2016 (1) TMI 659 - AT - Income Tax

Disallowance u/s 14A - CIT(A) deleted the disallowance - Held that - As relying on CIT vs. Hero Cycles Limited 2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT and CIT vs. Winsome Textile Industries Ltd. 2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT to hold that Section 14A cannot be invoked when no exempt income was earned. Thus 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 CIT vs. Holcim Pvt. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT ) Ld. CIT(A) has rightly held that the AO was not justified in making the disallowance and therefore the same was rightly deleted. - Decided against revenue Addition on account of unverifiable purchases - CIT(A) deleted the addition - Held 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. - Decided in favour of revenue for statistical purposes.

Summary

Issues involved:
1. Disallowance of expenses under section 14A read with Rule 8D.
2. Deletion of addition made on account of unverifiable purchases.

Detailed analysis:
Issue 1: The appeal by the Revenue challenged the order of the Ld. Commissioner of Income Tax (Appeals) regarding the disallowance of expenses under section 14A read with Rule 8D. The AO had disallowed an amount under section 14A, but the Ld. CIT(A) deleted the addition. The Judicial Member found that the AO did not provide reasons for not being satisfied with the correctness of the claim of the assessee regarding the expenses incurred for earning exempt income. The Judicial Member referred to the judgment of the Jurisdictional High Court in a similar case and noted that since there was no exempt income earning during the year, the disallowance was not justified. Consequently, the Judicial Member upheld the decision of the Ld. CIT(A) and dismissed the grounds raised by the Revenue.

Issue 2: The second issue pertained to the deletion of an addition made on account of unverifiable purchases. The AO had made the addition based on a previous decision, which had been set aside by ITAT. The Judicial Member noted that in a similar case for the assessment year 2009-10, the ITAT had directed the AO to consider all submissions and evidence before making such additions. In the present case, the Judicial Member directed the AO to decide the issue based on the documentary evidence already filed and verified during the assessment. Consequently, the appeal filed by the Revenue was partly allowed for statistical purposes.

In conclusion, the ITAT Delhi upheld the decision of the Ld. CIT(A) regarding the disallowance of expenses under section 14A read with Rule 8D and directed the AO to reconsider the addition made on account of unverifiable purchases based on the documentary evidence provided by the assessee.