Deputy Commissioner of Income-tax, V. Rajmal Lakhichand Jewellers Pvt. Ltd.,

ITA 833/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7722 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL U PATH AK
• Keywords: Gross profit estimation; Depreciation; Earning of tax free income
• Section: 14A; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 671 /P U N/201 5 / ASSESSMENT YEAR : 20 0 9 - 10 RAJMAL LAKHICHAND JEWELLERS PVT. LTD., 169, BALAJI PETH, JALGAON - 425001 PAN : AAECS0061L ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2, JALGAON / RESPONDENT . / ITA NO . 833/PUN/2015 / ASSESSMENT YEAR : 2009 - 10 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2, JALGAON ....... / APPELLANT / V/S. RAJMAL LAKHICHAND JEWELLERS PVT. LTD., 169, BALAJI PETH, JALGAON - 425001 PAN : AAECS0061L / RESPONDENT ASSESSEE BY : S HRI SUNIL U . PATHAK REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 22 - 06 - 2017 / DATE OF PRONOUNCEMENT : 23 - 0 8 - 2017 2 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 / ORDER PER VIKAS AWASTHY, JM : TH ESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, NASHIK DATED 20 - 03 - 2015 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE ASSESSEE IN APPEAL BY RAISING ELABORATE GROUNDS HAS PRIMARILY ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON TWO COUNTS : 1. DISALL OWANCE OF RS.16,90,477/ - ON ACCOUNT OF WRITE OFF OF OBSOLETE STOCK. 2. DISALLOWANCE OF EXPENDITURE IN RESPECT OF FLAT AT KHAR, MUMBAI VIZ: (I). INTEREST EXPENDITURE RS.43,85,538/ - . (II). DEPRECIATION RS.48,46,127/ - . (III). TELEPHONE/ELECTRIC ITY EXPENSES RS.48,000/ - 3. THE DEPARTMENT IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN RESPECT OF : 1. DELETING THE ADDITION OF RS.1,66,95,244/ - ON ACCOUNT OF LOW GROSS PROFIT AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. 2 . DELETING THE ADDITION OF RS.5,15,368/ - U/S. 14A R.W. RULE 8D O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 3 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 ITA NO. 671/PUN/2015 (ASSESSEES APPEAL) 4. SHRI SUNIL U. PATHAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD WRITTEN OFF STO CK OF S.K. BERRIES ALSO CALLED AS BRINJALS VALUED AT RS.16,90,477/ - . THE ASSESSEE WAS SELLING THE AFORESAID PRO DUCT IN POWDER FORM TO PHARMA COMPANIES. THE AFORESAI D PRO DUCT HAD BECOME OBSOLETE AS THE ASSESSEE COULD NOT FIND BUYERS FOR THE SAME. THE STOCK WAS CARRIED FORWARD IN THE BOOKS YEAR AFTER YEAR. SINCE, THE VALUE OF STOCK HAD BECOME NIL THE ASSESSEE DECIDED TO WRITE OFF THE SAME. 5. SHRI ACHAL SHARMA REP RESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN SUSTAINING THE FINDINGS OF ASSESSING OFFICER IN REJECTING THE CLAIM OF ASSESSEE. THE LD. DR SUBMITTED THAT THE ASSESSEE HA S ADMITTED BEFORE THE AUTHORITIES B ELOW THAT S.K. BERRIES ALSO CALLED BRINJALS IS A PERISHABLE PRODUCT. THE AFORESAID STOCK RELATES TO BUSINESS ACTIVITY WHICH HAS BEEN DISCONTINUED LONG TIME BACK. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW AS TO WHY OBSOLETE STOCK WAS CARR IED FORWARD FROM E ARLIER YEARS. THE LD. DR PRAYED FOR UPHOLDING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND REJECTING THE CLAIM OF ASSESSEE. 