finding the original statements unreliable and insufficient to justify the addition.

2. Disallowance under Section 14A read with Rule 8D:

The Revenue also appealed against the deletion of disallowance made under Section 14A read with Rule 8D, arguing that the disallowance should be made even if no exempt income was earned during the year, based on CBDT Circular No. 5/2014. The Tribunal, however, noted that judicial precedents, including decisions from the Delhi, Madras, and Bombay High Courts, have consistently held that in the absence of exempt income, no disallowance under Section 14A is warranted.

The Tribunal also addressed the Explanation inserted in Section 14A by the Finance Act, 2022, clarifying that the provisions apply even if no exempt income is earned. However, the Tribunal held that this amendment is prospective, effective from 01.04.2022, and does not apply to the assessment years under consideration (2016-17 to 2018-19). The Tribunal relied on the Supreme Court's decisions in M.M. Aqua Technologies Ltd. and Vatika Township Pvt. Ltd., which emphasized that amendments imposing new obligations should be treated as prospective unless explicitly stated otherwise.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the disallowance under Section 14A, as no exempt income was earned during the relevant assessment years, and the amendment brought by the Finance Act, 2022, does not apply retrospectively.

Conclusion:

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s orders deleting the additions under Section 69C and the disallowance under Section 14A for the assessment years 2012-13 to 2018-19.

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