2018 (11) TMI 594 - AT - Income Tax

Addition u/s 68 - denial of natural justice - Held that - No summons u/s 131 of the Income Tax Act, 1961 were received by the assessee. As argued that the assessing officer has not made any independent enquiry at his end, to disprove the claim of the assessee companies. CIT(A) has passed a mechanical order without considering the legal position and the facts of the case as brought out by the AO. AO has not given adequate opportunity and has passed an order without enquiring. The Kolkata Bench of the ITAT has passed similar order in many cases on the same issue of additions made u/s 68 of the share capital, has set aside the assessment to the file of the AO for fresh adjudication in the lines stated above after giving the assessee adequate opportunity of being heard. Keeping in view the totality of the facts and circumstances of the case and also the orders of the Co-ordinate Bench of the Tribunal in similar matters, we set aside this issue to the file of the AO for fresh adjudication and in accordance with law, after giving the assessee adequate opportunity of being heard. Accordingly Ground No. 3 of the assessee is allowed for statistical purposes. Disallowance u/s 14A r.w.r. 8D - Held that - We find that it is not in dispute that the assessee has no income from dividends which is exempt u/s 10 of the Act, during the Assessment Year under consideration. Under these circumstances, there cannot be any disallowance u/s 14A of the Act, as held by the Hon ble Jurisdictional High Court in the case of CIT vs. Ashika Global Securities Ltd. 2018 (7) TMI 1425 - CALCUTTA HIGH COURT . Hence, we delete the disallowance in question and allow this ground of appeal of the assessee.

Summary

Issues:
1. Addition u/s 68 of the Income Tax Act on share capital and share premium.
2. Disallowance u/s 14A r.w.r. 8D.

Analysis:

Issue 1: Addition u/s 68 of the Income Tax Act on share capital and share premium:
The appeal was against the order of the Commissioner of Income Tax (Appeals) relating to Assessment Year 2012-13. The assessing officer added an amount under section 68 of the Act, which was challenged by the assessee. The assessee argued that no summons were received under section 131, and the assessing officer did not conduct an independent inquiry. The Tribunal noted that in similar cases, the matter was usually sent back to the assessing officer for fresh adjudication after providing adequate opportunity to the assessee. Citing previous cases, the Tribunal emphasized the importance of fair opportunity for the assessee to present evidence. The Tribunal set aside the issue to the assessing officer for fresh adjudication, allowing the assessee's appeal for statistical purposes.

Issue 2: Disallowance u/s 14A r.w.r. 8D:
Regarding the disallowance under section 14A r.w.r. 8D, the Tribunal found that the assessee had no income from dividends exempt under section 10 of the Act during the relevant assessment year. Referring to a judgment of the Jurisdictional High Court, the Tribunal concluded that in the absence of exempt income, there cannot be any disallowance under section 14A. Consequently, the disallowance was deleted, and the ground of appeal by the assessee was allowed.

In conclusion, the Tribunal allowed the assessee's appeal in part, setting aside the issues for fresh adjudication and deleting the disallowance under section 14A. The judgment highlighted the importance of providing a fair opportunity to the assessee and ensuring proper inquiry in tax assessments.