2024 (10) TMI 657 - AT - Income Tax

Addition u/s 68 on cash deposited during the demonetization period , addition u/s 69A, addition on account of inventories, addition of 10% of the total expenses, disallowance on account of rent, disallowance made by the AO u/s 37(1), addition on account of kumaoni rasoi and cash payment, addition on account of depreciation as the assets was not used more than 180 days and unsecured loans - grounds of appeal were accepted by the AO in the remand proceedings and the CIT(A) had granted relief to the assessee after considering the remand report of the ld. AO - HELD THAT - No adverse comments were given by the ld AO in the remand proceedings. We find that the ld CIT(A) had taken cognizance of the remand report while adjudicating each issue and had granted relief to the assessee. In our considered opinion, there could be no grievance that could be left to the revenue. Hence, logically the revenue ought not to have even preferred an appeal on these issues since, AO had accepted to the contentions of the assessee in the remand proceedings. See Smt B Jayalakshmi 2018 (8) TMI 208 - MADRAS HIGH COURT - Ground Nos. 1 to 3 and 5 to 10 raised by the revenue are dismissed. Disallowance u/s 14A - CIT(A) deleted addition - as per AO CIT(A) has erred in not considering the CBDT circular No 5/2014 dated 11.02.2014, clarifying that section 14A r.w.r. 8D provides for disallowance of the expenditure even where the tax payer has not earned any exempt income - HELD THAT - We find that there was no exempt income derived by the assessee during the year under consideration and hence there cannot be any applicability of provisions of section 14A of the Act. Reliance in this regard is placed on the decision of Era Infrastructure Ltd r. 2022 (7) TMI 1093 - DELHI HIGH COURT . Respectfully following the same, ground No. 4 raised by the revenue is dismissed.

Summary

Issues:
1. Addition under section 68 of the Income-tax Act on cash deposited during demonetization.
2. Addition under section 69A for unexplained investments.
3. Addition on account of inventories.
4. Disallowance under section 14A of the Act.
5. Disallowance of expenses.
6. Disallowance of rent expenses.
7. Disallowance under section 37(1) of the Act.
8. Disallowance on account of kumaoni rasoi and cash payment.
9. Disallowance of depreciation.
10. Addition on account of unsecured loans.

Analysis:
The appeal before the Appellate Tribunal ITAT DELHI involved various grounds raised by the revenue. The first issue pertained to the addition made under section 68 of the Income-tax Act concerning cash deposits during the demonetization period. The revenue contended that the Commissioner of Income Tax (Appeals) erred in deleting the addition without proper substantiation of cash deposits. However, the Tribunal noted that the Assessing Officer had accepted the contentions of the assessee in the remand proceedings, and relief was granted based on the remand report. Consequently, the Tribunal dismissed this ground along with several others, as the revenue had no valid grievance left.

The second issue revolved around the addition under section 69A for unexplained investments. The revenue challenged the deletion of this addition, arguing lack of documentary evidence to substantiate the source of investment. However, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the remand report and dismissed the revenue's appeal on this ground.

Regarding the third issue of addition on account of inventories, the Tribunal found that the Commissioner of Income Tax (Appeals) had granted relief to the assessee after considering the remand report, which the Assessing Officer had accepted. The Tribunal, therefore, dismissed the revenue's appeal on this ground as well.

The fourth issue concerned the disallowance under section 14A of the Act. The revenue challenged the deletion of this disallowance, but the Tribunal observed that no exempt income was derived by the assessee during the relevant year, rendering section 14A inapplicable. Citing a relevant High Court decision, the Tribunal dismissed the revenue's appeal on this ground.

The fifth to tenth issues involved various disallowances and additions, all of which were dismissed by the Tribunal based on the acceptance of contentions during the remand proceedings and the relief granted by the Commissioner of Income Tax (Appeals). The Tribunal upheld the decisions of the lower authorities and ultimately dismissed the appeal of the revenue.

In conclusion, the Tribunal pronounced the order on 11/10/2024, dismissing the revenue's appeal in its entirety.