M/S SUPERTECH FORGINGS (INDIA) .P LTD, JALANDHAR V. DY. COMMISSIONER OF INCOME TAX CIRCLE -IV, JALANDHAR

ITA 49/ASR/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5751 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 23-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Rectification of order; Opportunity of being heard; Earning of tax free income; Tax effect; Rule 8D
• Section: 147; 263; 132; 154; 2; 143(3); 14A; 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. MAHAVIR PRASAD, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER I.T.A. No. 49/Asr/2019 Assessment Year: 2011-12 M/s. Supertech Forging (India) Pvt. Ltd., Vill. Raowali, Pathankot Road, Jalandhar [PAN: AACCS 0402M] (Appellant) Vs. Deputy Commissioner of Income Tax, Circle IV, Jalandhar (Respondent) Appellant by Sh. Rohit Kapoor, CA & Virsain Aggarwal Respondent by Sh. S. M. Surendranath, D.R. Date of Hearing 07.12.2021 Date of Pronouncement 23.12.2021 ORDER Per Dr. M. L. Meena, AM: This appeal of the assessee is directed against the order of Ld. CIT(A)-2, Jalandhar dated 04.07.2018 in respect of A.Y. 2011-12. 2. The appellant assessee has filed an application, requesting for condonation of delay of 110 days which was supported with an affidavit ITA No. 49/Asr/2019 2 duly attested by public notary, Jalandhar. The Ld. AR contended that an FIR was lodged against the assessee on 17.07.2018 and consequently, he was regularly called by police officials for the investigation leading to undue pressure, stress and depression and went into isolated life. It is further stated that the assessee had no knowledge of the CIT(A) orders passed by the CIT(A). Once it was put to his knowledge of the office staff, it was delayed by 110 days to file the appeal before the ITAT. The Ld. Counsel has contended that the delay in filing the appeal was thus under the exceptional circumstances and may please be condoned in view of this judgment laid down by the Hon’ble Supreme Court published vide citation no. [1956] 29 ITR 607 (SC) where Hon’ble Apex Court observed as under: “3. Therefore, in view of the above said reason, the appeal could not be filed within the stipulated time limit and as such filed the appeal on 24.01.2019. It is, therefore, requested that the delay in filing the appeal on account of exceptional circumstances, may, please, be condoned and oblige in view of the judgment laid down by the Supreme Court in the case of [1956] 29 ITR 607 (SC) in which it was held as under:- 8. It is observed that even in the present case, the applications filed by the assessee before the ld. CIT(Appeals) seeking condonation of the delay in filing the appeals for all the three years under consideration were duly supported by an affidavit filed by the assessee as well as the medical certificates and since the contents of the same were sufficient to shows that the assessee had acted bonafide under the advice from his consultants and there was no negligence nor any deliberate or intentional act on his part to delay in filing of appeals, we are of the view that there was a sufficient cause for the delay on the part of the assessee in filing the appeals before the ld. CIT(Appeals) for all the three years ITA No. 49/Asr/2019 3 under consideration. We, therefore, condone the said delay and remit the matter back to the ld. CIT(Appeals) for disposing of the appeals of the assessee for all the three years under consideration on merit in accordance with law after giving proper and sufficient opportunity of being heard to the assessee.” The Ld. Counsel for the appellant has explained the reasons for delay in filing the appeal by filing the affidavit along with the copy of FIR to explain that there was sufficient cause for delay in filing the appeal. 3. In our opinion, thus, the right of limitation is not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek the remedy for redressal of legal injury so suffered; the law of limitation is thus founded on public policy. The length of delay is not material to condone the delay but the cause of delay is much more relevant to consider the condonation application. In the case of “Nand Kishore vs State of Punjab”, [6 SCC 614] the apex court had condoned the delay of 31 years since there existed a sufficient cause. 