Tarini Minerals Pvt. Ltd., Rourkela V. ACIT, Rourkela

ITA 197/CTK/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5874 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 20-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C BHADRA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 13; 22

Judgement Text

P A G E 1 | 27 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 197 /CTK/201 9 ASSESSMENT YEAR : 2012 - 13 TARINI MINERALS PVT LTD., A/6, COMMERCIAL ESTATE, CIVIL TOWNSHIP, ROURKELA. VS. ACIT, ROURKELA CIRCLE, ROURKELA. PAN/GIR NO. AAACT 6489 P (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI S.C.BHADRA , AR REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 07 / 1 2 / 20 20 DATE OF PRONOUNCEMENT : 28 / 1 /20 2 1 O R D E R PER C.M.GARG,JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), SAMBALPUR DATED 27.3.2019 FOR THE ASSESSMENT YEAR 2012 - 13 . 2. IN THE GROUNDS OF APPEAL, THE ASSESSEE CHALLENGED THE CONFIRMATION OF ADDITION OF RS.1,42,83,744/ - UNDER DIFFERENT HEADS AS BELOW: I) BOGUS SUNDRY CREDITORS : RS.17,36,046/ - II) DISALLOWANCE U/S.14A : RS.62,61,345/ - III) COMMISSION TO SUBHA ISPAT LTD. : RS.62,86,353/ - ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 2 | 27 3. THE FIRST DISPUTE IS CONFIRMATION OF ADDITION OF RS.17,36,046/ - UNDER THE HEAD BOGUS SUNDRY CREDITORS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. FACTS ARE THAT THE ASS ESSEE HAS CLAIMED RS.17,36,046/ - AS SUNDRY CREDITOR FROM M/S. ZODIAC ENTERPRISES. THE AO ISSUED LETTER TO THE SUNDRY CREDITOR TO ESTABLISH THE GENUINENESS OF TRANSACTION BUT THE SAME WAS RETURNED BACK UNSERVED. THE ASSESSEE ALSO COULD NOT FURNISH ANY EXP LANATION REGARDING THE SUNDRY CREDITOR TO THE SATISFACTION OF THE AO. HENCE, THE AO TREATED THE AMOUNT OF RS.17,36,046/ - AS BOGUS SUNDRY CREDITOR AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE, WHICH WAS UPHELD BY THE FIRST APPELLATE AUTHORITY. 5. BEFORE US, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE AMOUNT OUTSTANDING IS AGAINST AN EXPENDITURE INCURRED IN EARLIER YEAR, WHICH WAS ALLOWED IN THE ASSESSMENT PROCEEDING. HE ALSO REFERRED TO THE LEDGER COPY OF THE CREDITOR, WHICH REFLECTS OPENING AND CL OSING BALANCE AT RS.17,36,046/ - . HE SUBMITTED THAT MERELY THE LETTER WAS RETURNED BACK UNSERVED, CANNOT BY ITSELF BE TREATED AS THE CREDITOR IS BOGUS. LD A.R. REFERRED TO PAGE 3 OF THE APB I.E. LEDGER ACCOUNT OF ZODIAC ENTERPRISES FROM 1.4.2011 TO 31.3.2 012, WHEREIN, IT HAS BEEN SHOWN AS AT 1.4.2011, THE AMOUNT OF RS.17,36,046/ - IN OPENING BALANCE AS WELL AS CLOSING BALANCE, THEREFORE, SAME AMOUNT HAS BEEN BROUGHT FORWARD FROM THE PRECEDING YEAR. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 3 | 27 6. REPLYING TO ABOVE, LD DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 7. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION OF RS.17,36,046/ - ON THE GROUND THAT THE LETTER ISSUED TO M/S. ZODIAC ENTERPRISES WAS RETURNED BACK. FROM THE LEDGER ACCOUNT OF ZODIAC ENTERPRISES IN THE BOOKS OF THE ASSESSEE, IT IS REFLECTED THAT THE AMOUNT OF RS.17,46,046/ - HAS BEEN SHOWN AS OPENING BALANCE AND CLOSING BALANCE AS AT 1.4.2011. HENCE, THIS AMOUNT IS CARRIED FORWARD FROM THE PRECEDING YE AR AND, THEREFORE, THERE IS NO ADDITION OF THE CREDITOR DURING THE YEAR. IN VIEW OF ABOVE, WE DELETE THE ADDITION OF RS.17,46,046/ - . GROUND NO.1 OF APPEAL IS ALLOWED. 8. THE NEXT ISSUE RELATES TO CONFIRMATION OF ADDITION OF RS.62,61,345/ - U/S.14A OF THE ACT. 9. THE ASSESSING OFFICER HAS MADE ADDITION OF RS.62,61,345/ - WITH FOLLOWING OBSERVATIONS: DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN INVESTMENT THAT YIELD TAX FREE INCOME TO THE TUNE OF RS.1,78,26,335/ - . HENCE, THE ASSESSEE VIDE SHOW CAUSE NOTICE DTD.9.3.2015 WAS ASKED TO EXPLAIN AS TO WHY THE PROVISION OF SECTION 14A SHALL NOT BE RESORTED TO. IN RESPONSE TO THE SAME, THE AR OF THE ASSESSEE STATED THAT: THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN THE EXEMPTED INCOME, HENCE IT IS SUBMITTED THAT NO DISALLOWANCE IS WARRANTED. ASSESSEE'S REPLY IN THIS REGARD HAS BEEN CAREFULLY PERUSED. THOUGH, THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR SUCH EXEMPT INCOME, THERE IS EVERY POSSIBILITY THAT THE ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 4 | 27 INVESTMENT FROM WHICH SUCH EXE MPT INCOME IS EARNED MIGHT HAVE BEEN MADE OUT OF THE LOAN AMOUNT, FOR WHICH THE ASSESSEE PAID INTEREST. AS PER PROVISIONS OF RULE 8D, THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME SHALL BE AGGREGATE OF FOLLOWING AMOUNT S, NAMELY I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. II) II) IN A CASE WHERE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICUL AR INCOME OR 'RECEIPT, AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA A X B/C, WHERE A = AMOUNT OF EXP. BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE P.Y., B= THE AVG, OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE P.Y., C=THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEETS OF THE OF THE ASSESSEE, O N THE FIRST DAY AND THE LAST DAY OF THE P.Y, III) AMOUNT EQUAL TO HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENTS AS APPEARING IN THE BALANCE SHEET ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, THE APPLICABILITY OF RULE 8D IN THE INSTANT C ASE IS AS UNDER: I) THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE DIRECTLY RELATED.TO DIVIDEND INCOME, II) II) NIL III) HALF PER CENT OF THE AVERAGE VALUE OF INVESTMENT COMES TO RS.62,61,345/ - (0.5% OF RS.125,22,69,012/ - ). ACCORDINGLY, THE AGGREGATE OF THE ABOVE (I + II +III) COMES TO RS.62,61,345/ - , WHICH IS TREATED AS EXPENDITURE IN RELATION TO INCOME NOT FORMING PART OF TOTAL INCOME. THUS, THE SAME IS DISALLOWED U/S.14A OF THE I. T. ACT, 1961. 10. ON APPEAL, THE LD CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 5 | 27 11. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF SMT. INDRANI PATNAIK VS ACIT IN ITA NOS.393 & 394/CTK/2017 F OR ASSESSMENT YEARS : 2012 - 2013 & 2013 - 14 ORDER DATED 26.8.2020, WHEREAS ALTHOUGH LD DR RELIED ON THE ORDERS OF LOWER AUTHORITIES BUT COULD NOT CONTROVERT THE SUBMISSION OF LD A.R. OF THE ASSESSEE THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL . 1 2 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF LOWER AUTHORITIES, WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS BENCH IN THE CASE OF INDRANI PATNAIK (SUPRA), WHEREIN, AFTER AN EXHAUSTIVE A NALYSIS OF THE ISSUE, THE TRIBUNAL HELD THUS: 62. LD A.R., CHALLENGING THE ACTION OF THE ASSESSING OFFICER IN MAKING THE ADDITION U/S.14A OF THE INCOME TAX ACT, (IN SHORT THE ACT) SUBMITTED THAT THE LD CIT(A), IN HIS ORDER IN PARA 3.2 NOTED THAT THE CO NTENTION OF THE APPELLANT THAT SHE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF DIVIDEND INCOME , CANNOT BE ACCEPTED. LD A.R. SUBMITTED THAT THOUGH THE APPELLANT HAS NOT CLAIMED ANY EXPENDITURE, THE AO MADE ADDITION MERELY ON PRESUMPTION OF INCURRING E XPENSES AGAINST EXEMPT INCOME, WITHOUT RECORDING ANY REASON AS PER REQUIREMENT OF SECTION 14A OF THE ACT. LD A.R. SUBMITTED THAT THE KEY WORDS IN SUB - SECTION (2) OF SECTION 14A OF THE ACT ARE THAT IF THE AO, HAVING REGARD TO THE ACCOUNT OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN RESPECT OF SUCH EXPENDITURE. LD A.R. FURTHER SUBMITTED THAT SUB - SECTION(3) OF SECTION 14A OF THE ACT FURTHER PROVIDES THAT THE PROVISION OF SUB - SECTION (2) SHALL ALSO APPLY IN RELATI ON TO A CASE WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 6 | 27 INCOME. LD A.R. FURTHER POINTED OUT THAT HENCE, IT IMPLIES THAT METHOD PRESCRIBED UNDER RULE 8D OF INCOME TAX RULES, 1961 (IN SHORT THE RULES) IS APPLICABLE, WHERE THE AO HAS TO RECORD REASONS FOR SUCH NON - SATISFACTION ABOUT THE CLAIM AS WELL AS ACCOUNTS OF THE APPELLANT AFTER THE VERIFICATION AND EXAMINATION OF BOOKS OF ACCOUNTS AND FINANCIAL STATEMENT OF THE ASSESSEE. LD A.R. HAS PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) SESA GOA LTD VS JCIT, 60 SOT 121 (PAN) II) JK INVESTORS LTD VS ACIT (ITA NO.7858/MUM/2011) III) JOINT INVESTMENTS PVT LTD VS CIT, 372 ITR 694 (DELHI) IV) MAXOPP INVES TMENT LTD VS CIT, 402 ITR 640 (SC) V) DCIT VS INTEGRATED COAL MINING LTD (ITA NO.1031/KOL/2017). 