6. BOTH SIDES HEARD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS BEEN SHOWING STOCK OF S .K. BERRIES , PURPORTEDLY IN POWDER FORM OVER THE PERIOD OF TIME. SINCE, THE PRODUCT HAD BECOME UNSELLABLE THE ASSESSEE DECIDED TO WRITE OFF THE SAME IN THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE FACT THAT THE STOCK OF S.K. BERRIES HAD B ECOME OBSOLETE HAS NOT BEEN DISPUTED BY THE DEPARTMENT. THE DEPARTMENT HAS NEVER RAISED ANY OBJECTION QUA CARRYING FORWARD OF STOCK IN THE EARLIER YEARS. WE DO NOT FIND MERIT IN THE SUBMISSIONS OF 4 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 REVENUE THAT THE ASSESSEE CANNOT WRITE OFF THE STOCK WHIC H HAS BEEN CARRIED FORWARD OVER THE PERIOD OF TIME EVEN THOUGH IT HAD BECOME OBSOLETE. AS PER ESTABLISHED ACCOUNTING PRINCIPLE , THE STOCK HAS TO BE VALUED AT COST OR NET REALIZABLE VALUE, WHICHEVER IS LESS. EVEN OTHERWISE IT IS A TRADING STOCK AND ANY TRADING LOSS IS AN ALLOWABLE EXPENDITURE. WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF ASSESSEE IN WRITING OFF OF OBSOLETE STOCK WHICH WAS EARLIER CARRIED FORWARD IN THE BOOKS BY THE ASSESSEE. ACCORDINGLY, GROUND NO. 2 RAISED IN TH E APPEAL BY THE ASSESSEE IS ALLOWED. 7. IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING INTEREST, DEPRECIATION AND TELEPHONE/ELECTRIC ITY EXPENSES IN RESPECT OF FLAT AT KHAR, MUMBAI . THE LD. AR SUBMITTED THAT INTEREST EXPENDITURE WAS INCURRED IN RESPECT OF LOAN TAKEN FOR PURCHASING THE FLAT. THOUGH, THE SAID FLAT WAS PURCHASED IN THE NAME OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY, BUT WAS IN FACT USED FOR BUSINESS PURPOSES. THE ASSESSEE HAD CLAIMED DEPRECIATION , INTEREST EXPENDITURE AND TELEPHONE/ELECTRICITY EXPENSES IN RESPECT OF SAID FLAT IN ASSESSMENT YEAR 2007 - 08 AND THE SAME WAS DISALLOWED. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL IN ITA NO. 891/PN/2013. THE TR IBUNAL VIDE ORDER DATED 29 - 02 - 2016 ALLOWED THE CLAIM OF ASSESSEE. THE ASSESSEE HAD MADE SIMILAR CLAIM OF INTEREST, DEPRECIATION AND TELEPHONE/ELECTRIC ITY EXPENSES IN ASSESSMENT YEAR 2008 - 09. THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT PROCEEDINGS FOR TH E SAID ASSESSMENT YEAR ACCEPTED THE CLAIM OF ASSESSEE AND MADE NO DISALLOWANCE. THE LD. AR PLACED ON RECORD A COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008 - 09 AT PAGES 24 TO 28 OF THE PAPER BOOK. 8. THE LD. DR FAIRLY ADMITTED THAT THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 OF THE APPEAL HAS BEEN ADJUDICATED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08. 5 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 9. IT IS AN UNDISPUTED FACT THAT INTEREST RS.43,85,538/ - , DEPRECIATION RS.48,46,127/ - AND TELEPHONE/ELECTRIC ITY EX PENSES RS.48,000/ - ARE IN RESPECT OF FLAT AT KHAR, MUMBAI WHICH HAS BEEN USED BY THE ASSESSEE FOR BUSINESS PURPOSES. THE TRIBUNAL IN ITA NO. 891/PN/2013 (SUPRA) HAD DEALT WITH THIS ISSUE AND HAS HELD AS UNDER : 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CASE DISALLOWED INTEREST OF RS.38,87,288 AND TELEPHONE/ELECTRICITY CHARGES OF RS.48,154/ - IN RESPECT OF THE PROPERTY AT KHAR, MUMBAI ON THE GROUND