4. In the above view, there was sufficient-cause for the inordinate delay 110 days in filing the instant appeal which was not with any mala fide intentions. No objection was taken by the Ld. DR to condone the delay. Thus, considering the unanimous hardship and reasonable cause for the delay in filing of this appeal, we accept the request of the assessee as genuine and as such, the delay of 110 days is hereby condoned. ITA No. 49/Asr/2019 4 5. The crux of the matter is that the appellant has challenged the order of the Ld. CIT(A) on the issue of upholding the order of the Assessing Officer u/s 154 wherein addition of Rs.608940/- was made by way of disallowances under the provisions of section 14A read with rule 8D which was well beyond the limited scope of section 154 as there being no apparent mistake from the record, the rectification order passed by the AO are to have been annulled. 6. The CIT(A) has held vide para 4.5 of the impugned order that the disallowance made by AO is also in conformity with the judgment of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. is as under: “4.5 I find that disallowance made by the AO is also in conformity with the judgment of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. and of jurisdictional bench of Hon’ble ITAT Amritsar Bench in the case of Lally Motors India (P.) Ltd. dated 12.04.2018 in ITA No. 218/ASR/2017 on this issue. Hon’ble ITAT has categorically held that requirement of earning of tax-free income is not a pre-requisite for invoking the provisions of section 14A of the IT Act.” 7. Ld. Counsel submitted that the AO has ignored the fact that the total interest free funds available with the assessee company were to the tune of Rs. 6.6 crores (share capital 18280900 + reserve and surplus of Rs.4339126/-) as against the total investment of Rs.1.55 crores. Thus, the ITA No. 49/Asr/2019 5 appellant company had surplus funds to make the investment and as such question of making any disallowances u/s 14A doesn’t arise. In support, he placed reliance on the latest judgment of the Hon’ble Apex Court in the case of South Indian Bank Ltd. v. CIT Civil Appeal No. 9606 of 2001 dated September 9, 2021. He submitted that the question whether section 14A enables the Revenue to make disallowances on expenditure incurred for earning tax free income in cases where assessees do not maintain separate accounts for the investments and other expenditures incurred for earning the tax free income; Hon’ble Supreme Court observes that “in respect of payment made out of mixed fund, it is the assessee who has such right to appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure.” 8. He further relied on the Hon’ble Apex Court decision in the case of JRD Stock Brokers (P.) Ltd. v. CIT II, New Delhi [2015] 56 taxmann.com 15 (SC), wherein the Hon’ble Apex Court while adjudicating upon assessee’s application regarding computation of brokerage of assessee by applying rate of 0.6 per cent on total turnover, it was held that application u/s 154 sought re-computation of the turnover would not be confined to arithmetical ITA No. 49/Asr/2019 6 or adding figures, rather explanation and answers would be required, therefore, the re-computation could not be undertaken u/s 154. 9. The Ld. Counsel has filed a written synopsis to explain that the assessee has its own surplus funds to make subject investment to earn the exempt income which reads as under: 1.1 The assessee is in the business of manufacturing of ACSR Conductors (aluminum conductor steel reinforce), DPC Wire Strips (double paper covered wire), steel wire ropes, PVC Cables and besides this the appellant was also doing trading of M.S Pipes, aluminum wire and allied products. The appellant's case was framed u/s 143(3) vide order dated 04.06.2013 [Refer page 17-26] and the income was determined at Rs. 6535856. However, the assessed income was reduced to Rs. 6185856/- after giving appeal effect to order of Ld. CIT (A)-2, Jalandhar Appeal No 197/13-14/CIT(A). 1.2 The assessee company was issued notice u/s 154 dated 29.03.2017 seeking to rectify alleged mistake apparent from record and giving an opportunity to comply with the notice by 12.04.2017. It was clarified that the mistake sought to rectify was in relation to disallowance u/s 14A read with Rule 8D. 1.3 Thereafter, the order u/s 154 was passed for the AY 2011-12 dated 20.04.2017 Refer Page 14-16], making an addition of Rs. 608940/-; on account of disallowance u/s 14A and assessing the income at Rs. 6794796/- as against the returned income of Rs. 6185856/-. 