A. Tosh & Sons (India) Limited, Kolkata V. DCIT, Circle - 4, Kolkata, Kolkata

CO 20/KOL/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5991 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 21-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C NAYAK
• Assessee Lawyers: N K PODDA R
• Keywords: Business income; Reasonable cause; Assessment record; Condonation of delay
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : KOLKATA ( ) . . , . .. . . .. . !' !' !' !' , ,, , $ $ $ $ ,) [BEFORE HONBLE SRI B.R. MITTAL, J.M. & HONBLE SRI S.V. MEHROTRA, A.M.] % % % % / I.T.A NO. 290/KOL/2011 &' &' &' &' () () () () /ASSESSMENT YEAR : 2006-2007 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- M/S. A. TOSH & SONS (INDIA) LTD., CIRCLE-4, KOLKATA KOLKATA (PAN : AACCA 4863 A) ( *+ *+ *+ *+ /APPELLANT) ( ,-*+ ,-*+ ,-*+ ,-*+ /RESPONDENT) & C.O. NO. 20/KOL./2011 % % % % / (IN I.T.A NO. 290/KOL/2011) &' &' &' &' () () () () /ASSESSMENT YEAR : 2006-2007 A. TOSH & SONS (INDIA) LTD., KOLKATA -VS.- DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, KOLKATA (CROSS OBJECTOR) (RESPONDENT) FOR THE ASSESSEE : SHRI N.K. PODDAR, A.R. FOR THE DEPARTMENT : SHRI P.C. NAYAK, D.R. . . . . / ORDER PER SHRI B. R. MITTAL, JUDICIAL MEMBER/ . . , : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2006-07 ALONG WITH AN AFFIDAVIT OF DEPUTY COMMISSIONER OF INCOME TAX SHRI P.B. PRAMANIK FOR CONDONATION OF DELAY OF 129 DAYS AGAINST THE ORDER OF LD. COMMISSIONER O F INCOME-TAX (APPEALS)-IV, KOLKATA DATED 24.12.2009 ON THE FOLLOWING GROUNDS :- (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A.)-IV, KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION O F RS.19,92,444/- ON ACCOUNT OF TRADING PROFIT WITHOUT CONSIDERING THE F ACT THAT THE AO HAS WORKED OUT THE ADDITION THE TECHNICAL WAY AND IS BA SED ON CONCRETE BASIS AND REASONS. (2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A.)-IV, KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION O F RS.11,58,840/- IN RESPECT OF INTEREST ACCRUING ON THE CREDIT LYING IN THE ACCOUNT OF FOREIGN ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 2 CUSTOMERS, IGNORING THE MAIN ASPECTS ON THE BASIS O F WHICH THE AO HAD ADDED THE SAME SUCH AS IDENTIFICATION OF BUYER, REP AYMENT DEBTS AND ENJOYMENT OF THE BENEFIT BY UTILIZING THE AMOUNT CR EDITED. 2. THE ASSESSEE HAS FILED CROSS OBJECTION DISPUTING THE ORDER OF LD. CIT(APPEALS) TO MAKE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX AC T READ WITH RULE 8D BY FOLLOWING THE DECISION OF SPECIAL BENCH, ITAT IN THE CASE OF ITO VS.- DAGA CAPITAL MANAGEMENT PVT. LTD. [119 TTJ 289]. 3. IN RESPECT OF DELAY, LD. D.R. SUBMITTED THAT DEL AY WAS DUE TO A REASONABLE CAUSE AS WITHIN A SPAN OF ONE WEEK, THE OFFICE OF LD. COMMIS SIONER OF INCOME TAX RECEIVED 93 APPELLATE ORDERS FROM THE OFFICE OF LD. CIT(APPEALS ) AND IT TOOK TIME TO PROCESS THE APPLICATION FOR FILING SECOND APPEAL. LD. D.R. SUBM ITTED THAT THE DELAY WAS NOT DELIBERATE BUT DUE TO A REASONABLE CAUSE. 