2022 (11) TMI 1257 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - Non establishing identity, creditworthiness and genuineness of the transaction - HELD THAT - DR has fairly agreed that the Assessing Officer in the remand report has reported that the assessee has duly established the identity, creditworthiness of the creditors and genuineness of the transaction and he has also fairly agreed that the issue is also squarely covered by the Decision of AMBITION AGENCIES PRIVATE LIMITED 2021 (11) TMI 750 - CALCUTTA HIGH COURT and SMT. B. JAYALAKSHMI 2018 (8) TMI 208 - MADRAS HIGH COURT - Decided against revenue. Addition u/s 14A - expenditure incurred towards tax exempted income - HELD THAT - As held in many decisions where the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A of the Act. - Decided against revenue.

Summary

Issues:
1. Disallowance under section 68 of the Income Tax Act.
2. Disallowance under section 14A of the Income Tax Act.

Issue 1: Disallowance under Section 68 of the Income Tax Act:
The Revenue filed an appeal against the Commissioner of Income Tax (Appeals) order under section 250 of the Income Tax Act, challenging the deletion of disallowance under section 68. The assessee had failed to provide necessary details during the assessment, resulting in an ex parte order by the Assessing Officer. However, during the appellate proceedings, the assessee submitted documents proving the identity, creditworthiness of creditors, and genuineness of the transaction. The CIT(A) called for a remand report, which confirmed the authenticity of the transaction. Citing precedents from the Madras High Court and the Calcutta High Court, where similar additions were deleted based on remand reports, the Tribunal dismissed the Revenue's appeal as the identity and creditworthiness of the creditors were established.

Issue 2: Disallowance under Section 14A of the Income Tax Act:
The Revenue contested the deletion of disallowance under section 14A by the CIT(A) concerning expenditure on tax-exempted income. The CIT(A) relied on various High Court decisions, stating that no disallowance under section 14A is warranted if no tax-exempt income is derived from investments. The Revenue referred to the newly inserted explanations to Section 14A, arguing for retrospective application based on a decision by the ITAT Guwahati. However, the assessee cited a recent Delhi High Court decision holding that the explanation to Section 14A applies prospectively. In the absence of a jurisdictional High Court or Supreme Court decision, the Tribunal followed the Delhi High Court ruling and dismissed the Revenue's appeal, upholding the deletion of disallowance under section 14A.

In conclusion, the Tribunal dismissed the appeal of the Revenue on both issues, upholding the decisions of the CIT(A) regarding the deletion of disallowances under sections 68 and 14A of the Income Tax Act.