2018 (1) TMI 1591 - AT - Income Tax

Assessment u/s 153A - Disallowance u/s 14A - CIT(A) deleted the disallowance by relying on the judgment of CIT Vs. All Cargo Global Logistics Ltd. 2012 (7) TMI 222 - ITAT MUMBAI(SB) - HELD THAT - During the course of the search and seizure action conducted on the assessee on 29.08.2011 no material whatsoever was found as regards the disallowance u/s 14A. We find that the Hon ble High Court of Bombay in the case of CIT Vs. All Cargo Global Logistics Ltd. (Supra) had upheld the order of the special bench of the Tribunal wherein it was observed that in the absence of incriminating material seized during the course of the search and seizure proceedings conducted under Sec. 132 no addition in respect of an unabated assessment could be made. CIT(A) in the present case going by the rule of judicial discipline had followed the judgment of the Hon ble High Court of Bombay in the case of All Cargo Global Logistics Ltd. (supra) therefore no infirmity emerges from his order. - Decided against revenue.

Summary

Issues:
1. Disallowance under Sec. 14A of the Income Tax Act
2. Validity of order passed by CIT(A) based on High Court judgment

Issue 1: Disallowance under Sec. 14A of the Income Tax Act

The case involved an appeal by the revenue against the CIT(A)'s order directing the deletion of a disallowance under Sec. 14A of Rs. 68,07,509/-, which was made based on the decision of the Bombay High Court in the case of All Cargo Logistics Ltd. The revenue contended that the High Court's decision had not been accepted by the department, and a Special Leave Petition (SLP) was pending. The A.O had made the disallowance as the assessee had earned exempt dividend income of Rs. 3,89,42,949/-. The assessee argued that no incriminating material was found during the search and seizure action, hence no addition should be made. The CIT(A) agreed with the assessee, citing the High Court's affirmation of the ITAT's decision. The revenue challenged the CIT(A)'s order, but the Tribunal upheld it, stating that in the absence of incriminating material, no addition could be made, and the CIT(A) had correctly followed the High Court's judgment.

Issue 2: Validity of order passed by CIT(A) based on High Court judgment

The Tribunal analyzed whether the CIT(A) was right in law in deleting the disallowance under Sec. 14A based on the High Court's judgment. It was noted that no incriminating material was found during the search and seizure action, aligning with the High Court's decision that no addition could be made in such cases. The Tribunal upheld the CIT(A)'s order, emphasizing the rule of judicial discipline in following the High Court's judgment. Despite the revenue's SLP against the High Court's decision, as it had not been stayed by the Supreme Court, the Tribunal found no reason to overturn the CIT(A)'s order. Consequently, the appeal by the revenue was dismissed, affirming the CIT(A)'s decision based on the High Court's judgment.

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