4. ON THE OTHER HAND, LD. A.R. HAS NOT DISPUTED THE ABOVE CONTENTION OF LD. D.R. 5. WE, ON CONSIDERATION OF THE CONTENTS OF THE AFFI DAVIT OF DEPUTY COMMISSIONER OF INCOME TAX SHRI P.B. PRAMANIK AND ALSO CONSIDERING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS.- WEST BENGAL INFRASTRUCTURE & FINANCE CORPORATION LIMITED (2011) 196 TAXMAN 321, CONDONE THE DELAY AND ENTERTAIN THE APP EAL OF THE DEPARTMENT ON MERITS. 6. IN RESPECT OF THE GROUND NO. 1 OF THE APPEAL, RE LEVANT FACTS ARE THAT THE ASSESSEE IS ENGAGED IN TRADING ACTIVITY OF TEA AND PHARMACEUTIC AL PRODUCTS. THE ASSESSEE IS ALSO ENGAGED IN EXPORT OF TEA. THE ASSESSEE PURCHASED 6,31,815.57 K G. TEA AND SOLD 6,26,586.72 KG. THE ASSESSEE HAS TWO BUSINESS UNITS, ONE IS IN KOLKATA AND ANOTHER IS IN COCHIN. IN BOTH THE CASES, MOST OF THE PURCHASES WERE MADE FROM TEA BROKER/ AU CTIONEER. ASSESSING OFFICER STATED THAT THE ASSESSEE HAS NOT SHOWN ANY INCREASE OR DECREASE OF QUANTITY EITHER IN STOCK OR IN SALE. HE HAS FURTHER STATED THAT THE ASSESSEE HAS ALSO NOT SHOWN ANY LOSS/ WASTAGE IN TRADING ACCOUNT AND STATED THAT IT IS VERY UNUSUAL. ASSESSING OFFICER H AS STATED THAT THE ASSESSEE AFTER MANUFACTURING, TEA IS KEPT IN SEALED AND AIR TIGHT CONTAINER WITH SUFFICIENT PACKAGING TO PREVENT IT FROM CONTACT OF AIR AND MOISTURE. ASSESSING OFFICER STATED THAT TEA ABSORBS MOISTURE UPTO 8%. THEREFORE, THERE SHALL BE INCREASE IN QUANTITY DUE TO ABSORPTI ON OF MOISTURE BUT THE ASSESSEE HAS NOT ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 3 CONSIDERED THIS ASPECT BY ENHANCING THE QUANTITY OF SALE. ACCORDINGLY, ASSESSING OFFICER PRESUMED THAT THERE IS 4% ENHANCEMENT OF TEA, WHICH COMES TO 25,272 KG. ASSESSING OFFICER TAKING INTO ACCOUNT AVERAGE RATE OF SALE SHOWN BY T HE ASSESSEE OF RS.78.84 PER KG. MADE THE ADDITION OF RS.19,92,444/- AS TRADING PROFIT. BEING AGGRIEVED, ASSEESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE RELEVANT SUBMISSION MADE BY THE ASSESSEE BEFORE LD. CIT(APPEALS) IS STATED IN PARA 8 OF THE IMPUGNED ORDER OF LD. CI T(APPEALS), WHICH IS AS UNDER :- THE FIRST ISSUE RELATES TO THE ADDITION OF RS.19,9 2,444/- TO THE TRADING RESULTS DISCLOSED BY THE APPELLANT ASSESSEE COMPANY THROUGH ITS AUDITED PROFIT & LOSS ACCOUNT. THE LEARNED AO FOUND THAT TH E APPELLANT ASSESSEE- COMPANY HAD DURING THE YEAR UNDER APPEAL PURCHASED AND SOLD 6,31,815.57 KG. OF TEA. MOST OF THE TEAS BOTH AT CALCUTTA AS WE LL AS AT COCHIN WERE PURCHASED FROM TEA BROKERS/ AUCTIONEERS. THE LEARNE D AO ADMITTED THAT TEA AFTER BLENDING IS KEPT IN SEALED AND AIRTIGHT CONTA INERS WITH SUFFICIENT PACKAGING TO PREVENT IT FROM CONTACT OF AIR AND MOI STURE. NOTWITHSTANDING THAT, THE LEARNED AO ALLEGED THAT TEA ABSORBS MOIST URE UPTO 8%, AND THEREBY THE SALEABLE QUANTITY WOULD INCREASE BY AT LEAST 4% . ALLEGING THAT ASSESSEE COMPANY DID NOT CONSIDER THIS ASPECT, THE LEARNED A O ARBITRARILY ESTIMATED THAT THE INCREASED QUANTITY OF 25,272 KG. MUST HAVE BEEN REALIZED BY THE ASSESSEE COMPANY AT THE AVERAGE SALE PRICE OF RS.78 .84 PER KG. HE, THEREFORE, ARBITRARILY ADDED A SUM OF RS.19,92,444/ - ON THIS ACCOUNT TO THE TRADING RESULTS DISCLOSED BY