No Disallowance on Assumption of getting Future Tax Free Income from Investment made by assesee : ITAT deletes Addition [Read Order]

The Kolkata bench of Income Tax Appellate Tribunal (ITAT) has recently held that disallowance made on the assumption of getting future tax free income from the investment made by the assessee would not be sustainable. Therefore the bench deleted the addition.

 While the proceedings were carried out, no one is appeard for the assesee  N.T. Sherpa appeared for the revenue.

This appeal has been filed by the assessee   before the Tribunal against the order of. Commissioner of Income Tax (Appeals).

Assessee-Bagdevi Suppliers Pvt. Limited,  has filed its original return of income showing total income of Rs.17,476/-. This  was selected for scrutiny assessment.

The assessee thereafter filed an application before the Pr. CIT, Shillong because the principal place of business was shifted to Shillong. Such application was moved under Section 264 of the Income Tax Act. 

Section 264 empowers the Principal Chief CIT or Principal CIT to exercise revisionary powers on the application of an assessee or on their own motion.

In the original assessment order an addition was made under Section 68 of the Income Tax Act on account of unexplained share application money.

This issue was agitated before the Principal Chief Commissioner, who remitted this issue to the file of  Assessing Officer and after going through this submission of the assessee the assessing officer did not make any addition of this amount in the assessment order passed under section 143(3) read with section 264 of the Income Tax Act.

Thereafter assessee has submitted that the Assessing Officer has erred in making an addition of Rs.91,750/- under Rule 8D read with section 14A as much as Income Tax Rules, 1962 and Income Tax Act, 1961.

It was observed by the tribunal that there is no tax-free income claimed by the assessee. Also the Assessing Officer has worked out the disallowance on his assumption that in future, some tax-free income will result in the assessee on the investment.

Therefore the bench consisting Rajpal Yadav , (Vice-President) and Manish Borad, (Accountant Member) allowed the appeal filed by the assesee and observed that “As per the decision of Delhi High Court if there is no tax-free income to the assessee, then no disallowance is to be made under section 14A of the Income Tax Act”.

To Read the full text of the Order CLICK HERE

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