IN THE INCOME-TAX APPELLATE TRIBUNAL“C” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER &

SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 2415 /MUM/2025 (A.Y. 20 18-19)

8 Phulchand Exports Private v/s. Assistant Commissioner of Limited बनाम Income Tax, Central Circle – 2^nd Floor, West Wing, Electric 3(3), Kautilya Bhavan, Bandra Mansion, Appasaheb Marathe Kurla Complex, Bandra East, Marg, Worli, Prabhadevi Mumbai – 400 051, Mumbai –400 025, Maharashtra Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACP2529C Appellant/अपीलार्थी .. Respondent/प्रतिवादी

ITA No. 3102/MUM/2025 (A.Y. 2018-19)

ITA No. 3103/MUM/2025 (A.Y. 2019-20)

Deputy Commissioner of Income v/s. Phulchand Exports Private Tax, Central Circle – 3(3),404, बनाम Limited

4^th Floor, Kautilya Bhavan, 254B, Nirlon House, Dr. Bandra Kurla Complex, Bandra Annie Besant Road, Worli, East, Mumbai – 400 051, Mumbai–400030, Maharashtra Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACP2529C Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Shankarlal Jain & Shri Satish Kumar Respondent by : Shri R.A Dhyani, (CIT-DR)

Date of Hearing 15.07.2025 Date of Pronouncement 04.08.2025 आदेश / O R D E R PER BENCH :-

The above captioned appeals and cross appeals have been filed by the assessee and the Revenue respectively against the orders of even date passed by the Learned Commissioner of Income-tax (Appeal) CIT(A) 51, Mumbai [hereinafter referred to as “CIT(A)”] pertaining to the order passed u/s. 153A r.w.s. 143(3)of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Years [A.Y.] 2018- 19&2019-20. Since some of the issues are common and also the fact that appeals were heard together, they are being taken up together for adjudication vide this composite order for the sake of brevity. We take up Department appeals first.

ITA No. 3102/MUM/2025 (A.Y. 2018-19)(Revenue)

1. On facts and in circumstances of the case, the ld. CIT(A) has erred in restricting disallowance made under section 14A to the extent of tax exempt income earned by the assessee during the year by overlooking the clarification of legislative intent provided by the CBDT vide Circular No. 5/2014 dated 11.02.2014 and to this effect even an amendment was made by Finance Act, 2022 by way of insertion of Explanation to Section 14A of Income Tax Act, 1961.”

2. The appellant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be.

3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the disallowance made u/s 36(1)(iii) of the Act holding that no disallowance can be made if the surplus fund is in excess of the interest free advances and ignoring the fact that assessee has failed to substantiate that interest free advances has given out of owned funds as no supporting documents like fund flow statement etc. has been furnished.

3. The assessee deals in trading and export of iron ore, metals and commodities. It filed its return of income declaring total income of Rs. 1,53,94,250/-of the Act .A search and seizure action u/s.132 of the Act was carried out in Phulchand Group at the office and residential premises on 24.10.2018, wherein the assessee was also covered under such action. The AO issued notice u/s.153A of the Act and in response, the assessee filed its return of income declaring total income at Rs. 1,53,94,250/-. The AO assessed the total income at Rs.11,44,26,980/- making disallowances i.e. (i) u/s.14A r.w.r. 8D amounting to Rs.,77,87,780/-and (ii) u/s.36(1)(iii)

amounting to Rs.6,65,38,828/- vide order u/s.143(3) dated 10.05.2021. 4. Ground No.1 pertains to the addition of Rs. 77,87,780/- u/s 14A of the Act. The AO noted that the assessee had made an investment of Rs.80 cr. in shares and partnership firms but had not made any disallowance u/s 14A of the Act. The assessee incurred loss on investments to the tune of Rs.4,25,765/- earned dividend income of Rs.1,20,120/- and LTCG of Rs.8,72,997/-.