63. FURTHERMORE, LD A.R. SUBMITTED THAT THEREFORE, IF THE AO, HAVING REGARDS TO THE ASSESSEE IS NOT SATISFIED WITH THE AMOUNT OF THE CLAIM OF THE ASSESSEE, I N RESPECT OF SUCH EXPENDITURE IN RELATION TO EXEMPT INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME, AS PER THE PROVISION OF SECTION 14(2) AND 14(3) OF THE ACT, THE AO IS BOUND TO RECORD HIS DISSATISFACTION ABOUT THE CLAIM OF EXPENDITURE OR CLAIM OF NO EXPENDITURE AGAINST EXEMPT INCOME FROM THE BOOKS OF ACCOUNT. DRAWING OUR ATTENTION TOWARDS FINDING RECORD BY THE AUTHORITIES BELOW, LD A.R. SUBMITTED THAT IN THE INSTANT CASE, THE AO WITHOUT RECORDING ANY OBSERVATION OR FINDING THAT, HAVING REGARD TO T HE ACCOUNTS OF THE ASSESSEE THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF ASSESSEE IN RESPECT OF SUCH CLAIM OF EXPENDITURE OR NO EXPENDITURE, OBSERVED THAT THOUGH THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR SUCH EXEMPT INCOME, THERE IS EVERY POSSIBILITY THAT THE INVESTMENTS FROM WHICH SUCH EXEMPT INCOME IS EARNED MIGHT HAVE BEEN MADE OUT OF LOAN ACCOUNT, FOR WHICH ASSESSEE PAID INTEREST. LD A.R. FURTHER DREW OUR ATTENTION TOWARDS RELEVANT PARA 6.1 AT PAGE 6 OF THE CIT(A) ORDER AND SU BMITTED THAT THE LD CIT(A) IN HIS ORDER MENTIONED THAT DURING ASSESSMENT PROCEEDING, THE APPELLANT HAD EXPLAINED THAT SHE HAS A CAPITAL BALANCE OF RS.441.11 CRORES AS ON 31.3.2012 AND FUNDS BORROWED WAS EXCLUSIVELY UTILISED FOR THE PURPOSE FOR WHICH THOS E WERE OBTAINED. LD A.R. FURTHER EXPLAINED THAT THE TERM LOAN OF RS.84.74 CRORES RAISED FROM HDFC BANK WAS UTILISED FOR ACQUIRING WINDMILLS TO THE EXTENT OF RS.90.00 CRORES AND THERE WAS NO SCOPE FOR APPELLANT TO UTILISE THE LOAN FUND OTHERWISE OR FOR MAKING INVESTMENT FOR E ARNING EXEMPT INCOME. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 7 | 27 64. FURTHER, LD A.R. PLACED RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS HDFC BANK, 366 ITR 505 (BOM), WHEREIN, IT IS HELD THAT WHERE THE ASSESSEES CAPITAL NET PROFIT, RESERVE, SURPLUS AND CURRENT ACCOU NT DEPOSIT WERE HIGHER THAN INVESTMENT IN TAX FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF INTEREST FREE FUND, AVAILABLE WITH THE ASSESSEE. LD AR PRESSING INTO SERVICE THIS PROPOSITION RENDERED BY HONBLE HIGH COURT SUBMITTED THAT THE LD CIT(A) CONCLUDED THAT INTEREST BEARING LOAN FROM BANK HAVE BEEN UTILISED FOR THE CREATION OF ASSET I.E. WINDMILLS AND IT HAS NOT BEEN DIVERTED AND THIS FACT HAS NOT BEEN CONTROVERTED BY THE AO IN ANY MANNER. LD A. R. VEHEMENTLY POINTED OUT THAT THE ASSUMPTION OF THE AO THAT INTEREST BEARING LOANS HAS BEEN UTILISED FOR INVESTMENT IN SHARES HAS NO BASE IN VIEW OF THE FINDINGS RECORDED BY THE LD CIT(A) IN PARA 6.1 AT PAGE 6 OF FIRST APPELLATE ORDER. LD A.R. ALSO CONTE NDED THAT THE AO HAS NOT DEMONSTRATED IN THE ASSESSMENT ORDER THAT ON EXAMINATION OF ACCOUNT HE COULD BE ABLE TO LOCATE ANY EXPENDITURE INCURRED OR ATTRIBUTABLE TO EARN EXEMPTED INCOME AND ALSO HE HAS NOT RECORDED HIS DISSATISFACTION ON ACCOUNT OF THE CLAI M OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME AS PROVIDED IN SUB - SECTION (3) OF SECTION 14A OF THE ACT. LD A.R ALSO SUBMITTED THAT THE APPELLANT HAS SUFFICIENT FUNDS IN HER CAPITAL ACCOUNT AND TOTAL INVESTMENT IN MUTUAL FUNDS, SHARE, DEPOSIT AND PAYMENT TO INSURANCE IS LESS THAN THE AMOUNT OF CAPITAL, THEREFORE, THERE IS NO POSSIBILITY OR CHANCE OF INVESTMENT OF BORROWED FUNDS IN SHARES, MUTUAL FUNDS AND DEPOSIT, THEREFORE, THE AO ON WRONG ASSUMPTION WITHOUT RECORDING DI SSATISFACTION SWITCHED OVER AND JUMPED TO RULE 8D OF INCOME TAX RULES TO COMPUTED THE DISALLOWANCE, WHICH IS NOT SUSTAINABLE AND VALID AS PER MANDATE OF SECTION 14A OF THE INCOME TAX ACT, 1961. 65. LD A.R. FURTHER SUBMITTED THAT THE HONBLE SUPREME COURT I N THE CASE OF CIT VS RELIANCE INDUSTRIES LTD., IN CIVIL APPEAL NO.10 OF 2019 ORDER DATED 2.1.2019 HEARD AND DISPOSED OF WITH THE OBSERVATIONS NOTED AS UNDER: THE INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE WERE SUFFICIENT TO MEET ITS INVESTMENT. HENCE , IT COULD BE PRESUMED THAT INVESTMENTS WERE MADE FROM THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. 66. LD A.R. LASTLY SUBMITTED THAT THE OBSERVATIONS OF THE AO AS WELL AS LD CIT(A) ARE ONLY ASSUMPTION THAT THE APPELLANT MIGHT HAVE INCURRED CERT AIN EXPENSES TO EARN EXEMPT INCOME. HE SUBMITTED THAT ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 8 | 27 WITHOUT RECORDING DISSATISFACTION HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE ABOUT THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME, ON ASSUMPTION ONLY, THE DISALLOWANCE U/S.14A OF THE ACT R.W RULE 8D OF THE RULES, IT IS NOT CORRECT AND SUSTAINABLE AND THE AO WAS NOT CORRECT IN MAKING ADDITION AND LD CIT(A)IS NOT JUSTIFIED IN CONFIRMING THE SAME. HE FINALLY PRAYED THAT THE ADDITION MADE BY THE AO AND CONFIRM ED BY THE LD CIT(A) BE ORDERED TO BE DELETED. 67. REPLYING TO ABOVE, LD CIT DR SUBMITTED THAT UNDER SECTION 14A OF THE ACT, STATUE PROVIDE FOR PRESUMPTIVE EXPENDITURE WHICH HAS TO BE DISALLOWED BY FORCE OF STATUE. HE PLACED RELIANCE ON THE ORDER OF THE IT AT CHENNAI IN THE CASE OF M.A. ALAGAPPAN VS ACIT, 82 TAXMANN.COM 276 (CHE.TRIB). LD D.R. FURTHER PLACED RELIANCE ON THE DECISION OF ITAT DELHI IN THE CASE OF DELHI TOWERS LTD VS DCIT, 78 TAXMANN.COM 56 (DEL) AND SUBMITTED THAT THE MERE FACT THAT THE AO DID NOT EXPRESSLY RECORDED HIS SATISFACTION, WHILE MAKING THE DISALLOWANCE, WOULD NOT PER SE DESTROY MANDATE OF SECTION 14A OF THE ACT. LD CIT DR SUPPORTING THE ORDERS OF LOWER AUTHORITIES SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE TOWARD S EARNING OF EXEMPT INCOME, HENCE, THERE IS EVERY POSSIBILITY THAT THE INVESTMENT FROM WHICH SUCH EXEMPT IS EARNED MIGHT HAVE BEEN MADE OUT OF THE LOAN AMOUNT, FOR WHICH THE ASSESSEE HAD PAID INTEREST AND CLAIMED IN THE PROFIT AND LOSS ACCOUNT. THEREFOR E, THE AO WAS CORRECT IN MAKING ADDITION AND LD CIT(A) WAS ALSO JUSTIFIED IN CONFIRMING THE SAME. DRAWING FURTHER OUR ATTENTION TOWARDS PARA 5 & SUB - PARA 2 & 3 OF THE ASSESSMENT ORDER, LD CIT DR SUBMITTED THAT THE EXPENDITURE IS ATTRIBUTABLE TO SUCH EA RING IS NOT ASCERTAINABLE, THE ONLY METHOD AVAILABLE FOR SUCH CLAIM UNDER RULE 8D OF I.T. RULES AND THE AO RIGHTLY COMPUTED THE PRESUMPTIVE AMOUNT OF DISALLOWANCE U/S.14A OF THE ACT AS PER RULE 8D OF I.T. RULES AND THERE IS NO DEFECT OR DEFICIENCY IN THE C ALCULATION MADE BY THE AO IN THIS REGARD. LD CIT DR CONCLUDED HIS ARGUMENTS BY SUBMITTING THAT THE ORDERS OF LOWER AUTHORITIES MAY KINDLY BE UPHELD BY CONFIRMING THE ADDITION. 