1.4 The appellant had filed an appeal against the said order on 27.04.2017 on the ground that the investment in shares was not covered by provisions of section 14A and had filed detailed submissions to support the contention. However the submissions of the appellant company were not accepted and as such, the CIT(A) confirmed the disallowance of Rs. 608940/- made by the AO u/s 14A. 1.5 However, aggrieved by the order of the CIT(A), the appellant company is in appeal before your goodself vide form 36 filed on 18.11.2019 [Refer page 1-3]. 1.6 The Ld. DCIT has made detailed computation on page 2 of order u/s 154 dated 20.04.2017 which is being reproduced as under: - ITA No. 49/Asr/2019 7 Particulars Working Amount Assessed income after appeal effect to order u/s 250(6) dated 17.05.2016 6185856 Average of Investments (15583000+5000000)/2=10291500 Average of total assets Interest Payment 13304316 Disallowance 531031 Add: 0.5% of investment 77915 Total disallowance 608940 Total 6794796 2. Arguments in Brief Application of Section 154 to disallow interest u/s 14A i). lt is apparent that the Ld. AO has done detailed re-computation. Also, Rule 8D itself requires detailed calculation and application of mind, which is evident from the text re-produced below. However, by no stretch of imagination, can the re- computation be termed as a mistake apparent of record as the disallowance u/s 14A read with rule 8D requires thorough evaluation of the financial records of the appellant company and re-computation of the investment, total assets, etc of the appellant company. The section 14A requires Assessing Officer to record satisfaction that interest bearing funds have been used to earn tax free income based upon credible and relevant evidence. As such, since there was no tangible i material that could have enabled Assessing Officer to record satisfaction in terms of section 14A, disallowance made was unjustified. The in-built language of section 14 itself highlights the word 'satisfaction' and the said requirement of recording satisfaction requires deliberation on the facts and circumstances of the case and as such, it cannot be termed as 'Mistake apparent from record'. In this regard, relevant text of section 14A is re-produced as under: - ITA No. 49/Asr/2019 8 Section - 14A, Income-tax Act, 1961 - FA, 2021 [Expenditure incurred in relation to income not includible in total income 14A. [(1)] For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred86 by the assessee in relation to86 income which does not form part of the total income86 under this Act.] [(2) The Assessing Officer shall 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 assessee, 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 to 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:] 88[Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.] Rule - 8D, Income-tax Rules, 1962 50[Method for determining amount of expenditure in relation to income not includible in total income. 8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with— i. the correctness of the claim of expenditure made by the assessee; or ii. the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). ITA No. 49/Asr/2019 9 "(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely: - (i) the amount of expenditure directly relating to income which does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely :-- AxB/C Where, A=amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year B=the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ; C= the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year." ii) The said determination would not be confined to arithmetical or adding figures, rather explanation and answers would be required, therefore, re-computation could not be undertaken under section 154. In view of this, the stand of the department to resort to section 154 defies the whole purpose of the section. In this regard, reliance is being placed upon the following case laws: - Sr. No Citation Brief ITA No. 49/Asr/2019 10 1 [2015] 56 taxmann.com 15 (SC) JRD Stockbrokers (P.) Ltd. v. Commissioner of Income-tax II, New Delhi Section 29, read with sections 132 and 154, of the Income-tax Act, 1961 - Business income - Computation of (Rectification of mistake) - debatable questions Tribunal computed brokerage of assessee by applying rate of 0.6 per cent on total turnover and same attained finality - Assessee through application under section 154 sought re- computation of said turnover - High Court by impugned order held that said determination would not be confined to arithmetical or adding figures, rather explanation and answers would be required, therefore, re-computation could not be undertaken under section 154 - Whether special Leave Petition