THAT THE INTEREST AND OTHER EXPENSES CLAIMED HAS NO RELATION WITH THE BUSINESS OF THE ASSESSEE COMPANY. WE FIND IN APPEAL THE LD.CIT(A) NOT ONLY UPHELD THE ACTION OF THE AO BUT HE FURTHER ENHANCED THE DISALLOWANCE BY RS.31,71,672/ - BEING THE INTEREST ON LOAN AMOUNT OF RS.2,64,30,607/ - DIVERTED FOR NON BUSINESS PURPOSES. THE REASONING FOR SUCH ENHANCEMENT HAS ALREADY BEEN REPRODUCED IN THE FINDINGS GIVEN BY THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE FLATS HAVE ALREADY ENTERED INTO THE BLOCK OF ASSET AND DEPRECIATION CLAIMED IN THE ORIGINAL RETURN HAS BEEN ALLOWED AND THE SAME HAS NOT BEEN WITHDRAWN, THEREFORE, IT I S TO BE HELD THAT THE FLAT AT KHAR IS A BUSINESS ASSET AND UTILIZED FOR THE PURPOSE OF BUSINESS. IT IS ALSO HIS SUBMISSION THAT IN VIEW OF VARIOUS DECISIONS THE FLATS NEED NOT TO BE REGISTERED IN THE NAME OF THE ASSESSEE COMPANY. 12. WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE FLATS PURCHASED AT KHAR HAS BEEN SHOWN IN THE ASSET SIDE OF THE BALANCE SHEET AND THE LOAN OBTAINED FROM BANK IN THE NAME OF THE DIRECTORS HAS BEEN SHOWN AS LIABILITY IN THE LIABILITY SIDE OF THE BALANCE SHEET. THE BOARD OF DIRECTORS VIDE RESOLUTION DATED 10 - 02 - 2006 HAVE APPROVED FOR THE PURCHASE OF THE FLATS IN THE NAME OF THE 2 DIRECTORS. DEPRECIATION IN THE COMPUTATION STATEMENT IS AS PER FORM NO.3CD ENCLOSED ALON G WITH RETURN OF INCOME. IN THE SCHEDULE OF DEPRECIATION ENCLOSED ALONG WITH FORM 3CD WE FIND DEPRECIATION HAS BEEN CLAIMED AT RS.2,18,73,103/ - WHICH INCLUDES THE DEPRECIATION OF RS.62,39,688/ - ON BUILDING/FLATS AMOUNTING TO RS.5,98,28,719/ - (PAGE 35 OF T HE PAPER BOOK). THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSEES CLAIM FOR DEPRECIATION HAS BEEN ACCEPTED FOR THE A.Y. 2007 - 08 IS ALSO NOT DISPUTED BY THE CIT(A). WE FIND BEFORE CIT(A) THE ASSESSEE HAS INTER ALIA MADE FOLLOWING SUBMIS SIONS : 6 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 IT WAS ONLY FOR THE SAKE OF CONVENIENCE THAT THE SAID FLATS WERE REGISTERED IN THE NAME OF THE DIRECTORS. THE FACTS OF THE CASE CLEARLY SHOW THAT THE COMPANY IS THE REAL OWNER OF BOTH THE FLATS NOTWITHSTANDING THEIR REGISTRATION IN THE NAMES OF D IRECTORS. IT IS THE DEFACTO AND BENEFICIAL OWNERSHIP WHICH IS MATERIAL AND RELEVANT. IN THE CONTEXT OF DEPRECIATION THE COURTS HAVE ACCEPTED THE ASSESSEES CLAIM FOR THE SAME EVEN WHEN PROPERTY/VEHICLES ARE NOT REGISTERED IN THE NAME OF COMPANY/FIRM BUT IN THE NAMES OF DIRECTORS/PARTNERS. ADDL.CIT VS. MANJEET ENGG. IND. 154 ITR 509 DELHI CIT VS. FAZILKA DABWALI 270 ITR 398; P&H RATIO OF THE SAID DECISIONS WOULD ALSO APPLY TO THE FACTS OF OUR CASE ALSO. IT IS ALSO IMPORTANT TO NOTE THAT THE APPELLANTS CL AIM FOR DEPRECIATION HAS BEEN ACCEPTED ALSO FOR THE A.Y. 2007 - 08. WE ARE ENCLOSING HEREWITH A COPY OF OUR SALES TAX REGISTRATION CERTIFICATE WHEREIN THE PARTICULARS OF OFFICES AND ITS ADDRESSES ARE MENTIONED. 