68. PLACING REJOINDER TO ABOVE, LD A.R. SUBMITTED THAT IN THE CASE OF M.A. ALAG APPAN (SUPRA), THE TRIBUNAL HELD THAT WHERE THE ASSESSEE CLAIMED THAT NO EXPENDITURE IS INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM A PART OF TOTAL INCOME UNDER THE INCOME TAX ACT, STATUE HAS PROVIDED FOR PRESUMPTIVE EXPENDITURE WHI CH HAS TO BE DISALLOWED BY FORCE OF THE STATUTE. LD A.R. SUBMITTED THAT THE ITAT CHENNAI IN THIS ORDER HAS RELIED UPON THE JUDGEMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF PRADEEP KHANNA VS ACIT IN ITA APPEAL NO.953 OF 2015 ORDER DATED 11.8.2016 AND T HE DECISION OF COORDINATE BENCH OF ITAT IN THE CASE OF JUSTICE ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 9 | 27 SAM P. BHARUCHA VS ADDL. CIT, 53 SOT 192. IN THE CASE OF JUSTICE SAM P. BHARUCHA (SUPRA), IN PARA 5.1, IT HAS BEEN CLEARLY MENTIONED THAT NO NOTIONAL EXPENDITURE CAN BE APPORTIONED FOR THE PUR POSE OF EARNING EXEMPT INCOME UNLESS THERE IS AN ACTUAL EXPENDITURE AND THE INCOME NOT FORMING PART OF TOTAL INCOME AND IN PARA 5.2, IT HAS ALSO BEEN MENTIONED THAT THE AO HAS NOT GIVEN ANY FINDING THAT ANY OF THE EXPENDITURE INCURRED AND CLAIMED BY THE AS SESSEE IS ATTRIBUTABLE FOR EARNING THE EXEMPT INCOME. HENCE, SECTION 14A CANNOT BE APPLIED TO THE ABOVE CASE. IN PARA 6, IT HAS BEEN MENTIONED THAT SUB - SECTION(3) FURTHER PROVIDES THAT EVEN IN CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRE D, THE ASSESSING AUTHORITY HAS TO PRESUME THAT THE INCURRING OF SUCH EXPENDITURE AS PROVIDED WITH SUB - SECTION (2) READ WITH RULE 8D. LD A.R. SUBMITTED THAT NEITHER IN SECTION 14A NOR IN RULE 8D OF I.T.RULES, THERE IS NO MENTIONING OF MANDATE THAT THE AO IS ENTITLED FOR MAKING PRESUMPTIVE DISALLOWANCE. THEREFORE, THE OBSERVATION OF THE CHENNAI ITAT IN THE CASE OF M.A. ALAGAPPAN (SUPRA) IS AGAINST THE LAW AND MANDATE OF SECTION 14A OF THE ACT. 69. FURTHER, LD A.R. SUBMITTED THAT THE ORDER OF ITAT DELHI IN THE CASE OF DELHI TOWERS (SUPRA) IS NOT APPLICABLE IN THE PRESENT CASE AT HAND. LD A.R. COMPARING THE FACTS AND CIRCUMSTANCES OF THE CASE OF DELHI TOWER (SUPRA) WITH THE PRESENT CASE SUBMITTED THAT IN PARA 11 OF THE SAID ORDER OF ITAT DELHI, A CALCULATION OF DISALLOWING EXPENDITURE WAS GIVEN IN THE PAPER BOOK AND THE TRIBUNAL, FROM THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, OBSERVED THAT THERE IS NO FRESH INVESTMENT THAT HAS BEEN MADE BY THE ASSESSEE DURING THE YEAR UNDER CON SIDERATION AND THE DIVIDEND INCOME HAS BEEN EARNED FROM OLD INVESTMENT. THEREAFTER, THE TRIBUNAL OBSERVED THAT THE LD CIT(A) WAS NOT CORRECT IN CONFIRMING THE ENTIRE DISALLOWANCE MADE BY THE AO AND RESTRICTED THE DISALLOWANCE TO THE TUNE OF EXEMPT INCOME EARNED BY THE ASSESSEE. LD A.R. SUBMITTED THAT IN THE PRESENT CASE, THE ASSESSEE HAS NOT SUBMITTED ANY CALCULATION REGARDING DISALLOWANCE UNDER SECTION 14A R.W. 8D OF I.T.RULES A. THE LD A.R. STRENUOUSLY CONTENDED THAT FROM THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND FINDINGS RECORDED BY THE LD CIT(A) IN THE IMPUGNED ORDER CLEARLY REVEALS THAT THE AUTHORITIES BELOW HAVE NOT MADE SUBSTANTIAL COMPLIANCE OF MANDATE OF STATUTORY PROVISIONS OF SECTION 14A R.W RULE 8D OF I.T.RULES. THEREFORE, THE OR DER OF ITAT DELHI IN THE CASE OF DELHI TOWERS (SUPRA) ARE NOT APPLICABLE IN FAVOUR OF THE REVENUE IN THE PRESENT CASE HAVING DISSIMILAR FACTS AND CIRCUMSTANCES. 70. LD A.R. VEHEMENTLY POINTED OUT THAT THE LD CIT DR HAS NOT SHOWN ANY JUDGMENT OF HONBLE S UPREME COURT AND HONBLE HIGH ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 10 | 27 COURT FAVOURING HIS STAND THAT BEFORE MAKING DISALLOWANCE AND CONSEQUENT ADDITION U/S.14A R.W RULE 8D OF I.T.RULES, SHOWING THAT NO SATISFACTION IS REQUIRED TO BE RECORDED BY THE AO REGARDING THE CLAIM OF EXPENDITURE ATTRIBUT ABLE TO EARNING OF EXEMPT INCOME OR CLAIM OF NO EXPENDITURE OF THE ASSESSEE OR DISPENSING THE COMPLIANCE OF REQUIREMENT OF SUB - SECTION (2) & (3) OF SECTION 14A OF THE ACT. PER CONTRA, THERE ARE NUMBER OF JUDGMENTS BY HONBLE SUPREME COURT, HONBLE HIGH CO URTS AND CO - ORDINATE BENCHES OF THIS TRIBUNAL TO SUPPORT THE CONTENTION OF THE ASSESSEE THAT FOR MAKING SUBSTANTIAL COMPLIANCE AND SUSTAINABLE ADDITION U/S.14A R.W. RULE 8D, THE AO IS MANDATORILY REQUIRED TO RECORD HIS DISSATISFACTION, HAVING REGARD TO TH E ACCOUNTS OF THE ASSESSEE, THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. 71. LD A.R. PLACED RELIANCE ON THE DECISION OF ITAT PANAJI IN THE CASE OF SESA GOA LTD (SUPRA) TO SUBMIT THAT BEFORE MAKING ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT, THE AO IS REQUIRED TO RECORD HIS SATISFACTION HAVING REGARD TO THE ACCOUNTS OF THE ASSESSE E , THAT CLAIM OF THE ASSESSEE THAT EXPENDITURE INCURRED IS NOT RELATED TO INCOME FORMING PART OF TOTAL INCOME IS INCORRECT AND SUCH SATISFACTION MAY BE ARRIVED AT AN OBJECTIVE BASIS. LD A.R. FURTHER SUBMITTED THAT IN THIS ORDER, THE TRIBUNAL HAS HELD THAT THE AO IS REQUIRED TO RECORD REASONS FOR ARRIVING AT SUCH SATISFACTION. IN THE INSTANT CASE, THE AO HAS NOT MADE SUCH EXERCISE BEFORE PROCEEDING TO MAKE DISALLOWANCE U/S.14A R.W RULE 8D. 72. FURTHER DRAWING OUR ATTENTION TOWARDS ORDER OF ITAT MUMBAI IN TH E CASE OF J.K. INVESTORS (SUPRA), LD A.R. SUBMITTED THAT IT IS IMPERATIVE THAT THE AO CAN INVOKE RULE 8D ONLY WHEN HE RECORDS SATISFACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THEREFORE, THE CONDITION PRECEDENT FOR AO ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE AO MUST RECORD THAT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME. 73. FURTHER, PLACING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PVT LTD (SUPRA), LD A.R. SUBMITT ED THAT AS PER SUB - SECTION (2) OF SECTION 14A OF THE ACT, THE JURISDICTION TO PROCEED FURTHER AND DETERMINE THE AMOUNT OF DISALLOWANCE COULD BE DERIVED ONLY AFTER EXAMINATION OF THE ACCOUNTS AND REJECTION OF THE ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 11 | 27 ASSESSEES CLAIM OR EXPLANATION. LD A.R. FUR THER POINTED OUT THAT IN THIS JUDGMENT, HONBLE HIGH COURT HAS CLEARLY LAID DOWN THE PROPOSITION THAT THE AO CAN PROCEED TO MAKE DISALLOWANCE U/S.14A R.W RULE 8D ONLY WHEN THE AO REJECTS THE CLAIM OF THE ASSESSEE THAT EXPENDITURE CLAIMED BY THE ASSESSEE TO WARDS EARNING OF EXEMPT INCOME OR CLAIM THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING OF EXEMPT INCOME IS REJECTED. 74. FURTHER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD (SUPRA), LD A.R. DREW OUR ATT ENTION TO PARA 41 OF THE JUDGEMENT AND SUBMITTED THAT HAVING REGARD TO THE LANGUAGE OF SECTION 14A(2) OF THE ACT, R.W. RULE 8D OF THE RULES, THEIR LORDSHIPS HAVE MADE IT CLEAR THAT BEFORE APPLYING THE THEORY OF APPORTIONMENT, THE AO NEEDS TO RECORD SATISFA CTION THAT HAVING REGARD TO THE KIND OF THE ASSESSEE, SUO MOTO DISALLOWANCE UNDER SECTION 14A WAS NOT CORRECT. LD A.R. FURTHER POINTED OUT THAT SUB - SECTION(2) OF SECTION 14A OF THE ACT TALKS ABOUT SUO MOTO DISALLOWANCE OR EXPENDITURE SHOWN BY THE ASSESSE E TOWARDS EARNING OF EXEMPT INCOME AND SUB - SECTION(3) OF SECTION 14A PROVIDES THAT THE PROVISIONS OF SUB - SECTION (2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME UNDER THIS AC T AND THE PRESENT ASSESSEES CASE FALLS WITHIN THE AMBIT OF SUB - SECTION(3) OF SECTION 14A OF THE ACT. 75. RELIANCE HAS ALSO BEEN PLACED BY THE LD AR ON THE DECISION OF ITAT KOLKATA IN THE CASE OF M/S. INTE GRATED COAL MINING LTD (SUPRA) TO SUBMIT THAT IN THIS CASE, IT WAS OBSERVED THAT THE AO HAS NOT EXAMINED THE ACCOUNTS OF THE ASSESSEE AND THERE WAS NO SATISFACTION RECORDED BY THE AO ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AND WITHOUT THE SAME, HE INVOKED RULE 8D OF I.T.RULES. IT WAS ALSO HELD THAT WHILE REJECTING THE CLAIM OF ASSESSEE WITH REGARD TO EXPENDITURE IN RELATION TO EXEMPT INCOME, THE AO HAS TO INDICATE COGENT REASONS FOR THE SAME BUT NO SUCH EXERCISE HAS BEEN UNDERTAKEN. LD A.R. SUB MITTED THAT THE AO HAD STRAIGHT AWAY EMBARKED UPON COMPUTING DISALLOWANCE UNDER RULE 8D OF THE RULES AND IT WAS CONCLUDED THAT THE AO IS BOUND TO RECORD HIS DISSATISFACTION ONLY FROM BOOKS OF ACCOUNT OF THE ASSESSEE BEFORE PROCEEDING TO MAKE DISALLOWANCE U NDER SECTION 14A OF THE ACT R.W. RULE 8D OF THE RULES. 