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TMI Blog2023 (12) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... HIGH COURT] by holding that provisions of section 68 of the Act cannot be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN ,financial and bank statements showing share application money . In the instant case before us assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. Besides the investors have also furnished complete details/evidences before the AO which proved the identity , creditworthiness of investors and genuineness of the transactions. Thus we are inclined to set aside the order of Ld. CIT(A) by allowing the appeal of the assessee. Disallowance u/s 14A r..w.r. 8D - expenditure incurred on earning income - Whether exempt income was earned or not? - Scope of explanation to Section 14A by Finance Act, 2022 w.e.f 01.04.2022 as added- HELD THAT:- This is a settled position that no disallowance is to be made u/s 14A read with Rule 8D where there is no exempt income as has been decided in the case of PCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same information in respect of share application money. Further the AO also issued summons to the directors of the assessee company u/s 131 dated 23.01.2015 to appear personally and also to produce the directors of the share subscribers on 10.02.2015. The directors of the assessee company could not appear before the AO however the Counsel of the assessee filed the details comprising ITRs, names and addresses, acknowledgment, bank statements and audited accounts of the share applicants. The AO instead of carrying out of any further verification into evidences/details qua the share application money received by the assessee treated the share application money of Rs. 2,70,50,000/- as unexplained cash credit and added the same to the income of the assessee on the ground that compliance was not made to the summons issued u/s 131 of the Act. 5. The assessee preferred an appeal before the Ld. CIT(A) however the Ld. CIT(A) dismissed the appeal by upholding the order of AO by observing that the summons issued u/s 131 of the Act were not complied. 6. The Ld. A.R vehemently submitted before the Bench that the order passed by AO and confirmed by the Ld. CIT(A) is factually wrong and aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o file submissions for which the bench allowed 15 days.The ld DR filed written submissions dated 03.11.2023 to defend the order passed by the lower authorities which were taken into account and considered. Under this circumstances, the Ld. D.R submitted ,while relying heavily on the order of Ld. CIT(A), that the order of ld CIT(A) needs to be affirmed. 8. We have heard the rival contentions and perused the material on record. The undisputed facts are that the assessee has raised money by way of share application of Rs. 2,70,50,000/- from group companies. The assessee has filed all the documents concerning the investors however the personal presence of the directors of the assessee company and the investors was not made before the AO. We note that the AO, instead examining and enquiring into the materials/evidences furnished further, has straightaway jumped to the conclusion that these are unexplained cash credit . Similarly the Ld. CIT(A) has affirmed the findings of AO on this issue on the same reasoning without commenting on the evidences filed by the assessee. In our opinion when the assessee has filed all the documents/evidences before the authorities, they are duty bound to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw as such arose. The High Court was right in refusing to state a case. 8.1 The case of the assessee is also squarely covered by the decisions of Hon ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT (supra ) wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions , the fact that summon issued were returned un-served or no body complied with them is of little significance to prove the genuineness of the transactions and identity and creditworthiness of the creditors. The relevant portion of the decision is extracted below: We find considerable force of the submissions of the learned Counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the Ld. CIT(A) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Cygnus Developers India Pvt. Ltd. (supra) the operative part whereof is extracted below: 8. We have heard the submissions of the learned D.R, who relied on the order of AO. The learned counsel for the assessee relied on the order of Ld. CIT(A) and further drew our attention to the decision of Hon ble Allahabad High Court in the case of CIT vs. Raj Kumar Agarwal vide ITA No. 179/2008 dated 17.11.2009 wherein the Hon ble Allahabad High Court took a view that non-production of the director of a Public Limited Company which is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs. Devinder Singh Shant in ITA No. 208/Kol/2009 vide order dated 17.04.2009. 9. We have considered the rival submissions. We are of the view that order of Ld. CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the revenue that the revenue disputed only the proof of identity of share holder. In this regard it is seen that for AY 2004-05 Shree Shyam Trexim Pvt. Ltd. was assessed by ITO, Ward-9(4), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of expenses u/s 14A of the Act, however the AO by applying CBDT circular No. 5/2014 dated 11.02.2014 calculated the disallowance at Rs. 1,26,958/- and added the same to the income of the assessee. 12. In the appellate proceedings, the Ld. CIT(A) simply dismissed the appeal of the assessee when the assessee did not appear before the Ld. CIT(A). 13. After hearing the rival contentions and perusing the material on record, we find that undisputedly there is no exempt income earned during the year. However the AO disallowed the sum of Rs. 1,26,958/- u/s 14A read with Rule 8D of the Rules which was also confirmed by the Ld. CIT(A). This is a settled position that no disallowance is to be made u/s 14A read with Rule 8D where there is no exempt income as has been decided in the case of PCIT Vs State Bank of Patiala (2018) 99 taxman.com 286(SC) and CIT Vs Joint Investment Pvt Ltd (2015) 372 ITR 69 (Delhi) 14. We have also noted the arguments put forward by the Ld. D.R that explanation to Section 14A by Finance Act, 2022 w.e.f 01.04.2022 is explanatory in nature and retrospective and therefore disallowance was rightly made by the AO and affirmed by the Ld. CIT(A) irres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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