filed against impugned order 2 [1971] 82 ITR 50 (SC) SUPREME COURT OF INDIA T.S. Balaram, Income- tax Officer V. Volkart Brothers Section 154, read with section 113 [Corresponding to section 17(1) of the Indian Income-tax Act, 1922], of the Income-tax Act, 1961 - Rectification of mistake - Apparent from record - Assessment years 1958-59, 1960-61 to 1962-63 - Assessments of assessee-firm were made on slab rates prescribed under respective Finance Acts, applicable to registered firms - Its partners were assessed in status of non-resident at maximum rates in respect of their respective share income - Subsequently, despite assessee-firm's objections, ITO purporting to correct mistakes under section 154 of 1961 Act, assessed assessee-firm at maximum rates of income-tax by applying provisions of section 17(1) of 1922 Act - Whether unless a firm can be considered as a 'person' section 17(1) of 1922 Act could not govern assessment of assessee-firm - Held, yes - Whether question of applicability of section 17(1) of 1922 Act to case of assessee-firm was not therefore, ITO was not justified in thinking that on that question there could be no two opinions - Held, yes - Whether, therefore, ITO was wholly wrong in holding that there was a mistake apparent from record of assessments of assessee-firm - Held, yes 3 [1997] 94 Taxman 271 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax V. Section 154, read with section 35B, of the Income-tax Act, 1961 - Rectification of mistakes - Apparent from record - Weighted deduction in respect of Commission', 'ECGC Charges' and 'Foreign Dealers Visiting Expenses', was not originally allowed but it was allowed by Assessing Officer on application under section 154 - Whether rectification is possible where question involved is debatable - Held, no - Whether point which is not examined on fact or in law can be dealt with as mistake apparent on record - Held, no - Whether, therefore. allowance of weighted deduction in instant case by wav of rectification was unjustified - Held, yes 4 HIGH COURT OF CALCUTTA Oil India Ltd. V. Commissioner of Section 254, read with sections 154 and 40(a)(v), of the Income-tax Act, 1961 - Appellate Tribunal - Orders of - Assessment year 1969-70 - ITO allowed deduction of Rs. 1,40,411 being l/12th of expenditure on repairs, maintenance, etc., of bungalows and depreciation on bungalows, furniture, etc., owned by assessee- company and used by its employees - Later, ITO was of opinion that said deduction represented a mistake apparent on permissible under section 40(a)(v) - He deleted said deduction under section 154, which was confirmed by AAC - Tribunal remanded case to AAC for fresh disposal ITA No. 49/Asr/2019 11 Income-tax after examining whether details filed by assessee were correct and whether expenses disallowed were justified - Whether Tribunal's order, in remanding case to AAC for fresh disposal without first deciding whether there was a mistake apparent from records, was not in accordance with law - Held, yes iii) It is further pertinent to mention here that the appellant had not earned any exempt income during the year under consideration. In this regard, your goodself kind attention is drawn towards the audited Profit and loss account from which it is evident that the appellant company had not earned any tax-free income during the year. As such, in view of the above fact; that the d. AO failed to establish direct link between the exempt income and the investment made, the disallowance is bad in law. In this regard, reliance is being placed upon the following case laws: - Sr. No Citation Brief 1 July 7, 2020[2020] 115 taxmann.com 247 (SC) INCOME TAX: Where High Court upheld Tribunal's order allowing partial relief to assessee under section 14A by taking a view that no investment was made by assessee in shares and securities out of interest bearing funds. SLP filed said order was to be dismissed due to low tax effect Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income (Interest bearing funds, availability of) - Assessment year 2008-09 - In appellate proceedings. Tribunal taking a view that no investment was made by assessee in shares and securities (Mutual funds) out of interest bearing funds. granted partial relief to assessee on issue of disallowance of expenditure made under section 14A, read with rule 8D - High Court upheld order passed by Tribunal - Revenue filed SLP against order of High Court but later on sought to withdraw it due to low tax effect - Whether, on facts, SLP filed