76. LD A.R. ALSO PLACED RELIANCE ON THE DECISION OF ITAT CUTTACK IN THE CASE OF ACIT VS PATNAIK MINERALS PVT LTD IN ITA NO.231/CTK./2015 FOR A.Y. 2011 - 12 ORDER DATED 3.8.2017 TO SUPPORT HIS CONTENTI ON. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 12 | 27 77. LD A.R. ALSO DREW OUR ATTENTION TOWARDS RECENT DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PRINCIPAL CIT VS CIMS HOSPITAL PVT LTD (2020) 4 NYPCTR 244 (GUJ) ORDER DATED 25.2.2020 AND SUBMITTED THAT THE AO CAN APPLY RULE 8D ONLY IF THE AO H AVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO THE EXEMPTED INCOME AND CONSEQUENTLY, IT WAS HELD THAT THE TRIBUNAL WAS JUSTIFIED IN DELETING THE DISALLOWANCE. THEREFORE, THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD CIT(A) FOR BOTH THE ASSESSMENT YEAR MAY KINDLY BE DELETED. 78. ON CONSIDERATION OF ABOVE NOTED RIVAL SUBMISSIONS, FIRST OF ALL, WE ARE OF THE VIEW THAT IT WOULD BE APPR OPRIATE TO REPRODUCE RELEVANT SECTION 14A OF THE ACT FOR PROPER ADJUDICATION OF THE GROUND OF THE ASSESSEE CHALLENGING THE CONFIRMATION OF DISALLOWANCE BY THE LD CIT(A) MADE BY THE AO U/S.14A OF THE ACT R.W. RULE 8D, WHICH READS AS UNDER: 14A. (1) FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. (2) THE ASSESSING OFFICER SH ALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSE SSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. (3) THE PROVISIONS OF SUB - SECTION (2) SHALL ALSO APPLY IN RELATION T O A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT : 79. IN OUR HUMBLE UNDERSTANDING, THE MANDATE OF SECTION 14A OF THE ACT HAS BEEN BASED ON TH E THEORY THAT THERE MUST BE PROXIMATE CAUSE BASED ON RELATIONSHIP OF EXPENDITURE THAT TAX EXEMPT INCOME IS ESTABLISHED, ONLY THEN A DISALLOWANCE HAS TO BE MADE U/S.14A OF THE ACT. THE ONUS TO ESTABLISH PROXIMATE CAUSE BASED ON THE RELATIONSHIP OF THE EXPE NDITURE THAT THE EXEMPT INCOME IS ESTABLISHED IS ON THE REVENUE. THUS, THE APPLICATION OF PROVISIONS OF SUB - SECTION (2) & (3) ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 13 | 27 OF SECTION 14A OF THE ACT R.W RULE 8D IS NOT AUTOMATIC IN EACH AND EVERY CASE, WHERE THERE IS INCOME NOT FORMING PART OF TOTAL IN COME, THE ASSESSEE IS EARNING EXEMPT INCOME. IN OUR CONSIDERED OPINION, SUB - SECTION (2) & (3) OF SECTION 14A OF THE ACT ARE INTENDED TO ENFORCE AND IMPLEMENT THE PROVISIONS OF SUB - SECTION (1) OF SECTION 14A OF THE ACT. AS PER SUB - SECTION (2), IT IS NECES SARY FOR THE AO FIRST TO ASCERTAIN WHERE THERE IS PROXIMATE CONNECTION BETWEEN THE EXPENDITURE INCURRED AND THE INCOME NOT FORMING PART OF THE TOTAL INCOME. UNDER THIS ACT, IN ACCORDANCE WITH SUCH METHOD , AS MAY BE PRESCRIBED, IF THE AO HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS WITH THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT, THEN, THE AO WOULD BE JUSTIFIED IN APPLYING PRO VISIONS OF SUB - SECTION(2) & (3) OF SECTION 14A OF THE ACT R.W. RULE 8D FOR MAKING THE DISALLOWANCE. 80. KEEPING IN VIEW ABOVE MANDATE OF SECTION 14A OF THE ACT, WE PROCEED TO ADJUDICATE THE GROUND OF THE ASSESSEE CHALLENGING THE DISALLOWANCE MADE BY THE AO UNDER SECTION 14A OF THE ACT R.W RULE 8D. FROM THE RELEVANT PARA 5 OF THE ASSESSMENT ORDER, WE OBSERVE THAT IN SUB PARA (1), THE AO NOTED THAT THE ASSESSEE HAS SHOWN INVESTMENT THAT YIELD TAX FREE INCOME AND HE SHOW CAUSED THE ASSESSEE TO EXPLAIN AS TO W HY PROVISIONS OF SECTION 14A SHALL NOT BE RESORTED TO. IN RESPONSE TO SAID SHOW CAUSE NOTICE, LD A.R. OF THE ASSESSEE STATED THAT THE ASSESSEE HAS NOT INCURRED NOR CLAIMED ANY EXPENDITURE IN RESPECT OF SUCH INCOME, HENCE, NO DISALLOWANCE IS WARRANTED FOR. THUS, THE CASE OF THE ASSESSEE FALLS WITHIN THE AMBIT OF SUB - SECTION (3) OF SECTION 14A OF THE ACT. FURTHER, FROM SUB PARA (2) OF PARA 5, WE OBSERVE THAT THE AO OBSERVED AS UNDER: THOUGH THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR SUCH EXEMPT INCOME, THERE IS EVERY POSSIBILITY THAT THE INVESTMENT FROM WHICH SUCH EXEMPT INCOME IS EARNED MIGHT HAVE BEEN MADE OUT OF THE LOAN AMOUNT, FOR WHICH ASSESSEE PAID INTEREST. 81. THEREA FTER, THE AO MENTIONED THE PROVISIONS OF RULE 8D IN THE NEXT SUB - PARA (3) AND IMMEDIATELY AFTER RECORDING SAID PROVISIONS, HE PROCEED TO CALCULATE THE DISALLOWANCE UNDER RULE 8D OF THE I.T.RULES. FROM ABOVE NOTED ANALYSIS OF RELEVANT PARAS OF THE ASSESSM ENT ORDER, IT IS CLEAR THAT AFTER RECEIVING REPLY OF SHOW CAUSE NOTICE FROM THE ASSESSEE THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN RESPECT OF SUCH INCOME, HENCE, NO DISALLOWANCE IS REQUIRED TO BE MADE, THE AO WITHOUT COMPLYING WITH THE MANDATE OF SUB - SECTION (2) & (3) OF SECTION 14A DIRECTLY JUMPED TO AN IMAGINARY CONCLUSION THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR SUCH EXEMPT ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 14 | 27 INCOME, THERE IS EVERY POSSIBILITY THAT THE INVESTMENT FROM WHICH SUCH EXEMPT INCOME IS EARNED MIGHT HAVE BEEN MADE OUT OF THE LOAN AMOUNT , FOR WHICH THE ASSESSEE PAID INTEREST . 82. THUS, THERE IS NO WHISPER OR MENTION BY THE AO IN THE ASSESSMENT ORDER PARA 5 COMPLYING WITH THE MANDATE OF SUB - SECTION(2) & (3) OF SECTION 14A OF THE ACT, WHICH REQUIRES THAT THE AO SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD, AS MAY BE PRESCRIBED, VIZ; RULE 8D OF I.T.RULES, IF THE AO, HAVING REGARD TO THE AC COUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE, IN RELATION TO EXEMPT INCOME. THUS, WE SAFELY PRESUME THAT THE AO HAS NOT MADE OR UNDERTAKEN ANY EXERCISE AS PER MANDATE OF SUB - SE CTION (2) & (3) OF SECTION 14A BEFORE PROCEEDING TO MAKE DISALLOWANCE WHILE INVOKING OR RESORTING TO SECTION 14A OF THE ACT R.W RULE 8D. 83. FROM THE RELEVANT PART OF THE CIT(A) ORDER, I.E. PARA 3.2, WE OBSERVE THAT THE LD CIT(A) HAS CONFIRMED THE ADDITION BY OBSERVING THAT THE CONTENTION OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF DIVIDEND INCOME CANNOT BE ACCEPTED AND THERE HAS TO BE EXPENDITURE INCURRED FOR SUCH EARNING. HENCE, PROVISIONS OF SECTION 14A ARE CLEARLY ATTRACTED. THEREAFTER, LD CIT(A) FURTHER OBSERVED THAT SINCE THE EXPENDITURE ATTRIBUTABLE TO SUCH EARNING IS NOT ASCERTAINABLE, THE ONLY METHOD AVAILABLE FOR SUCH CALCULATION IS RULE 8D OF THE I.T.RULES AND THE AO HAS COMPUTED THE EXPENDITURE AS PER RULE 8D AND SUC H CALCULATION APPEARED TO BE CORRECT, AS THE ASSESSEE HAS NOT POINTED OUT ANY ERROR IN SUCH CALCULATION. LASTLY, LD CIT(A) NOTED THAT SIMILAR DISALLOWANCE HAS BEEN CONFIRMED BY LD CIT(A) - 2 FOR ASSESSMENT YEAR 2010 - 2011 BY ORDER DATED 28.1.2015, THEREFORE, THE DISALLOWANCE MADE BY THE AO IS CONFIRMED. 