M/s Firepro Wireless & Technologies Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 250/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3762 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• 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; Assessment record; 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.250/DEL./2016 (ASSESSMENT YEAR : 2009-10) ITA NO.251/DEL./2016 (ASSESSMENT YEAR : 2010-11) M/S. FIREPRO WIRELESS & TECHNOLOGIES VS. ACIT, PRIVATE LIMITED, CENTRAL CIRCLE 11, D 159, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELH I. NEW DELHI 110 020. (PAN : AACCC6876D) (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 : 29.11.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEALS, THE SAME ARE BEING D ISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DI SCUSSION. 2. APPELLANT, M/S. FIREPRO WIRELESS & TECHNOLOGIES PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEALS SOUGHT TO SET ASIDE THE IMPUGNED ORDERS BOT H DATED ITA NO.250 & 251/DEL./2016 2 19.11.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XXXI, NEW DELHI QUA THE ASSESSMENT YEARS 2009-10 & 2010-11 ON THE GROUNDS INTER ALIA THAT:- ASSESSMENT YEAR : 2009-10 (A) THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNED ITO & THE CIT(A} ERRED IN : 1. NOT REDUCING THE AMOUNT OF RS. 24,69,20,357/- OU T OF RS.28,00,00,000/- THAT HAD BEEN ADDED ON ACCOUNT OF THE BOGUS PURCHASES SINCE THE ACTUAL PURCHASE MADE FROM THE S AME PARTIES WERE RS.3,30,79,643/-. 2. UPHOLDING THE ASSESSMENT & ADDITION OF RS.1,00,0 00/- U/S 14A INSPITE OF THE FACT THAT THE ASSESSMENT FOR THE YEAR HAD ABATED IN TERMS OF SECTION 153A & NO INCRIMINATING MATERIAL WAS UNEARTHED IN THE COURSE OF SEARCH & SEIZURE OPERATI ONS. 3. ENHANCING THE INCOME OF THE ASSESSEE BY MAKING A N ADDITION OF RS. 1,00,000/- MADE U/S 14A. 4. DISALLOWING U/S 14A WITHOUT THE ASSESSING OFFICE R GIVING ANY FINDING IN THE ASSESSMENT ORDER REGARDING THE A MOUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TO EARN TAX-FREE INCOME. 5. NOT FOLLOWING THE ORDERS OF THE JURISDICTIONAL H IGH COURT IN THIS MATTER. ASSESSMENT YEAR : 2010-11 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ITO AND THE CIT{A} ERRED IN : 1. INCLUDING RS. 2,00,00,000 IN THE TAXABLE INCOME ON ACCOUNT OF BOGUS PURCHASES ALTHOUGH THE SAME WAS NO T BOGUS AND IT WAS GENUINE PURCHASES. 2. UPHOLDING THE ASSESSMENT & ADDITION OF RS. L,00, 000/-U/S 14A INSPITE OF THE FACT THAT THE ASSESSMENT FOR THE YEAR HAD ABATED IN TERMS OF SECTION LS3A & NO INCRIMINATING MATERIAL WAS UNEARTHED IN THE COURSE OF SEARCH & SEIZURE OPERATI ONS. 3. DISALLOWING RS.1,00,000 U/S 14A OF INCOME TAX AC T. ITA NO.250 & 251/DEL./2016 3 4. DISALLOWING U/S 14A WITHOUT THE ASSESSING OFFICE R GIVING ANY FINDING IN THE ASSESSMENT ORDER REGARDING THE A MOUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TO EARN TAX-FREE INCOME. 5. NOT FOLLOWING THE ORDERS OF THE JURISDICTIONAL H IGH COURT IN THIS MATTER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : DURING THE APPELLATE PROCEEDING S, LD. CIT (A) FROM THE ASSESSMENT RECORD OF TULIP GROUP NOTICED T HAT THE ASSESSEE AND OTHER SIMILAR COMPANIES ARE DIRECT OR INDIRECT INVESTORS IN THE FLAGSHIP COMPANY OF THE GROUP. AS SESSEE HAS ACCOUNTED SALES OF RS.189.39 CRORES & RS.3,00,17,05 3/- FOR AYS 2009-10 & 2010-11 RESPECTIVELY BUT WITHOUT ANY INCO ME BEFORE TAX FROM THE TRADING ACTIVITIES. LD. CIT (A) ALSO NOTI CED THAT NET PROFIT BEFORE TAX WAS RS.88.81 LAKHS AND RS.79.48 LAKHS WH ICH INCLUDED DIFFERENCE OF FOREIGN EXCHANGE OF RS.52.89 LAKHS AN D RS.1.71 CRORES FOR AYS 2009-10 & 2010-11 RESPECTIVELY. 3. ASSESSING OFFICER (AO) ALSO NOTICED THAT THE ASS ESSEE HAS MADE INVESTMENT OF RS.2 CRORES EACH IN FOR AYS 2009 -10 & 2010- 11 IN THE TULIP GROUP COMPANIES. LD. CIT (A), AFTE R CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE DISALLOWAN CE UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) SHOULD NOT BE MADE @ 0.5% AT THE AVERAGE VALUE OF T HE INVESTMENT, INVOKED THE PROVISIONS CONTAINED U/S 14A OF THE ACT AND MADE ITA NO.250 & 251/DEL./2016 4 DISALLOWANCE OF RS.1,00,000/- EACH IN AYS 2009-10 & 2010-11 BEING 0.5% OF THE AVERAGE INVESTMENT. 3. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFO RE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 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. GROUND NO.1 IN ASSESSMENT YEARS 2009-10 & 2010-11 5. GROUND NO.1 IN AYS 2009-10 & 2010-11 IS DISMISSE D HAVING NOT BEEN PRESSED DURING THE COURSE OF ARGUME NTS. GROUNDS NO.2, 3, 4 & 5 IN ASSESSMENT YEARS 2009-10 & 2010-11 6. LD. AR FOR THE ASSESSEE CONTENDED THAT SINCE NO DIVIDEND HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR UNDER A SSESSMENT, NO DISALLOWANCE CAN BE MADE. 7. LD. DR FOR THE REVENUE, ON THE OTHER HAND, RELIE D UPON THE ORDER OF THE LD. CIT (A). 8. UNDISPUTEDLY, NO DIVIDEND HAS BEEN EARNED BY THE ASSESSEE DURING THE YEARS UNDER ASSESSMENT I.E. AYS 2009-10 & 2010-11. LD. CIT(A) MADE DISALLOWANCE OF RS.1,00,000/- EACH IN BOTH THE ITA NO.250 & 251/DEL./2016 5 ASSESSMENT YEARS MERELY ON THE BASIS OF PRESUMPTION AND ASSUMPTIONS THAT, SINCE THE ASSESSEES MAIN ACTIVI TY IS INVESTMENT, THEREFORE, IT CANNOT BE DENIED THAT THE FUNDS HAS B EEN UTILIZED FOR INVESTMENT ACTIVITIES. WHEN UNDISPUTEDLY NO DIVID END INCOME HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR UNDER A SSESSMENT, NO DISALLOWANCE CAN BE MADE. 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.1 LAKH EACH IN AYS 2009-10 & 2010-11 IS ORDERED TO BE DELETED. CONSEQUENTLY, GROUNDS NO.2, 3 & 4 ARE DETERMINED IN FAVOUR OF THE ASSESSEE. 10. RESULTANTLY, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF NOVEMBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF NOVEMBER , 2019/TS ITA NO.250 & 251/DEL./2016 6 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.