by revenue was to be dismissed as withdrawn - Held, yes [Para 31[ln favour of assessee] 2 January 2, 2020[2019] 112 taxmann.com 322 (SC)AY 2009-10 Principal Commissioner INCOME TAX: SLP dismissed against High Court ruling that disallowance under section 14A cannot exceed exempt income of relevant year Section 14A of the Income-tax Act, 1961 read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to income not included in total income (Rule 8D) - Assessment year 2009-10 - High Court by impugned order held that upper disallowance cannot exceed exempt income of relevant year and; therefore, where for year in question, finding of fact was that assessee had not earned any tax free income, corresponding expenditure could not be worked out for disallowance - Whether Special leave petition filed against impugned order ITA No. 49/Asr/2019 12 of Income-tax- 2 v.Caraf Builders & Constructions (P.) Ltd was to be dismissed - Held, yes [Paras 25 and 261 in favour of assessee] 3 July 1, 2019[2019] 106 taxmann.com 181 (SC) AY 2013- 14Principal Commissioner of Income-tax V. GVK Project and Technical Services Ltd INCOME TAX: Where High Court upheld Tribunal's order holding that in absence of any exempt income reported by assessee, disallowance could not be made under section 14A, SLP filed against said order was to be dismissed Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to income not includible in total income (Applicability of) - Assessment year 2013-14 - In course of assessment, Assessing Officer proceeded to calculate disallowance under section 14A on basis of investments made by assessee - Tribunal opined that in absence of any exempt income reported by assessee, disallowance could not be made under section 14A - Tribunal thus deleted disallowance made by Assessing Officer - High Court upheld Tribunal's order - Whether, on facts, SLP filed against order of High Court was to be dismissed - Held, yes [Para 1][in favour of assessee] 4 March 28, 2019(2019] 103 taxmann.com 326 (SC) Principal Commissioner of Income-tax IT: Where High Court upheld Tribunal's order that in absence of any exempt income, disallowance under section 14-A of any amount was not permissible, SLP filed against said decision was to be dismissed Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to income not includible in total income (Applicability of) - In course of appellate proceedings. Tribunal under section 14-A of any amount was not permissible - High Court upheld order passed by Tribunal - Whether, on facts, SLP filed against decision of High Court was to be dismissed - Held, yes [Para 3] [in favour of assessee] 5 August 4, 2018(2018] 95 taxmann.com 250 (SC) Commissioner of Income Tax, (Central) 1 v. Chettinad Logistics (P.) Ltd. IT: SLP dismissed against High Court ruling that section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year Section 14A, of the Income-tax Act, 1961, read with rule 8D of the Income-Tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income (General principle) - Assessment year 2011-12 - High Court bv impugned order held that section 14A can only be triggered, if, assessee seeks to square off expenditure against income which does not form part of total income under Act: rule 8D only provides for a method to determine amount of expenditure incurred in relation to income, which does not form part of total income of assessee and it cannot go beyond what is provided in section 14A - It further held that where no exempt income i.e., dividend, was earned in relevant assessment year by assessee. section 14A could not be invoked - Whether SLP against said impugned order was to be dismissed - Held, yes (Para 11 in favour of assessee] 10. Per contra, the addl. CIT(DR) stands by the impugned order. ITA No. 49/Asr/2019 13 11. Having Heard both the sides, perusing the material facts and submissions filed, it is not disputed that the AO invoked section 154 of the Act for the addition u/s 14A rwr 8D. It is pertinent to mention that for the purpose of invoking section 14A, the AO is required to record satisfaction with interest bearing funds have been used to earn tax free income based upon credible and relevant evidence. We find that there was no tangible material that could have enabled the AO to record satisfaction in terms of section 14A. Therefore, such disallowance made by the AO without deliberation on the facts and circumstances of the case for the purpose of recording satisfaction required u/s 14A of the Act was unwarranted and unjustified. 