84. IN OUR CONSIDERED OPINION, THE BASIC PRINCIPLES OF TAXATION IS TO TAX NET INCOME AND THE EXEMPTION HAS TO BE ALLOWED ON THE NET BASIS I.E. GROSS RECEIPTS ( - ) RELATED EXPENDITURE. HENCE, IF THE EXPENDITUR E IS DIRECTLY RELATED TO EXEMPT INCOME, IT CANNOT BE ALLOWED TO SET OFF AGAINST THE TAXABLE PROFIT AND IF ANY EXPENDITURE IS DIRECTLY RELATED TO TAXABLE INCOME, IT CANNOT BE ALLOWED TO SET OFF AGAINST THE EXEMPT INCOME MERELY BECAUSE SOME INCIDENTAL BENEFI T HAS ARISEN TOWARDS EXEMPTED INCOME. 85. ON VIGILANT AND CAREFUL UNDERSTANDING OF INTENTION OF THE LEGISLATURE AND THE MANDATE GIVEN IN SECTION 14A OF THE ACT, WE ARE OF THE HUMBLE VIEW THAT BEFORE MAKING DISALLOWANCE U/S.14A OF THE ACT, THE AO IS REQUIRE D TO RECORD SATISFACTION THAT HAVING REGARD TO ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 15 | 27 THE ACCOUNTS OF THE ASSESSEE, HE IS NOT SATISFIED WITH THE CORRECTNESS THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE, IN RELATION TO EXEMPT INCOME NOT FORMING PART OF TOTAL INCOME IS INCORRECT. SUCH SATISFACTION MUST BE ARRIVED AT ON THE OBJECTIVE BASIS. 86. AS WE HAVE NOTED ABOVE, IN THE INSTANT CASE, THE AO SIMPLY SHOW CAUSED THE ASSESSEE AND AFTER TAKING ON RECORD REPLY OF THE ASSESSEE MERELY OBSERVED THAT THOUGH THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR SUCH EXEMPT INCOME THAT THERE IS EVERY POSSIBILITY THAT THE INVESTMENTS FROM WHICH SUCH EXEMPT INCOME IS EARNED MIGHT HAVE BEEN MADE OUT OF LOAN ACCOUNT, FOR WHICH ASSESSEE PAID INTEREST . BUT THERE IS NO EXERCISE AS PER MANDATE OF SUB - SECTION (2) & (3) OF SECTION 14A OF THE ACT BY THE AO, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR SUCH EXEMPT INCOME. 87. FROM THE VIGILANT READING OF LD CI T(A) ORDER PARA 3.2, IT IS VIVID THAT NO SUCH EXERCISE HAS BEEN UNDERTAKEN BY THE LD CIT (A) BEFORE CONFIRMING THE DISALLOWANCE MADE BY THE AO AS PER MANDATE OF SUB - SECTION (2)& (3) OF THE SECTION 14A OF THE ACT. 88. BEFORE REACHING TO ANY CONCLUSION, WE A LSO FIND IT APPROPRIATE AND NECESSARY TO CONSIDER THE RATIO OF CASE LAWS CITED BY BOTH THE PARTIES. 89. LD CIT DR HAS PLACED RELIANCE ON THE ORDER DATED 6.1.2017 OF ITAT DELHI BENCH IN THE CASE DELHI TOWERS LTD (SUPRA), WHEREIN, IT WAS HELD THAT WHERE THE AO PROCEEDED TO MAKE DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W. RULE 8D IN RESPECT OF EXEMPT DIVIDEND INCOME EARNED BY THE ASSESSEE, MERE FACT THAT AO DID NOT EXPRESSLY RECORD HIS SATISFACTION WHILE MAKING SAID DISALLOWANCE, WOULD NOT PER SE DESTROY MANDATE OF SECTION 14A OF THE ACT. HE PLACED ANOTHER ORDER OF ITAT CHENNAI IN THE CASE OF M.A.ALAGAPPAN (SUPRA), ORDER DATED 3.4.2017, WHEREIN, IT WAS HELD THAT EVEN NO EXPENDITURE IS INCURRED BY AN ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT, STATUTE HAS PROVIDED FOR PRESUMPTIVE EXPENDITURE WHICH HAS TO BE DISALLOWED BY FORCE OF STATUTE, THE ASSESSING AUTHORITY HAS TO APPLY RULE 8D OF THE I.T.RULES. 90. WHEN WE RESPECTFULLY CONSIDER THE RATIO OF THE JU DGMENT RELIED ON BY LD A.R., THEN WE FIND THAT IN THE RECENT JUDGMENT ORDER DATED 25.2.2020 IN THE CASE OF CIMS HOSPITAL PVT LTD (SUPRA), HONBLE GUJARAT HIGH COURT HELD THAT THE AO CAN APPLY RULE 8D ONLY IF THE AO HAVING REGARD TO THE ACCOUNTS OF THE ASSE SSEE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO THE EXEMPTED INCOME. AS WE HAVE NOTED ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 16 | 27 ABOVE IN EARLIER PARA OF THE ORDER, THE AO IN THE PRESENT CASE DID NOT RECORD SUCH SATISFACTIO N PRIOR TO INVOKING OF SECTION 14A OF THE ACT R.W RULE 8D OF I.T.RULES, HE COULD NOT HAVE MADE ANY DISALLOWANCE. FURTHER IN THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD (SUPRA), THEIR LORDSHIPS SPEAKING FOR THE APEX COURT HEL D IN PARA 41 THUS: HAVING REGARD TO THE LANGUAGE OF SECTION 14A(2) OF THE ACT, READ WITH RULE 8D OF THE RULES, WE ALSO MAKE IT CLEAR THAT BEFORE APPLYING THE THEORY OF APPORTIONMENT, THE AO NEEDS TO RECORD SATISFACTION THAT HAVING REGARD TO THE KIND OF TH E ASSESSEE, SUO MOTO DISALLOWANCE UNDER SECTION 14A WAS NOT CORRECT. IT WILL BE IN THOSE CASES WHERE THE ASSESSEE IN HIS RETURN HAS HIMSELF APPORTIONED BUT THE AO WAS NOT ACCEPTING THE SAID APPORTIONMENT. IN THAT EVENTUALITY, IT WILL HAVE TO RECORD ITS S ATISFACTION TO THIS EFFECT. FURTHER, WHILE RECORDING SUCH A SATISFACTION, NATURE OF LOAN TAKEN BY THE ASSESSEE FOR PURCHASING THE SHARES/MAKING THE INVESTMENT IN SHARES IS TO BE EXAMINED BY THE AO. 91. FURTHERMORE, HONBLE DELHI HIGH COURT IN THE CASE O F JOINT INVESTMENTS PVT LTD (SUPRA) IN PARA 8 HELD THUS: THE COURT IN TAIKISHA ENGINEERING (SUPRA) PERTINENTLY OBSERVED SECTION 14A(2) OF THE ACT AND RULE 8D(1) IN UNISON AND AFFIRMATIVELY RECORD THAT THE COMPUTATION OR DISALLOWANCE MADE BY THE ASSESSEE O R CLAIM THAT NO EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME MUST BE EXAMINED WITH REFERENCE TO THE ACCOUNTS, AND ONLY AND WHEN THE EXPLANATION/CLAIM OF THE ASSESSEE WAS NOT SATISFACTORY, COMPUTATION UNDER SUB - RULE (2) TO RULE 8D OF THE RULES WAS TO BE M ADE. WE NEED NOT, THEREFORE, GO ON TO SUB - RULE (2) TO RULE 8D OF THE RULES UNTIL AND UNLESS THE AO HAS FIRST RECORDED THE SATISFACTION, WHICH IS MANDATED BY SUB - SECTION (2) TO SECTION 14A OF THE ACT AND SUB - RULE (1) TO RULE 8D OF THE RULES. 92. IN THE C ASE OF SESA GOA LTD.,(SUPRA), CO - ORDINATE BENCH OF ITAT PANAJI ALLOWED THE GROUND OF THE ASSESSEE CHALLENGING THE ADDITION MADE UNDER SECTION 14A OF THE ACT R.W RULE 8D OF I.T.RULES BY OBSERVING THAT BEFORE MAKING ANY DISALLOWANCE UNDER SECTION 14A, AO IS REQUIRED TO RECORD A SATISFACTION, HAVING REGARD TO ACCOUNTS OF ASSESSEE, THAT CLAIM OF THE ASSESSEE THAT EXPENDITURE INCURRED IS NOT RELATED TO THE INCOME, WHICH IS FORMING PART OF TOTAL INCOME, IS INCORRECT. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 17 | 27 93. IN VIEW OF FOREGOING DISCUSSION AND AFTER CONSIDERING THE PREPOSITIONS AND INTERPRETATION LAID DOWN BY VARIOUS JUDGMENTS INCLUDING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD (SUPRA) AND JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIMS HOSPITAL PVT L TD (SUPRA), IT IS IMPERATIVE THAT THE AO CAN INVOKE RULE 8D OF THE I.T.RULES ONLY WHEN HE RECORDS HIS SATISFACTION IN REGARD TO CORRECTNESS OF THE CLAIM OF THE ASSESSEE VIZ; SUO MOTO DISALLOWANCE OF EXPENDITURE OR NO EXPENDITURE, HAVING REGARD TO THE ACC OUNTS OF THE ASSESSEE. THE CONDITIONS PRECEDENT CREATED BY THE LEGISLATURE FOR THE AO ENTERING UPON THE DETERMINATION OF THE ACCOUNTS OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE AO HIMSELF RECORD THAT HE IS NOT SATISFIED WITH THE CORR ECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUO MOTO DISALLOWANCE OR CLAIM OF NO EXPENDITURE FOR EARNING EXEMPT INCOME. OBVIOUSLY, WHILE REJECTING THE CLAIM OF THE ASSESSEE IN REGARD TO SUO MOTO DISALLOWED EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE AO HAS TO INDICATE COGENT REASON FOR THE SAME AND FOR RECORDING SUCH COGENT REASONS, IT IS REQUIRED THAT THE AO HAS TO EXAMINE THE ACCOUNTS OF THE ASSESSEE FIRST AND THEN IF HE IS NOT SATISFIED WITH THE CORRECTNES S OF SUCH CLAIM, ONLY THEN HE CAN INVOKE THE PROVISIONS OF SECTION 14A OF THE ACT R.W RULE 8D OF THE I.T.RULES. IN THE PRESENT CASE, AS WE HAVE DISCUSSED