13. FROM THE ABOVE IT IS CLEARLY SEEN THAT THE ASSESSEES CLAIM OF DEPRECIATION WHICH HAS BEEN ACCEPTED BY THE AO IN THE ORIGINAL ASSESSMENT HAS NOT BEEN WITHDRAWN. THIS OTHERWISE IMPLIES THAT THE AO HAS ACCEPTED THE FLAT AS BUSINESS ASSET USED FOR THE PURPOSE OF BUSINESS. WE FIND THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. FAZILKA DABWALI TPT COMPANY PVT. LTD. FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. PODDAR CEMENT PVT. LTD. AND OTHERS REPORTED IN 226 ITR 625 HAS ALLOWED THE CLAIM OF DEPRECIATION ON BU SES PURCHASED IN THE NAME OF ITS DIRECTORS. ALTHOUGH THE BUSES WERE NOT REGISTERED IN THE NAME OF THE COMPANY IT WAS HELD THAT REGISTRATION OF THE SAME IN THE NAME OF THE COMPANY IS NOT RELEVANT AND THE COMPANY IS ENTITLED TO DEPRECIATION IN RESPECT OF TH E BUSES. 14. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. PODDAR CEMENT PVT. LTD. (SUPRA) HAS HELD THAT UNDER THE COMMON LAW, OWNER MEANS A PERSON WHO HAS GOT VALID TITLE LEGALLY CONVEYED TO HIM AFTER COMPLYING WITH THE REQUIREMENTS OF LAW SUCH AS TH E TRANSFER OF PROPERTY ACT, REGISTRATION ACT, ETC. BUT, IN THE CONTEXT OF SECTION 22 OF THE INCOME TAX ACT, 1961 HAVING REGARD TO THE GROUND REALITIES AND FURTHER HAVING REGARD TO THE OBJECT OF THE INCOME TAX ACT, NAMELY, ' TO TAX THE INCOME', ' OWNER ' IS A PERSON WHO IS ENTITLED TO RECEIVE INCOME FROM THE PROPERTY IN HIS OWN RIGHT. THE HONBLE DELHI HIGH COURT IN THE CASE OF ADDL.CIT VS. MANJEET ENGINEERING INDUSTRIES (SUPRA) HAS HELD THAT WHEN A PARTNER BRINGS HIS PROPERTY TO THE PARTNERSHIP FIRM AND TH E FIRM TREATS HIS PROPERTY AS BELONGING TO THE FIRM ONLY, IT HAS THE EFFECT OF TRANSFERRING THE PROPERTY TO THE FIRM. DOCUMENT IN WRITING AND 7 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 REGISTRATION IS NOT NECESSARY. FOLLOWING THE ABOVE PRINCIPLES AND CONSIDERING THE FACT THAT THE COMPANY HAS ALRE ADY SHOWN THE ASSET IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AND THE LOAN OBTAINED BY THE DIRECTORS FOR PURCHASE OF THE FLATS HAS BEEN SHOWN AS LIABILITY IN THE LIABILITY SIDE OF THE BALANCE SHEET AND THE DEPRECIATION CLAIMED BY THE ASSESSEE ON SUCH FL AT HAS NOT BEEN REJECTED IN THE ASSESSMENT COMPLETED U/S.143(3), THEREFORE, DISALLOWANCE OF INTEREST AND THE TELEPHONE/ELECTRICITY EXPENSES ON ACCOUNT OF FLAT AT KHAR, MUMBAI IN OUR OPINION IS NOT JUSTIFIED. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE AND TELEPHONE AND ELECTRICITY EXPENDITURE RELATING TO THE FLATS AT MUMBAI. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. THERE HAS BEEN NO CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE ASSESSMENT YEAR UNDER APPEAL. THUS, IN VIEW OF THE FINDINGS OF CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE FIND MERIT IN THE GROUND NO. 3 RAISED BY THE ASSESS EE. ACCORDINGLY, THE SAME IS ALLOWED IN SAME TERMS. 1 0 . THE OTHER GROUNDS I.E. GROUND NOS. 1, 4 AND 5 RAISED IN APPEAL BY THE ASSESSEE ARE GENERAL IN NATURE, HENCE, REQUIRE NO ADJUDICATION. 1 1 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 833/PUN/2015 (REVENUES APPEAL) 1 2 . THE FIRST GROUND OF APPEAL BY THE REVENUE IS WITH RESPECT TO DELETING OF GROSS PROFIT ADDITION. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A JEWELER AND IS REGULARLY MAINTAINING BOOKS OF ACCOUNT. ALL THE SALES AND PURCHASES ARE DULY ACCOUNTED. DAY TO DAY QUANTITY ACCOUNT IS MAINTAINED. THE GROSS PROFIT SHOWN BY THE ASSESSEE IN THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL IS 4.28% . WHEREAS, IN ASSESSMENT YEAR 2008 - 09 IT WAS MERELY 1.69% . NO A DDITION WAS MADE BY THE ASSESSING OFFICER IN PAST ON ACCOUNT OF LOW GROSS PROFIT. THE ASSESSING OFFICER 8 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 ESTIMATED GROSS PROFIT @ 4.55% WITHOUT POINTING ANY MATERIAL DEFECT IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION AFTER CONSIDERING THE FACTS OF THE CASE AND DETAIL ED DOCUMENTS ON RECORD. THE LD. AR PRAYED FOR UPHOLDING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSING THE GROUND RAISED BY THE DEPARTMENT IN APPEAL. 1 3 . ON THE OTHER HAND LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN THE LIST OF DEFECTS IN BOOKS OF ASSESSEE IN PARA 15 OF THE ASSESSMENT ORDER. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN STOCK STATEMENT AND NO RECONCILIATION STATEMENT WAS MADE AS ON 31 - 03 - 2009, NO JUSTIFICATION WAS GIVEN FOR ADDING MANUFACTURING EXPENSES. THERE IS NO CONCLUSIVE EVIDENCE OF MOVEMENT OF GOODS FROM KARIGARS, THERE IS NO RECORD OF LABOUR CHARGES PAID TO THE KARIGARS, NO RECORD WAS MAINTAINED FOR PURCHASE OF COPP ER/ALLOY AND THE ASSESSEE HAD NOT MAINTAINED RECORD OF ITEM WISE, PURITY WISE DETAILS OF ORNAMENTS MANUFACTURED AND SOLD DURING THE YEAR. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED GROSS PROFIT @ 4.55% AS AGAINST 4.2 8% DECLARED BY THE ASSESSEE. AS A RESULT OF INCREASE IN GROSS PROFIT , THE ASSESSING OFFICER MADE ADDITION OF RS.1,16,83,475/ - . 14. THE LD. AR OF THE ASSESSEE HAS POINTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2008 - 09 THE GROSS PROFIT OF ASSESSEE WAS 1.69% NO ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE GROUND OF LOW GROSS PROFIT. THIS FACT HAS NOT BEEN DISPUTE BY LD. DR. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSESSEE HAD MADE DETAILED SUBMISSIONS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) REBUTTING THE DEFECTS POINTED BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APPEALS) SOUGHT REMAND REPORT FROM ASSESSING OFFICER ON THE 9 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 SUBMISSIONS MADE BY ASSESSEE ASSAILING ADDITION ON ACCOUNT OF LOW GRO SS PROFIT. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS EXAMINED THE SAME EXTENSIVELY AND HAS THEREAFTER RETAINED THE GROSS PROFIT OF 4.28% AS DECLARED BY THE ASSESSEE. WE CONCUR WITH THE WELL REASONED FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE . FOR THE SAKE OF BREVITY AND IN LINE WITH THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. K.Y. PILLIAH AND SONS REPORTED AS 63 ITR 411. SUBSEQUENTLY, FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GLOBAL VANTEDGE PVT. LTD. REPORTED AS 354 ITR 21 WE ARE NOT REPRODUCING THE REASONS GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN ACCEPT ING THE REASONS OF THE ASSESSEE. THE LD. DR HAS NOT BEEN ABLE TO SHOW ANY MATERIAL INFIRMITY IN THE IMPUGNED ORDER ON THIS ISSUE. ACCORDINGLY, GROUND NO. 1 RAISED BY THE REVENUE IN APPEAL IS DISMISSED BEING DEVOID OF ANY MERIT. 1 5 . IN GROUND NO. 2 RAISED IN THE APPEAL, THE REVENUE HAS ASSAILED DELETING OF DISALLOWANCE OF RS .5,15,368/ - MADE U/S. 14A R.W. RULE 8D OF THE ACT. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS INVESTED SUM OF RS.1,36,40,800/ - IN THE SHARE S OF GROUP COMPANIES. THESE INVESTMENTS HAVE BEEN MADE IN EARLIER YEARS. NO FRESH INVESTMENT HAS BEEN MADE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME FROM ANY OF THE GROUP COMPANIES. SINCE, THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME NO DISALLOWANCE U/S. 14A IS WARRANTED. IN SUPPORT OF HIS SUBMISSI ONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I . COMMISSIONER OF INCOME TAX VS. CORRTECH ENERGY PVT. LTD., 372 ITR 97 (GUJ.); II . CHEMINVEST LIMITED VS. COMMISSIONER OF INCOME TAX, 378 ITR 33 (DELHI); 10 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 III . AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX IN ITA NO. 984/PN/2016 FOR ASSESSMENT YEAR 2008 - 09 DECIDED ON 14 - 10 - 2016; IV . SHRI GOYAL ISHWARCHAND KISHORILAL VS. JCIT IN ITA NO. 422/PN/2013 FOR ASSESSMENT YEAR 2009 - 10 DECIDED ON 26 - 06 - 2014. 1 6 . ON THE OTHER HAND LD. DR SUBMITTED THAT IRRESPECT OF THE FACT THAT THE ASSESSEE HAS EARNED ANY EXEMPT INCOME ON THE INVESTMENT, DISALLOWANCE HAS TO BE MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A R.W. RULE 8D OF THE ACT. THE LD. DR PRAYED FOR REVERSING THE FINDINGS OF CO MMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND RESTORING THE ADDITION MADE BY ASSESSING OFFICER. 1 7 . IT IS AN UNDISPUTED FACT THAT THE INVESTMENT WAS MADE BY THE ASSESSEE IN GROUP COMPANIES IN THE PAST YEARS AND NO FRESH INVESTMENT WAS MADE DURING YEAR UNDER CONSIDERATION. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED VS. COMMISSIONER OF INCOME TAX (SUPRA) HAS HELD TH AT WHERE NO DIVIDEND INCOME WAS EARNED BY THE ASSESSEE FROM THE AMOUNT INVESTED IN THE SHARES , NO DISALLOWANCE U/S. 14A IS TO BE MADE. RECENTLY, SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. VIREET INVESTMENT (P) LT D. REPORTED AS 165 ITD 27 HAS REITERATED THE LAW LAID DOWN IN THE CASE OF CHEMINVEST LIMITED VS. COMMISSIONER OF INCOME TAX (SUPRA). THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION MADE U/S. 14A R.W. RULE 8D BY FOLLOWING VARIOUS DECISION S. THERE ARE CATENA OF DECISIONS WHEREIN IT HAS BEEN HELD THAT NO DISALLOWANCE U/S. 14A R.W. RULE 8D IS WARRANTED WHERE NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE DURING THE RELEVANT PERIOD. WE FIND NO REASON TO TAKE A 11 ITA NO S. 671 & 833/PUN/2015, A.Y. 2009 - 10 DIVERGENT VIEW. WE FIND NO I NFIRMITY IN THE VIEW TAKEN BY COMMISSIONER OF INCOME TAX (APPEALS) TO DELETE THE ADDITION. ACCORDINGLY, GROUND NO. 2 RAISED IN THE APPEAL BY REVENUE IS DISMISSED. 1 8 . THE GROUND NOS. 3, 4 AND 5 RAISED IN THE APPEAL BY THE REVENUE ARE GENERAL IN NATURE, HENCE, REQUIRE NO ADJUDICATION. THE APPEAL OF THE REVENUE IS DISMISSED , ACCORDINGLY . 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL BY REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 23 RD DAY OF AUGUST, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 23 RD AUGUST, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, NASHIK 4. THE PR. COMMISSIONER OF INCOME TAX - 2, NASHIK 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE