2021 (9) TMI 406 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - whether investments were made out of interest free funds available with the assessee? - HELD THAT - Interest free funds as available with the assessee were more than the investment made in the joint venture entities, remain uncontroverted before us. In such a situation, the ratio of binding judicial pronouncement was squarely applicable to the fact of the case. Therefore, no fault could be found in the impugned order, in this regard. The ground raised by the revenue stand dismissed. Estimation of income - Bogus purchases - HELD THAT - As the assessee was engaged in civil construction which would require consumption of various material. The assessee could produce copies of invoices, delivery Challans as well as material inward register. The payment to the supplier was through banking channels. Therefore, it was a fit case for estimation of addition to plug the leakage of revenue. The estimation of 12.5% as made by Ld. CIT(A), in our considered opinion, was quite fair reasonable on the given factual matrix. Finding no reason to interfere in the same, we dismiss the ground raised by the revenue.

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act
2. Addition on account of alleged bogus purchases

Disallowance under section 14A:
The appeal involved a disallowance under section 14A of the Income Tax Act. The appellant, the revenue, contested the deletion of certain disallowances under Rule 8D(2)(ii) by the Ld. CIT(A). The Ld. AO had made a disallowance based on Rule 8D, which was contested by the appellant. The Ld. CIT(A) deleted the interest disallowance after considering the availability of interest-free funds with the assessee. The tribunal upheld the Ld. CIT(A)'s decision, citing the precedent set by the Hon'ble Bombay High Court in CIT V/s Reliance Utilities and Power Ltd. The tribunal found no fault in the Ld. CIT(A)'s order and dismissed the ground raised by the revenue.

Addition on account of alleged bogus purchases:
The second issue in the appeal pertained to an addition on account of alleged bogus purchases. The appellant was aggrieved by the Ld. CIT(A)'s decision to estimate the addition at 12.5% based on the Hon'ble Gujarat High Court's decision. The tribunal observed that the assessee, engaged in civil construction, provided documentary evidence of purchases through banking channels and material consumption for business activity. The tribunal found the estimation of 12.5% by the Ld. CIT(A) fair and reasonable given the factual matrix. Consequently, the tribunal dismissed the ground raised by the revenue and upheld the Ld. CIT(A)'s decision.

In conclusion, the tribunal dismissed the appeal, upholding the decisions made by the Ld. CIT(A) regarding the disallowance under section 14A and the addition on account of alleged bogus purchases. The order was pronounced on 6th September 2021.