ABOVE, THAT NEITHER FROM THE ASSESSMENT ORDER NOR FROM THE FIRST APPELLATE ORDER, THE AUTHORITIES BE LOW HAVE NOT CONSIDERED THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME AS PER MANDATE OF SECTION 14A OF THE ACT FROM THE RELEVANT PART OF THE ASSESSMENT ORDER, IT IS CLEARLY DISCERNIBLE THAT THE AO HAS NOT CONSID ERED THE CLAIM OF THE ASSESSEE FILED IN RESPONSE TO THE SHOW CAUSE NOTICE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME AND HE STRAIGHTFORWARD EMBARKED UPON AND JUMPED TO COMPUTE THE DISALLOWANCE UNDER RULE 8D OF RULES ON THE PRESUMPTION THAT THERE IS EVERY POSSIBILITY THAT THE INVESTMENTS MADE FROM WHICH SUCH EXEMPT INCOME IS EARNED MIGHT HAVE BEEN MADE OUT OF LOAN AMOUNT, FOR WHICH THE ASSESSEE HAS PAID INTEREST. THE DISALLOWANCE U/S.14A OF THE ACT REQUIRES FINDINGS OF THE AO THAT THE CLAIM OF THE ASSESSEE PERTAINING TO SUO MOTO DISALLOWANCE OR NO EXPENDITURE IS NOT CORRECT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE AND THEREAFTER ONLY THE AO IS VALIDLY ENTITLED TO COMPUTE DISALLOWANCE UNDER RULE 8D OF THE RULES. IN ABSENCE OF SUCH EXERCISE, THE DISALLOWANCE MADE BY THE AO CANNOT BE HELD AS VALID AND SUSTAINABLE IN VIEW OF MANDATE GIVEN BY THE LEGISLATURE FOR INVOKING PROVISIONS OF SECTION 14A OF THE ACT. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 18 | 27 94. THE DECISIONS RELIED UPON BY LD CIT DR HAVE BEEN PASSED BY CO - ORDINATE BEN CHES OF CHENNAI AND DELHI ITAT IN THE YEAR 2017. SUBSEQUENTLY, THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD (SUPRA) DATED 12.2.2018 HAS EXPRESSLY CLEARED ALL THE CLOUDS AND DOUBTS ON THE ISSUE AND CATEGORICALLY HELD THAT THE AO NEEDS TO RECORD SATISFACTION THAT HAVING REGARD TO THE CLAIM OF ASSESSEES SUO MOTO DISALLOWANCE U/S.14A WAS NOT CORRECT. IN THAT EVENTUALITY, IT WILL HAVE TO RECORD ITS SATISFACTION, OBLIVIOUS IN THE ASSESSMENT ORDER, TO THIS EFFECT PRIOR TO PROCEE DING TO MAKE DISALLOWANCE. SIMILAR VIEW HAS BEEN EXPRESSED BY HONBLE GUJARAT HIGH COURT IN THE RECENT JUDGMENT IN THE CASE OF CIMS HOSPITAL PVT LTD (SUPRA). THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD (SUPRA) AND HONBLE GUJARAT HIGH COURT IN THE CASE OF CIMS HOSPITAL PVT LTD (SUPRA) ARE BINDING ON ALL THE AUTHORITIES BELOW INCLUDING THE TRIBUNAL. THEREFORE, RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD CIT(A) UNDER SEC TION 14A OF THE ACT R.W. RULE 8D OF I.T.RULES IS NOT VALID AND SUSTAINABLE. THEREFORE, WE DIRECT THE AO TO DELETE THE ADDITION. OUR CONCLUSION ON THIS ISSUE WOULD APPLY MUTATIS MUTANDIS TO THE ASSESSMENT YEAR 2013 - 14. HENCE, GROUND NO.2 OF APPEAL FOR BO TH THE ASSESSMENT YEARS IS ALLOWED. 13. RESPECTFULLY FOLLOWING THE DECISION NOTED ABOVE, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 14. GROUND NO.3 RELATES TO DISALLOWANCE OF COMMISSION OF RS.62,86,353/ - PAID TO SUBH ISPAT LTD. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT AN AMOUNT OF RS.62,86,353/ - WAS PAID TO SUBH ISPAT LTD.,ON THE GROUND THAT NO REPLY WAS RECEIVED REGARD ING GENUINENESS OF THE CLAIM MADE BY THE ASSESSEE. HOWEVER, IT WAS SUBMITTED BY THE ASSESSEE THAT SUBH ISPAT LTD HAS BEEN SEIZED BY THE FINANCIAL INSTITUTIONS AND THEIR BUSINESS HAS CLOSED. THE ABOVE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR BY THE AO AN D, ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 19 | 27 THEREFORE, AN AMOUNT OF RS.62,86,353/ - WAS DISALLOWED. ON FURTHER APPEAL, THE LD CIT(A) CONFIRMED THE DISALLOWANCE. 16. LD A.R. OF THE ASSESSEE SUBMITTED THAT SIMILAR DISALLOWANCE MADE ON ACCOUNT OF COMMISSION PAID WAS DELETED BY THE TRIBUNAL VIDE ITS ORDER DATED 4.9.2019 IN ITA NO.341/CTK/2017 FOR THE ASSESSMENT YEAR 2011 - 12 IN ASSESSEES OWN CASE. HE ALSO SUBMITTED THAT ON SAME FACTS, THE TRIBUNAL FOLLOWING THE DECISION FOR THE ASSESSMENT YEAR 2010 - 11, HAS DELETED THE DISALLOWANCE. HENCE, IT WAS HIS SUBMISSION THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THE LD D.R. DID NOT CONTROVERT THE SUBMISSION OF LD A.R. OF THE ASSESSEE. 17. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, WE PERUSE THE ORDERS OF LOWER AUTHORITIES AS WELL AS THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE RELIED BY LD A.R. OF THE ASSESSEE. WE FIND THAT SIMILAR DISALLOWANCE WAS MADE BY THE REVENUE IN THE ASSESSMENT YEAR 2010 - 11 AND THE TRIBUNAL HAS DELETED THE DISALLOWANCE MADE ON ACCOUNT OF COMMISSION PA ID. WE ALSO FIND THAT SAME ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2011 - 12 IN THE APPEAL FILED BY THE REVENUE AND THE TRIBUNAL FOLLOWING THE DECISION FOR THE ASSESSMENT YEAR 2010 - 11 HAS DELETED THE DISALLOWANCE, BY O BSERVING AS UNDER: 6. AT THE TIME OF HEARING, LD A.R. OF THE ASSESSEE PRODUCED A COPY OF DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 2011, IN THE APPEAL FILED BY THE REVENUE AGAINST THE DELETION OF ADDITION MADE BY THE ASSESSI NG OFFICER. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 20 | 27 THE TRIBUNAL VIDE ITS ORDER DATED 31.8.2017 UPHELD THE FINDINGS OF THE CIT(A) IN DELETING THE DISALLOWANCE, INTER ALIA, OBSERVING AS UNDER: 7. WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE O N RECORD. WE FIND THAT THE CIT(A) DELETED THE DISALLOWANCE OF RS.3,29,17,011/ - OUT OF TOTAL COMMISSION PAYMENT OF RS.6,94,53,756/ - BY OBSERVING AS UNDER I HAVE CONSIDERED THE CONTENT AND SUBSTANCE OF THE IMPUGNED ASSESSMENT ORDER AND THE GROUNDS OF APPEAL PREFERRED AND THE ADDITIONAL SUBMISSIONS FILED BY THE APPELLANT, AND ACCORDINGLY DECIDE AS UNDER: A) IN RESPECT OF THE DISALLOWANCE OF COMMISSION PAYMENTS MADE BY THE APPELLANT TO THE EXTENT OF RS.3,29,17,011/ - , IT APPEARS THAT THE AO HAS NOT CORRECTLY UNDERSTOOD THE MEANING AND IMPORT OF THE TERM AGENT. IT IS NOT NECESSARY THAT AN AGENT RECEIVING COMMISSION PAYMENTS HAS TO ALWAYS BE A PHYSICAL GO - BETWEEN BETWEEN THE PRINCIPAL (THE APPELLANT IN THE INSTANT CASE) AND HIS/HER/ITS CUSTOM ERS BEING BUYERS. AN AGENT CAN CARRY OUT THE BUSINESS OF PROSPECTING FOR CLIENT - BUYERS WHICH WOULD MEAN THAT MANY OF THE INTENDED TARGETS MAY NOT TRANSFORM INTO BUYERS OR MAY DECIDE TO PURCHASE THE ITEMS DIRECTLY FROM THE PRINCIPAL INSTEAD OF THROUGH THE A GENT OR EVEN WITHOUT INFORMING THE AGENT. AN ADVERTISING AGENT, LIKEWISE, HAS ONLY A GENERIC TARGET SEGMENT AND NO CUSTOMERS CAN BE ASKED OF SUCH AGENT TO BE SPECIFICALLY IDENTIFIED. A PROCUREMENT AGENT, ON THE CONTRARY, MAY HAVE A SET OF SELLERS FROM WHOM HE/SHE ROUTINELY CONTRACTS FOR PURCHASES. B)THE CAMBRIDGE DICTIONARY DEFINES AN AGENT AS SOMEONE WHO SELLS A COMPANY'S PRODUCTS AND RECEIVES A PART OF THE MONEY PAID FOR THE GOODS FOR DOING THIS', WHICH WOULD MEAN THAT IT WOULD BE UNFAIR AND UNREASONABLE IN MANY CASES AND CIRCUMSTANCES TO EXPECT SUCH AGENT TO REMEMBER AND PROVIDE THE NAMES OF THE MULTITUDE OF BUYERS. C) IT IS ALSO CLEAR FROM THE DEFINITION THAT AN AGENT IS DEPENDENT FOR HIS/HER/ITS INCOMES ON HIS/HER, ITS PRINCIPALS AND THE SALES THAT HE/SHE/IT HELPS FACILITATE FOR THE LATTER. A COMMISSION AGENT DERIVES COMPENSATION FROM ACTUAL SALES, USUALLY EXPRESSED AS A PERCENTAGE OF SALES. IN MANY CASES, THEY MAY FACILITATE IN LOCATING ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 21 | 27 BUYERS FOR GOODS/SERVICES, PROVIDING INFORMATION ABO UT THE PRODUCT, MAKING THE ACTUAL SALE, AND ENSURING DELIVERY AND FOLLOW - UP SERVICE. HOWEVER, THE PRECISE NATURE AND DETAILS OF THE