2018 (3) TMI 1189 - AT - Income Tax

Addition u/s 14A - Held that - CIT (A) has mentioned that assessee s investments have been made in-group concern for exercising control and management of such concerns and in the relevant assessment year, the assessee has not derived any exempt income. This fact is not disputed by the revenue. Therefore, as there is no exempt income earned by the assessee during the year, respectfully following the decision of the Hon ble Delhi High Court in case of Cheminvest versus CIT (2015 (9) TMI 238 - DELHI HIGH COURT) , we do not find any infirmity in the order of the Ld. CIT (A) in deleting the disallowance under section 14 A Addition u/s 68 - Held that - As in the present case the assessee has given complete details with respect to the addition of ₹ 22,92,00,000/- and the ld AO has failed to make any inquiry we confirm the finding of the ld CIT(A) in deleting the above addition. Disallowance of interest with respect to loans - Held that - As we have confirmed the finding of the ld CIT (A) in deleting the addition u/s 68 of the Act, consequently we also confirm her finding in deleting the disallowance of interest on the above loans. Addition with respect to loan taken by the assessee company from eight different private companies - Held that - Addition u/s 68 cannot be made where despite complete information submitted by the assessee company no inquiry have been made by the ld AO. For the similar reasons we confirm the findings of the ld CIT (A) in deleting the above addition of ₹ 15.50 crores. Addition u/s 68 - Held that - We find that except the change of the name of the lender, and amount involved there is no change in the facts of the case. As on the similar circumstances, we have confirmed the finding of the ld CIT (A) in deleting the addition made by the ld Assessing Officer u/s 68 of the Income Tax Act where the assessee has provided the complete details but he AO has not carried out any inquiry or investigation. Therefore, for the same reasons we confirm the finding of the ld CIT (A) in deleting the addition of ₹ 30 lacs u/s 68 of the Act with respect to non Kolkata Companies.

Issues Involved:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Addition under section 68 of the Income Tax Act, 1961 for unexplained cash credit.
3. Disallowance of interest payments on alleged bogus loans.
4. Legality of additions made in absence of incriminating material.

Issue-wise Detailed Analysis:

1. Disallowance under section 14A of the Income Tax Act, 1961:
For both AY 2012-13 and AY 2013-14, the Assessing Officer (AO) disallowed expenses under section 14A read with Rule 8D, despite the assessee not earning any exempt income during these years. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted these disallowances, relying on the decision of the Delhi High Court in Cheminvest Ltd. vs. CIT, which held that no disallowance under section 14A can be made if no exempt income is earned. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, confirming that the AO's disallowance was not justified as the assessee did not earn any exempt income.

2. Addition under section 68 of the Income Tax Act, 1961 for unexplained cash credit:
For AY 2012-13 and AY 2013-14, the AO made additions under section 68 for unexplained cash credits from both Kolkata based and non-Kolkata based companies. The CIT(A) deleted these additions after verifying that the assessee had provided sufficient evidence such as names, addresses, PAN details, bank statements, income tax returns, and confirmations from the investor companies. The CIT(A) found that the AO did not conduct any further inquiry or investigation to discredit these documents. The ITAT upheld the CIT(A)'s decision, noting that the AO failed to make any inquiry into the documents provided by the assessee and relied solely on the inspector's report, which was not relevant to the companies in question. The ITAT emphasized that the AO must conduct thorough investigations and cannot make additions based on presumptions and assumptions.

3. Disallowance of interest payments on alleged bogus loans:
For AY 2012-13 and AY 2013-14, the AO disallowed interest payments on loans deemed bogus under section 68. The CIT(A) deleted these disallowances, reasoning that since the additions under section 68 were deleted, the interest disallowances should also be deleted. The ITAT upheld the CIT(A)'s decision, confirming that the interest disallowances were not justified as the loans were found to be genuine.

4. Legality of additions made in absence of incriminating material:
The assessee raised a ground in their cross-objections that no incriminating material was discovered during the search, and therefore, no additions were warranted. The ITAT did not find it necessary to adjudicate this ground separately, as the main issues were decided in favor of the assessee, leading to the deletion of the additions.

Conclusion:
The ITAT dismissed the appeals filed by the Revenue for both AY 2012-13 and AY 2013-14, upholding the CIT(A)'s decisions to delete the disallowances under section 14A, the additions under section 68, and the disallowances of interest payments. The cross-objections filed by the assessee were partly allowed, supporting the CIT(A)'s decisions. The ITAT emphasized the importance of the AO conducting proper inquiries and investigations before making additions under section 68.

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