M/s Pinewood Information Systems Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 244/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3748 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 19-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: R S AHUJA
• Keywords: Bogus purchase; Earning of tax free income; Rule 8D; Set aside
• Section: 153A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.244/DEL./2016 (ASSESSMENT YEAR : 2009-10) M/S. PINEWOOD INFORMATION SYSTEMS PVT. LTD., VS. AC IT, C 160, OKHLA INDUSTRIAL AREA, PHASE I, CENTRAL CIRCLE 11, NEW DELHI 110 020. (PAN : AADCP7011N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. AHUJA, ADVOCATE REVENUE BY : SHRI S.S. RANA, CIT DR DATE OF HEARING : 27.11.2019 DATE OF ORDER : 28.11.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. PINEWOOD INFORMATION SYSTEMS PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 27.11.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XXXI, NEW DELHI QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUND S INTER ALIA THAT:- THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNED ITO & THE CIT(A) ERRED IN : ITA NO.260/DEL./2016 2 1) ASSESSING THE INCOME OF RS. 13,03,42,286/- AS AGAINST RS.12,10,16,551/- (INCLUDING THE SURRENDERE D INCOME OF RS.11,90,00,000/-). 2) MAKING THE ADDITIONS OF THE AMOUNT OF RS. 11,90,00,000 ON ACCOUNT OF BOGUS PURCHASES IN SPITE OF THE FACT THAT THE ACTUAL PURCHASES FROM THE SAME PA RTIES WERE RS.78,93,726/- AND RS.11,11,06,274 WAS WRONGLY OFFERED FOR TAX IN THE RETURN OF INCOME. 3) UPHOLDING THE ASSESSMENT & ADDITION OF RS. 4,13,658/-U/S 14A INSPITE OF THE FACT THAT THE ASSE SSMENT FOR THE YEAR HAD ABATED IN TERMS OF SECTION 153A & NO INCRIMINATING MATERIAL WAS UNEARTHED IN THE COURSE OF SEARCH & SEIZURE OPERATIONS. 4) DISALLOWING RS.4,13,658/- UNDER SECTION 14A OF THE INCOME TAX ACT. 5) DISALLOWING U/S 14A WITHOUT THE ASSESSING OFFICER GIVING ANY FINDING IN THE ASSESSMENT ORDER REGARDING THE AMOUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TO EARN TAX-FREE INCOME. 6) NOT FOLLOWING THE ORDERS OF THE JURISDICTIONAL HIGH COURT IN THIS MATTER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ASSESSING OFFICER (AO) NOTICED THAT DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE COMPANY HAS MAD E INVESTMENT OF RS.5,57,48,277/- ON WHICH DIVIDEND INCOME WAS EA RNED. AO BY INVOKING THE PROVISIONS CONTAINED UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) READ WI TH RULE 8D OF THE INCOME-TAX RULES, 1962 (FOR SHORT THE RULES) MADE ITA NO.260/DEL./2016 3 DISALLOWANCE OF RS.93,00,035/- AND THEREBY ADDED TH E SAME TO THE INCOME OF THE ASSESSEE. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITION MADE BY THE AO BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PR ESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 2 5. GROUNDS NO.1 & 2 ARE DISMISSED HAVING NOT BEEN P RESSED DURING THE COURSE OF ARGUMENTS. GROUNDS NO.3, 4, 5 & 6 6. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMPU GNED ORDER CONTENDED THAT NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE QUA THE INVESTMENT MADE DURING THE YEAR UNDER ASSES SMENT NOR ANY DIVIDEND HAS BEEN EARNED AND AS SUCH, NO DISALLOWAN CE CAN BE MADE. 7. LD. DR FOR THE REVENUE, ON THE OTHER HAND, RELIE D ON THE ORDERS OF THE LOWER REVENUE AUTHORITIES. ITA NO.260/DEL./2016 4 8. PERUSAL OF THE PROFIT & LOSS ACCOUNT BROUGHT ON RECORD BY THE ASSESSEE SHOWS THAT NO EXPENDITURE HAS BEEN INCURRE D BY THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT NOR ANY D IVIDEND EARNED. IT IS SETTLED PRINCIPLE OF LAW THAT WHEN NO DIVIDEN D HAS BEEN EARNED BY THE ASSESSEE, THERE CANNOT BE ANY DISALLOWANCE U /S 14A OF THE ACT. 9. HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED VS. CIT (2015) 378 ITR 33 HAS HELD THAT, IN THE ABSENCE OF EXEMPT INCOME, DISALLOWANCE U/S 14A OF ANY AMOUN T WAS NOT PERMISSIBLE. SO, WE ARE OF THE CONSIDERED VIEW THAT SINCE ASS ESSEE HAS NOT EARNED ANY DIVIDEND INCOME NOR PROVED TO HA VE INCURRED ANY EXPENDITURE ON THE INVESTMENT DURING THE YEAR U NDER ASSESSMENT, NO DISALLOWANCE CAN BE MADE, HENCE DISA LLOWANCE OF RS.4,13,658/- IS ORDERED TO BE DELETED. 10. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 28 TH DAY OF NOVEMBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 28 TH DAY OF NOVEMBER , 2019 TS ITA NO.260/DEL./2016 5 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.