FACILITATIONS ENGAGED IN BY THE AGENTS DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF THE ARRANGEMENT/AGREEMENT ENTERED INTO WI TH THE PRINCIPAL, THE NATURE OF THE PRODUCTS/GOODS SOLD, RELEVANT BUSINESS FACTORS, ETC. BENEFITS FROM THE AGENCY ARRANGEMENT ACCRUE TO BOTH THE PRINCIPAL AND AGENT. PRINCIPALS CAN EXTEND MARKET REACH WITHOUT INCURRING MAJOR FIXED PERSONNEL COSTS, AND AGEN TS CAN EARN COMPENSATION BASED ON THEIR PRODUCTIVITY. SOME AGENTS MAY REPRESENT MORE THAN ONE PRINCIPAL. ALL OF THE ABOVE MEAN THAT THE AGENT IS MORE REACTIVELY DEPENDENT ON THE PRINCIPAL BEING PART OF A DIRECT ARRANGEMENT THAN WITH THE CLIENTS/BUYERS/CUST OMER WHICH RELATIONSHIP IS MORE PROACTIVE AND HENCE INDEPENDENT. WHILE, COMMISSION AGENTS DEPEND ON CUSTOMERS IN GENERATING THEIR COMPENSATION, THE COMPENSATION ITSELF IS PAID BY THE PRINCIPAL AFTER THE CUSTOMER/BUYER PAYS THE PRINCIPAL THE PROCEEDS OF THE SALE OR OTHER TRANSACTION. WHILE SOME AGENTS MAY BE AGGRESSIVE, THEY ALSO DEPEND ON SATISFIED CUSTOMERS FOR REPEAT BUSINESS AND ARE MOTIVATED TO THAT END; IT IS IN THIS CONNECTION THAT SOME OF THEM MAY KEEP TRACK OF BUYERS/CUSTOMERS IN THEIR OWN INTERESTS . SUCH TRACKING AND RETRIEVAL OF CUSTOMER DETAILS UPON DEMAND, AS THE AO HAS INSISTED UPON, IS NOT. PART OF A MANDATORY OR STATUTORILY STIPULATED NATURE OF DUTIES OF ALL AGENTS. D) THERE ARE COMMISSION AGENTS WHO ARRANGE AND PARTICIPATE IN THE SALES AND ARRANGE OUTBOUND - MOVEMENT - AND - PACKING, TRANSPORT AND LOGISTICS IN THE INTERESTS OF THE PRINCIPAL, AND THERE ARE AGENTS WHO DO NOT. THE LAW OF AGENCY IS AN AREA OF COMMERCIAL LAW DEAL ING WITH A SET OF CONTRACTUAL, QUASI - CONTRACTUAL AND NON - CONTRACTUAL FIDUCIARY RELATIONSHIPS THAT INVOLVE A PERSON (THE AGENT), WHO IS AUTHORIZED TO ACT ON BEHALF OF ANOTHER (THE PRINCIPAL) TO CREATE LEGAL RELATIONS WITH A THIRD PARTY. SUCCINCTLY, IT MAY B E REFERRED TO AS A MORE - OR - LESS EQUAL RELATIONSHIP BETWEEN A PRINCIPAL AND AN AGENT WHEREBY THE PRINCIPAL, EXPRESSLY OR IMPLICITLY, AUTHORIZES THE AGENT TO WORK UNDER HIS OR HER OR ITS CONTROL AND ON HIS OR HER OR ITS BEHALF. THE AGENT IS, THUS, REQUIRED T O NEGOTIATE ON BEHALF OF THE PRINCIPAL OR BRING HIM OR HER AND THIRD PARTIES INTO A CONTRACTUAL RELATIONSHIP. THE RECIPROCAL RIGHTS AND LIABILITIES BETWEEN A PRINCIPAL AND AN AGENT REFLECT COMMERCIAL AND LEGAL REALITIES. A BUSINESS OWNER OFTEN RELIES ON AN EMPLOYEE ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 22 | 27 OR ANOTHER PERSON TO CONDUCT A BUSINESS. THE PRINCIPAL IS BOUND BY THE CONTRACT ENTERED INTO BY THE AGENT, SO LONG AS THE AGENT PERFORMS WITHIN THE SCOPE OF THE AGENCY. IMPORTANTLY, A THIRD PARTY MAY RELY IN GOOD FAITH ON THE REPRESENTATION BY A PERSON WHO IDENTIFIES HIMSELF AS AN AGENT FOR ANOTHER. IT IS NOT ALWAYS COST EFFECTIVE TO CHECK WHETHER SOMEONE WHO IS REPRESENTED HAVING THE AUTHORITY TO ACT FOR ANOTHER ACTUALLY HAS SUCH AUTHORITY. IF IT IS SUBSEQUENTLY FOUND THAT THE ALLEGED AGENT WAS ACTING WITHOUT NECESSARY AUTHORITY, THE GENT WILL GENERALLY HE HELD LIABLE. E) IN THE INSTANT CASE, THE AGENTS WERE RELATIVELY SMALL AND UNKNOWN PLAYERS. ALSO, AS PER THE TERMS OF THE AGREEMENTS/UNDERSTANDING WITH THE APPELLANT, THEY DID NOT APPEAR TO HAVE ANY AUTHORITY TO ATTRACT OR ENLIST BUYERS FOR THE APPELLANT. THEIR RANGE OF DUTIES WAS LIMITED TO FACILITATING SMOOTH SUPPLY OF GOODS TO THE BUYERS.' THIS WOULD MEAN THAT THEY WERE IN MOST CASES INTERACTING WITH BUYERS WHO WERE IN DIRECT TRANSACTIONAL AND INTERACTIVE RELATIONSHIP WITH THE APPELLANT. THE BUYERS THEREFORE HAD NO CAUSE TO REGARD THE AGENTS AS PURCHASE INTERMEDIARIES (THEY BEING SUPPLY FACILITATORS TEMPORARILY VISIBLE AT A GIVEN POINT IN TIME IN RESPECT OF THE TRANSACTIONS OPERATIONAL AT THAT TIME) AND THE AGENTS HAD NO REASONS TO PREPARE IRON - CLAD LISTS AND DETAILS OF THE BUYERS. THEREFORE, THERE WAS LITTLE REASON FOR THE BUYERS TO MAKE ENQUIRIES ABOUT THE AGENTS AND CERTIFY THE GENUINENESS OR VERACITY OF THE LATTER IN THE MATTER OF SUPPLIES O F MATERIALS. I ALL THE BUYERS WERE CONCERNED WITH WAS THE TIMELY DELIVERY OF QUALITY - TESTED GOODS/PRODUCTS AS SPECIFIED BY THEM. ALL THE APPELLANT EXPECTED FROM THE AGENTS WAS TOTAL ADHERENCE TO THE TERMS OF THE AGREEMENT/ARRANGEMENT BETWEEN THEM. F) THEREFORE, THE EXPRESS NON - REMEMBRANCE OF THE AGENTS IN THE CREATIVE - PROACTIVE AWARENESSES OF THE BUYERS ALONE WILL NOT NEGATE THE FACT OF THE IMPUGNED TRANSACTIONS AND THE TRUTH AND CHARACTER OF THE COMMISSION PAYMENTS. THE AO HAS NOT CARRIED OUT ANY INVE STIGATIONS OR INQUIRES, ON UNEARTHED/DISCOVERED ANY EVIDENCES THAT SUGGEST THAT THE TRANSACTIONS AND PAYMENTS WERE NOT WHAT THEY SEEMED TO BE. THE DECISION TO DISALLOW HAS BEEN MADE ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 23 | 27 ON PRESUMPTION, SURMISE, CONJECTURE, SUPPOSITION, AND A SUMMARY AND UNILAT ERAL CONCLUSION BASED ON RUDIMENTARY FACTS (OF THE BUYERS BEING PRESUMABLY NON - EXISTENT OR APPARENTLY UNAWARE OF THE AGENTS AND THE AGENTS BEING UNABLE TO LIST THE BUYERS) TAKEN IN PREJUDICED ISOLATION AND BASED ON A SPURIOUS IMPLIED TRANSCENDENTAL PRINC IPLE THAT SEEKS TO COVER/FILL THE SCHISM BETWEEN FLIMSY FOUNDATIONS AND MERETRICIOUS ARGUMENTS ON ONE SIDE AND A TENDENTIOUS DECISION ON THE OTHER. THIS IS NOT A SCIENTIFIC, PROFESSIONAL AND RESPONSIBLE EXERCISE CARRIED OUT BY THE AO. MUCH MORE HOMEWORK WA S REQUIRED TO BE DONE BY THE AO IN DISCHARGE OF HIS RESPONSIBILITIES, WHICH HE PLAINLY FAILED TO CARRY OUT. G) HOW TO GO ABOUT DOING ONES BUSINESS SIS THE PREROGATIVE OF THE BUSINESS MAN, AS ARE THE RELATED MATTERS LIKE INCURRING EXPENSES, MAKING INVESTMENTS , OBTAINING LOANS AND PROVIDING ADVANCES, ETC. THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LIMITED VS CIT, 288 ITR 1 (SC) IS RELEVANT. THE HONBLE COURT HELD IN THE ABOVE RATIO REITERATED THE SETTLED POSITION IN THE PAST THAT NO BU SINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT. WHILE CONSIDERING THE CLAIM OF DEDUCTION OF ANY EXPENDITURE, INCOME TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. ONCE IT WAS ESTABLISHED T HAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS, REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EX PENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. THE AUTHORITIES MUST LOOK AT THE MATTER NOT FROM THEIR OWN POINT VIEW BUT THAT OF A PRUDENT BUSINESSMAN. H) CONSEQUENTLY, WHETHER TO ENGAGE THE SERVICES OF A COMMISSION AGENT OR NOT IN RESPECT OF HER SALES IS THE BUSINESS PREROGATIVE OF THE APPELLANT, AND EVEN IF SUCH AGENTS DO ARE NOT ABLE TO BRING IN A SINGLE CUSTOMER, THE EXPENSES MADE OF THE NATURE OF COMMISSION PAYMENTS TO THE AGENTS WOULD NOT BE INELIGIBLE. ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 24 | 27 I) IN HARMONY WITH THE PRINC IPLES OF ECONOMIC NEUTRALITY, WHAT IS TO BE VERIFIED IS WHETHER THE AGENTS ARE CREATING ECONOMIC VALUE FOR THE APPELLANT THROUGH THE FUNCTIONS CARRIED OUT, RISKS ABSORBED AND ASSETS BEING TIME AND EFFORT INVESTED IN BY IT, AND IS THEREFORE ENTITLED TO BE C OMPENSATED FOR THE SAME IN THE FORM OF RECEIPTS OF COMMISSIONS. COMPENSATION CAN BE DENIED OR DISALLOWED ONLY IF IT IS PROVED THAT THE APPARENT ARRANGEMENT IS NOT GERMANE OR RELATED TO THE BUSINESS AND/OR IS NON - GENUINE AND NO ECONOMIC VALUE IS BEING GENER ATED BY THE AGENT FOR THE PRINCIPAL. THE APPELLANT IS FREE TO ENTER INTO AGREEMENTS WITH AND APPOINT AS MANY AGENTS, AS IT SEEKS TO, IN LINE WITH ITS BUSINESS NEEDS AND COMMERCIAL PRACTICES. IF THE AGREEMENTS AND APPOINTMENTS ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, AND THE PAYMENTS MADE IN THE SAID REGARD ARE FULLY BILLED/VOUCHED, ACCOUNTED FOR AND AUDITED, THEN THERE IS LITTLE SCOPE FOR REVENUE TO TAKE A PREJUDICIAL VIEW. J) THE AO HAS NOT BEEN ABLE TO SHOW THAT THE PAYMENTS HAVE NOT BEEN M ADE TO THE PURPORTED AGENTS AND THAT THESE PAYMENTS ARE NOT RELATABLE TO THE CARRYING OUT THE BUSINESS AND FOR OTHER BUSINESS PURPOSES. THE AO HAS MERELY LEAPED TO CONCLUSIONS (IN THE CASES OF CATEGORIES II, III AND IV) THAT THE SEEMING ABSENCE OF BUYERS ( AS OSTENSIBLY EVIDENCED BY LETTERS ADDRESSED TO THEM RETURNING UNSERVED), OR THE NEGATIONS OR DISAVOWALS BY SUCH BUYERS OF ANY KNOWLEDGE OR NEXUS WITH THE AGENTS OR THE INABILITY OF THE COMMISSION AGENTS TO LIST THE ACTUAL BUYERS WOULD AUTOMATICALLY DISENT ITLE THE AGENTS OF THEIR STATUS AND RIGHTS TO RECEIVE COMMISSION PAYMENTS. IN THE SCHEME SET IN PLACE BY THE APPELLANT, THE BUYERS DIRECTLY TRANSACTED WITH HER; THE AGENTS DID NOT ENROLL THEM AND THEREFORE IN MOST CASES WOULD NOT KNOW THEM. THE AGENTS WOUL D BE ABLE TO ONLY PROVIDE SOME NAMES OF BUYERS IN RESPECT OF WHOM/WHICH THE AGENT WOULD HAVE FACILITATED THE SUPPLY AFTER THE SALES WERE MADE. LIKEWISE, SWORN DEPOSITIONS FROM THE BUYERS THAT THEY DID NOT KNOW THE AGENTS WOULD NOT MAKE FOR ADVERSE FINDING BECAUSE IN THE MINDS OF THESE BUYERS, THEY HAD TRANSACTED DIRECTLY WITH THE APPELLANT, AND THE PERSON REFERRED TO AS AN AGENT WOULD HAVE APPEARED IN THEIR EYES LIKE AN EMPLOYEE OF THE APPELLANT OR OTHER INDIVIDUAL ENGAGED IN FACILITATING THE MOVEMENT OF TH E ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 25 | 27 GOODS, AND NOT IN A FORMAL POSITION OF ENGAGEMENT AS AN AGENT. K) WHAT WAS NEEDED FOR THE AO WAS TO PROVE ANY OF THE FOLLOWING: A) THE IMPUGNED AGENTS DID NOT EXIST OR WERE NOT GENUINE AGENTS; B) THE AGENTS HAD NOT CARRIED OUT ANY FACILITATION WORK FOR THE APPELLANT; AND C) THE AGENTS HAD NOT ACTUALLY RECEIVED THE STA TED COMMISSION MONEYS. HE HAS INSTEAD PROCEEDED ON PRESUMPTIONS AND CONCLUDED ON UNPROVEN INANITIES THAT THE ABSENCE OF INFORMATION ABOUT THE BUYERS MEANT THAT THE COMMISSION AGENTS DID NOT EXIST OR WERE NOT GENUINE PARTICIPANTS IN THE APPELLANTS BUSINESS. IN RESPECT OF CATEGORY I, THE BUYERS CONFIRMING AT THEY HAD CARRIED OUT DIRECT TRANSACTIONS WITH THE APPELLANT IS WELL WITHIN THE GENERAL AND ACCEPTED SCHEME OF THINGS. IT IS NOT PART OF THE ROLE OF THE AGENT TO ALWAYS ACT AS A PHYSICAL INTERMEDIARY BETWE EN THE BUYERS AND THE APPELLANT BEING THE SELLERS. PURCHASES WERE DIRECTLY MADE FROM THE APPELLANT WITH THE AGENT REMAINING IN THE BACKGROUND. THE BUYER IS INTERESTED ONLY IN EFFECTING THE PURCHASES; HE IS NOT DUTY BOUND TO KEEP TAX ON THE APPELLANT - SELLE RS AGENTS AND PREPARE LISTS WHEN CALLED FOR. BUYERS ALSO INTERACT WITH SEVERAL AGENTS OF THE SAME NATURE EMPLOYED BY THEIR RESPECTIVE COMPETING PRINCIPALS PARTICIPATING IN THE SUPPLIERS OF MATERIAL SUPPLIES. SUCH LACK OF AWARENESS ALONE 'DOES NOT TAKE AWA Y THE CHARACTER OF THE PAYMENTS MADE BEING THAT OF COMMISSIONS OR THE TRUTH AND GENUINENESS OF THE PRINCIPAL - AGENT TRANSACTIONS. THE PART OF THE ORDER THAT DEALS WITH THE ENHANCEMENTS OF COMMISSION PAYMENTS APPEARS TO HAVE FRAMED ON SUSPICION AND PRESUMPTI ON, AND AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF STATE OF KERALA VS. M.M. MATHEW 42 STC (1978), HOWEVER STRONG SUCH SUSPICION OR PRESUMPTION IT COULD NOT REPLACE LEGAL PROOF. I) IN CONSEQUENCE OF ALL THE ABOVE, IT IS HELD THAT THE AOS ACTION IN DISALLOWING THE IMPUGNED EXPENSES TOTALING RS. 3,29,17,011/ - HAVE BEEN MADE ON EXTREMELY THIN AND SPECIOUS GROUNDS THAT THE BUYERS WERE NOT FOUND OR DID NOT RESPOND OR DISCLAIMED ANY KNOWLEDGE OF THE AGENTS OR THAT THE AGENTS WERE NOT ABLE TO REMEMBER THE BUYERS OR WERE NOT ABLE TO FURNISH DETAILED PARTICULARS ABOUT THEM OR FOR THE REASON THAT THE COMMISSION AGENTS WERE HUFS. ALL OF ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 26 | 27 THEM ARE REASONS THAT DO NOT SHOW ANY CLEAR UNDERSTANDING ABOUT T HE REASONS FOR AND THE MANNER IN WHICH THE AGENTS HA VE BEEN EMPLOY ED AND ENGAGED BY THE APPELLANT. THE APPELLANT IS SEEN TO HAVE MADE THE NECESSARY DEDUCTIONS OF I DS, MAINTAINED THE NECESSARY BILLS, RECEIPTS CERTIFICATES AND OTHER DOCUMENTATION, MADE THE NECESSARY ENTRIES IN BOOKS OF ACCOUNTS THAT HAVE BEEN D ULY AUDITED AND ALSO FURNISHED THE INCOME - TAX PAR TICULARS OF THE AGENTS BEFORE TH E AO. COPIES OF SOME OF THE COMMUNICATIONS MADE BY THE APPELLANT TO THE AO IN THIS REGARD HAVE BEEN PROVIDED ON RECORD BY THE APPELLANT. J) THE ENHANCEMENT MADE OF RS. 3,29,1 7,011/ - ON THE SAID COUNT IS CONSEQUENTLY DELETED AND THE APPEAL ALLOWED. 8. LD D.R. COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE FINDINGS OF THE CIT(A) THAT AT TIMES COMMISSION AGENT WHEN APPROACHES THE PURCHASERS, HE DOES NOT IDENTIFY HIMSELF AS AN AGE NT OF THE SELLER AND MERELY IDENTIFYING HIMSELF AS REPRESENTATIVE OF THE SELLER, IN SUCH CIRCUMSTANCES, THE BUYER CANNOT BE AWARE THAT THE PERSON WHO HAS APPROACHED IS EMPLOYEE OF THE SELLER OR AGENT OF THE SELLER. FURTHER, THE CIT(A) OBSERVED THAT THE CO MMISSION MAY BE PAID TO AN AGENT FOR FACILITATING THE TRADE EVEN WHEN THE ORDERS ARE DIRECTLY GIVEN TO THE SELLERS BY THE PURCHASERS. FURTHER, NON - SERVICE OF LETTERS TO THE BUYERS OR NON - COMPLIANCE OF THE LETTERS BY THE BUYERS DOES NOT SHOW THAT THE PAYME NT OF COMMISSION WAS NOT GENUINE WHEN THE RELATIVE SALE WAS CONSIDERED GENUINE. FURTHER, NON - FURNISHING OF THE NAME OF THE BUYERS BY AGENT IN COMPLIANCE TO THE NOTICE DOES NOT NECESSARILY MEAN THAT THE AGENT IS NOT AWARE OF THE BUYERS. WE FIND THAT NO MATERIAL COULD BE BROUGHT BEFORE US TO SHOW THE PERSON TO WHOM COMMISSION WAS PAID WERE ACCOMMODATION/ENTRY PROVIDER AND THE MONEY WHICH WAS PAID THROUGH BANKING CHANNEL TO THEM CAME BACK TO THE ASSESSEE. IN THE CIRCUMSTANCES, IN THE ABSENCE OF ANY SPECIF IC DEFECT BEING POINT OUT IN THE ORDER OF THE CIT(A), WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. BEFORE US N O SPECIFIC ERROR IN THE ORDER OF THE CIT( A) COULD BE POINTED OUT BY LD D.R. FURTHER, LD D.R. COULD NOT POINT OUT WHETHER THE ORDER OF THE ITAT PASSED IN ASSESSMENT YEAR 2010 - 2011 WAS VARIED IN APPEAL BY ANY HIGHER FORUM. HENCE, SINCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 11, ITA NO.197/CTK/2019 ASSESSMENT YEAR : 2012 - 13 P A G E 27 | 27 WE FOLLOWING THE PRECEDENT, CONFIRM THE FINDINGS OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AND REJECT THE GROUND OF APPEAL TAKEN BY THE REVENUE. 18. SINCE THERE IS NO CHANGE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEAR UNDER CONSIDERATION, FOLLOWING THE DECISION OF THE TRIBUNAL, WE DELETE THE DISALLOWANCE OF RS.62,86,353/ - ON ACCOUNT OF COMMISSION PAID TO SUBH ISPAT LTD AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 28 /1 /20 2 1 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 28 / 1 /20 2 1 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT: TARINI MINERALS PVT LTD., A/6, COMMERCIAL ESTATE, CIVIL TOWNSHIP, ROURKELA. 2. THE RESPONDENT. ACIT, ROURKELA CIRCLE, ROURKELA. 3. THE CIT(A) - , SAMBALPUR 4. PR.CIT - , SAMBALPUR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//