2017 (12) TMI 362 - AT - Income Tax

Addition u/s 14A r.w.r. 8D - Held that - No merit in the Departmental Appeal on this issue. It is not in dispute that assessee-company has not earned any dividend income in assessment years under appeal. The Hon ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT-VI New Delhi (2015 (9) TMI 238 - DELHI HIGH COURT ) has held that if there is no exempt income there can be no question of making any disallowance under section 14A of the I.T. Act Addition on the basis of the seized material - Held that - Whatever entries are referred to in the seized document have been duly explained by assessee-company before the authorities below and all the entries in the seized document are reflected in the books of account. The payments received from Central Coal Field Ltd. have been mentioned in the bank account of the assessee12 company and payments mentioned in the seized documents have been made to the three parties. The Ld. CIT(A) therefore on proper appreciation of all the seized documents in reference to the books of account correctly deleted the addition. Addition on account of unexplained cash found during search - Held that - No merit in this ground of appeal of the Revenue. The assessee -company explained the availability of the cash found during the course of search as available to the assessee-company and the group companies at the time of search which were duly reflected in the books of account confirmation of the availability of the cash were filed which supports the explanation of assessee-company. No material has been brought on record to dislodge the findings of fact recorded by the Ld. CIT(A). Revenue appeal dismissed.

Summary

Issues:
1. Challenge against deletion of addition under section 14A read with Rule 8D of I.T. Rules
2. Challenge against deletion of addition based on seized material
3. Challenge against deletion of addition on account of unexplained cash found during search

Issue No.1:
In this case, the Revenue challenged the deletion of additions under section 14A read with Rule 8D of I.T. Rules. The A.O. disallowed the claimed expenses related to exempt income as the assessee did not provide working of disallowances. However, the assessee argued that no dividend income was earned, hence no disallowance should be made. The Ld. CIT(A) agreed with the assessee, citing that Section 14A applies only when exempt income is earned. The Tribunal upheld the CIT(A)'s decision, noting that the issue was previously decided in favor of the assessee by the ITAT and the Delhi High Court. Therefore, the Departmental Appeals were dismissed, and Issue No.1 was decided against the Revenue.

Issue No.2:
In the challenge against the deletion of addition based on seized material, the Revenue disputed an addition made on the basis of financial jottings found during a search operation. The A.O. was not satisfied with the assessee's explanation, but the Ld. CIT(A) found that the entries in the seized document were duly reflected in the books of account. The Tribunal upheld the CIT(A)'s decision, stating that all entries were explained by the assessee and were supported by bank statements. Consequently, the Departmental Appeal was dismissed, and Issue No.2 was decided against the Revenue.

Issue No.3:
Regarding the challenge against the deletion of addition on account of unexplained cash found during search, the Revenue contested an addition made due to cash found exceeding the balance reflected in the cash book. The assessee provided confirmations from group companies to explain the cash availability, which was accepted by the Ld. CIT(A). The Tribunal found no merit in the Revenue's appeal, as the explanations and supporting documents provided by the assessee were deemed satisfactory. Therefore, the Revenue's appeal was dismissed, and Issue No.3 was decided against the Revenue.

In conclusion, the Tribunal dismissed both appeals of the Revenue and cross-objections of the assessee, upholding the decisions made by the lower authorities in each issue presented before the court.