12. It is noted that in-built language of section 14 itself highlights the word ‘satisfaction’ and the said requirement of recording satisfaction requires deliberation on the facts and circumstances of the case and as such, it cannot be termed as ‘mistake apparent from record’ in terms of provision of section 14A of the Act. The computation of the disputed disallowance u/s 14A would not be confined to arithmetical or adding figures, rather explanation and answers of the assessee would be required to the satisfaction of the AO, and therefore, re-computation could not be undertaken under section 154. In our view, the stand of the department to ITA No. 49/Asr/2019 14 resort to section 154 defies the whole purpose of the section being meant for rectification apparent mistakes from the record in the ITR, and Assessment Order. 13. It is evident from the audited Profit and loss account of the appellant company that it had not earned any tax-free income during the year under consideration. Thus, the AO has failed to establish direct link between the exempt income and the investment made. The law is settled on the issue of 14A that no disallowance of expenditure where no exempt income claimed by the assessee. 14. In the case of “GVK Project and Technical Services Ltd (Supra)”, the Hon’ble Apex Court has dismissed Department SLP filed against Hon’ble High Court ruling that disallowance under section 14A cannot exceed exempt income of relevant year Section 14A of the Income-tax Act, 1961 read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to income not included in total income (Rule 8D) - Assessment year 2009-10 - High Court by impugned order held that upper disallowance cannot exceed exempt income of relevant year. In the present case, for the year in question, finding of fact was that assessee had not earned any tax- free income, and corresponding expenditure could not be worked out for disallowance. As such, disallowance made by the AO and confirmed by the ITA No. 49/Asr/2019 15 ld. CIT(A) by relying on “Maxopp Investment Ltd. (Supra)”, is misplaced and cannot be approved. 15. However, the Ld. DR relied upon Circular No 5/2014 dated 11.02.2014 along with the judgement of Supreme Court of India in the case of Maxopp Investment vs Commissioner of Income Tax, New Delhi [2018] 91 taxmann.com 154 (SC). The AR in response to the same submitted that the circular cannot override the express provisions of section 14A and relied upon the judgement in the case of (Delhi) HIGH COURT OF DELHI Principal Commissioner of Income-tax-04 v. IL & FS Energy Development Company Ltd. [2017] 84 taxmann.com 186. 16. In rebuttal, the AR also submitted that the judgement of Maxopp vs CIT is not applicable in the given case as the issue in the Maxopp Investment ltd was that the dominant purpose for which investment in shares was made is not relevant for applicability of section 14A. In the given case, the shares were held as stock in trade or for the purpose of gaining control interest and the question before the apex court was whether the purpose for which the investment in shares were made will change the scenario of applicability of section 14A. Furthermore, the AR also pointed out that in the case of Maxopp industries, the dividend to the tune of Rs. 4990860/- was earned by the said company and as such, the said case is ITA No. 49/Asr/2019 16 distinguishable and is not applicable in the present case as no exempt income was earned by the appellant during the year under consideration. Moreover, the ld. AR also pointed out that the judgement of Maxopp Investments had duly been dealt in the judgement of Caraf Builders & Constructions (P.) Ltd [2019] 101 taxmann.com 167 (Delhi) and as such, is not applicable in the given case. 17. The AR also submitted that the judgement of Lally Motors as relied by the CIT(A) is not applicable in the present case as the said judgement in relation to section 263 proceedings and the present case is related to section 154 and as such the case relied upon by the Ld. DR has no relevance. 18. In the above view, we accept the grievance of the assessee as genuine and we as such delete the addition made by the AO u/s 14A read with Rule 8D by invoking provisions of section 154 of the Act. 19. In result, the appeal of the assessee stands allowed. Order pronounced U/R 34(4) on 23.12.2021 Sd/- Sd/- (Mahavir Prasad) (Dr. M. L. Meena) Judicial Member Accountant Member Dated: 23/12/2021 *GP/Sr./P.S.* ITA No. 49/Asr/2019 17 Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order