TMI Blog2017 (9) TMI 1521X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred substantial expenditure on account of those two heads. The assessee was suffering losses and it decided to charge lesser price in lieu of certain expenses incurred by the purchaser then the decision cannot be challenged by anybody. Revenue authorities are not entitled to step in to the shoes of the assessee and decide the issue as to how to run its business and which expenses to incur or not to incur. - Decided in favour of assessee. Disallowance made u/s. 14A - assessee had not earned exempt income - Held that:- As per the settled principles no disallowance u/s. 14A of the Act can be made if the assessee had not earned exempt income. In the case under consideration the AO had mentioned that the assessee had made investments. In other words, he also accepted the assessee had not claimed any exempt income against which expenditure was booked. Therefore, we are of the opinion that there was no justification for making any disallowance as per the provisions of section 14 A read with rule 8D. Reversing the order of the FAA,we decide the effective ground of appeal in favour of the assessee. - ITA No. 7120/Mum/2011 And ITA No. 2970/Mum/2013 - - - Dated:- 1-9-2017 - Shri R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 5,68,14,843/- by under invoicing the sales made to HHPL. 2.1. Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions before him. After considering the submission of the assessee and assessment order, he held that the assessee was not able to explain the reduced discounted sales price,that the AO had made the addition after making detailed comparative analysis of similar sales to other unrelated parties, that the explanation regarding bearing transport costs and advertisement expenditure was not convincing and satisfactory, that the assessee has not filed any documentary evidence in that regard,that the other unit was eligible for deduction u/s. 80-IB. He referred to the case of Shatrunjay Diamonds(261ITR258);Nund and Samont Co. P. Ltd.(70 ITR 268), and upheld the order of the AO. 2.2. Before us,the Authorised Representative(AR)contended that that no provision in the Act permitted the AO to make addition for alleged shortfall,that no additional consideration passed, that the AO did not take notice of the submissions made by the assessee. He referred to Pg.69 of the paper-book and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities to come to the conclusion that the sale price charged by the assessee from HHPL was not reasonable. It is a fact that the assesse had incurred negligible expenses under the heads transportation and advertisement, i.e.1.04% and 0.74% of the sales respectively. Whereas,HHPL had incurred substantial expenditure on account of those two heads. The assessee was suffering losses and it decided to charge lesser price in lieu of certain expenses incurred by the purchaser then the decision cannot be challenged by anybody. Revenue authorities are not entitled to step in to the shoes of the assessee and decide the issue as to how to run its business and which expenses to incur or not to incur. They have not doubted the transaction i.e. selling of goods to HHPL and receiving of lower price. Their objection is about discount allowed to the buyer. In our opinion,if an assessee files a plausible explanation for charging lesser or higher rates as compared to the normal market rates,it has to be seen from a point of view of a businessman. In the case of A Raman Co.(supra), the assessee firm was found to have affected sales of goods to its partners i.e. Manager of the two HUF.s. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Income-tax Act, 1922, could be invoked and the break-up value substituted in the place of the declared price and the respondent assessed to tax on capital gains on that basis. Dismissing the appeal filed by the Department,the Hon ble Apex Court held as follow: since the Tribunal had found that the consideration was not understated and there was no evidence direct or inferential to show that the consideration actually received by the respondent was more than what was disclosed or declared by the respondent, the proviso to section 12B(2) could not be invoked. Though the legislation in question is to remedy a social evil and should be read broadly and should be so read that the object is fulfilled, yet the onus of establishing a condition of taxability must be fulfilled by the Revenue ..Unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for computation of capital gains. Following the above judgment,we hold that the AO/FAA had not brought on record any evidence to prove that higher price was received by the assessee than what was stated in the books of accounts. We would also like to mention that bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us,stated that disallowance was not justified,that the assessee had not earned any tax free income during the year under appeal. He referred to the case of Cheminvest of the Hon ble Delhi High Court(377 ITR 78). The DR stated that matter could be decided on merits. 3.3. We have heard the rival submissions. As per the settled principles no disallowance u/s. 14A of the Act can be made if the assessee had not earned exempt income. In the case under consideration the AO had mentioned that the assessee had made investments. In other words, he also accepted the assessee had not claimed any exempt income against which expenditure was booked. Therefore, we are of the opinion that there was no justification for making any disallowance as per the provisions of section 14 A read with rule 8D. Reversing the order of the FAA,we decide the effective ground of appeal in favour of the assessee. ITA/2970/Mum/2013-AY.2009-10: 4. Following our order for the earlier AY.,we decide the effective ground of appeal in favour of the assessee,as the facts of both the cases are identical. As a result, appeals filed by the assessee for both the AY.s.stand allowed. Order pronounced i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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