THE APPELLANT ASSESSEE COMPANY THROUGH ITS AUDITED PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER AP PEAL. IN THE COURSE OF THE IMPUGNED ASSESSMENT PROCEEDING S, IT WAS INTER ALIA EXPLAINED BEFORE THE LEARNED AO THAT THERE WAS NO N ET INCREASE WHATSOEVER IN THE QUANTITY OF TEA PURCHASED THROUGH TEA BROKER S/ AUCTIONEERS, AND THAT THE SO CALLED MOISTURE EFFECT WAS AUTOMATICALLY NEU TRALIZED ON ACCOUNT OF REMOVAL OF DIVERSE FOREIGN MATERIALS INCLUDING META LS, PARTICLE FROM THE PACKAGING MATERIALS, JUTE STRINGS ETC. FOUND IN THE COURSE OF BLENDING. IT WAS ALSO EXPLAINED THAT NO SUCH ADDITION WAS EVER MADE IN THE HANDS OF THE ASSESSEE COMPANY AT ANY TIME DURING THE LAST FOUR D ECADES OR SO, ALTHOUGH THE NATURE OF BUSINESS OPERATIONS OF THE ASSESSEE C OMPANY CONTINUED TO BE THE SAME. IT IS WHOLLY INCORRECT TO ALLEGE THAT TEA ABSORBS M OISTURE TO THE EXTENT OF 8%, AS ALLEGED OR OTHERWISE OR AT ALL. THE APPELLANT AS SESSEE COMPANY STATES THAT THERE HAS BEEN NO INCREASE IN THE NET SALEABLE QUAN TITY OF TEA; AND THAT THE TRADING RESULTS DISCLOSED BY THE AUDITED ACCOUNTS A RE ABSOLUTELY TRUE AND CORRECT. THE LEARNED AO HAVING NOT FOUND ANY DEFECTS WHATSOE VER IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT ASSESSEE-COMPA NY IN THE USUAL COURSE OF ITS BUSINESS, WHICH ARE AUDITED BY REPUTED CHARTERE D ACCOUNTANTS YEAR AFTER YEAR, THE ARBITRARY ADDITION TO THE TRADING RESULTS IN THE SUM OF RS.19,92,444/- ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 4 BASED WHOLLY ON SUSPICION, SURMISES AND CONJECTURES , IS WHOLLY UNJUSTIFIED IN LAW. 7. LD. CIT(APPEALS) AFTER CONSIDERING THE ABOVE SUB MISSION VIDE PARA 9 HAD DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. IT READS AS UNDER :- 9. I HAVE CONSIDERED FACT NARRATED BY AO AND SUBMI SSION MADE BEFORE ME BY APPELLANT. THE AO HAS MADE ADDITION ON THE BASIS OF HIS OBSERVATION THAT GENERALLY TEA ABSORBERS MOISTURE W HICH INCREASE TO THE TUNE OF 8%. HE HAS CALCULATED TOTAL INCREASE ADOPTI NG @ 4% OF TOTAL PURCHASES. HE HAS QUANTIFIED TOTAL SALES AT 25272 K G. HE HAS ADOPTED AVERAGE SALES VALUE AND WORKED OUT TOTAL RS.19,92,4 44/-. THE AO HAS IGNORED THE FACT THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED AND HE HAS NOT POINTED OUT ANY MISTAKE. THE BOOKS O F ACCOUNT ON SIMILAR FACTS IS ACCEPTED BY THE DEPARTMENT AND NO ADDITION HAS BEEN MADE IN THE PAST. IF THERE IS INCREASE AFTER THE PURCHASES ARE MADE IT HAS TO BE REFLECTED IN PROFIT AND LOSS ACCOUNT. APPELLANT HAS ALSO POINTED OUT VARIOUS FACTORS ACCORDING TO WHICH THE AFFECT OF MO ISTURIZING IS NEUTRALIZED. IN MY OPINION, AO WAS NOT JUSTIFIED IN MAKING ADDITION WITHOUT ANY CONCRETE BASIS AND REASONS. IN VIEW OF FACTS NARRATED ABOVE, THE ADDITION MADE BY AO IS DELETED. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBU NAL. 8. AT THE TIME OF HEARING, LD. D.R. RELIED ON THE O RDER OF ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER ENHANCED THE QUANTITY OF TEA AS PER BOARD CIRCULAR. ON THE OTHER HAND, LD. A.R. SUBMITTED THAT THE ASSESSING OFFICER HAS ASSUMED AN INCREASE IN WEIGHT OF TEA PURCHASED BY THE ASSESSEE ONLY ON PRESUMPTIONS AND SURMISES. HE SUBMITTED THAT ASSESSING OFFICER HIMSELF HAS STATED THAT TEA IS KEPT IN SEAL ED AND AIR-TIGHT CONTAINER WITH SUFFICIENT PACKAGING TO PREVENT IT FROM CONTACT OF AIR AND MOI STURE. HE SUBMITTED THAT LD. CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE. LD. AR REITERATED THE SUBMISSIONS, AS MADE BEFORE THE LD. CIT(APPEALS), BEFORE US. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF THE AUTHORITIES BELOW. 10. WE AGREE WITH LD. A.R. THAT THE SAID ADDITION O F RS.19,92,444/- WAS MADE BY ASSESSING OFFICER ON ASSUMPTIONS AND PRESUMPTIONS THAT THERE IS AN INCREASE IN QUANTITY OF TEA PURCHASED BY THE ASSESSEE DUE TO ABSORPTION OF MOISTURE. ON T HE OTHER HAND, ASSESSING OFFICER HAS STATED ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 5 THAT TEA MANUFACTURED BY THE ASSESSEE IS KEPT IN SE ALED AND AIR-TIGHT CONTAINER WITH SUFFICIENT PACKAGING TO PREVENT IT FROM CONTACT OF AIR AND MOI STURE. THEREFORE, IF THE TEA IS KEPT IN SEALED AND AIR-TIGHT CONTAINERS, THEN THE QUESTION OF ABSO RPTION OF MOISTURE IN THE TEA MANUFACTURED BY THE ASSESSEE DOES NOT ARISE AND THERE COULD BE NO I NCREASE IN WEIGHT. WE OBSERVE THAT ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE NOR ANY EVIDENCE HAS BEEN BROUGHT ON RECORD THAT THERE IS ANY SALE OF TEA BY THE ASSESSEE OUT OF BOOKS OF ACCOUNTS. THEREFORE, WE AGREE WITH LD. CIT (APPEALS) THAT THE SAID ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER WITHOUT ANY CONCRETE BASIS AND REASONS. HENCE, WE UPHOLD THE ORDER OF LD. CIT(APPEALS) IN DELETING THE SAID ADDI TION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, GROUND NO. 1 OF THE APPEAL TAKEN BY TH E DEPARTMENT IS REJECTED. 11. IN RESPECT OF GROUND NO. 2 OF THE APPEAL, WE OB SERVE THAT ASSESSING OFFICER DISALLOWED THE AMOUNT BY OBSERVING AS UNDER :- IN THE BALANCE SHEET THE ASSESSEE HAS SHOWN BALANC E WITH FOREIGN BUYERS TO THE TUNE OF RS.8,41,20,942/-. FROM THE OL D ASSESSMENT RECORDS, IT IS SEEN THAT THE BALANCE IS OUTSTANDING FOR A LO NG TIME AND THE ASSESSEE HAS NOT REMITTED THE BALANCE TO THE ERSTWHILE BUYER S. ON BEING ASKED, IT WAS STATED THAT THE SAME WAS NOT REPAID FOR RBI CLE ARANCE. IN THIS REGARD, IT COULD NOT BE SUBSTANTIATE WHETHER THAT T HOSE BUYERS ARE REALLY EXISTS AS ON THIS DATE AND AS TO WHETHER THE AMOUNT IS REPAYABLE AT ALL. IT IS NOT UNDERSTOOD AS TO WHY THERE WILL NOT BE ANY P ERMISSION FROM RBI FOR REPAYMENT OF DUES IT AS ALL REPAYABLE TO SUCH B UYERS. BESIDES, NO EVIDENCE COULD BE PRODUCED BY THE AR, SO AS TO ESTA BLISH THAT THE ASSESSEE WAS PREVENTED FROM ANY LAW OF THE LAND TO REPAY THE ALLEGED DEBTS IN RESPECT OF FOREIGN BUYERS. THEREFORE, THE STORY OR NON- PERMISSION IS NOT ACCEPTED. IT IS SEEN THAT INTERES T TO THE TUNE OF RS.11,58,840/- HAS BEEN CREDITED BY THE ASSESSEE IN THE ACCOUNTS. CONSIDERING THE FACTS THAT IDENTITY OF BUYERS AS ON THIS DATE IS NOT ESTABLISHED AND IT IS NOT ESTABLISHED THAT SUCH DEB TS ARE REPAYABLE AND CONSIDERING THE FACTS THAT THE ASSESSEE ENJOYED THE BENEFIT BY UTILIZING THE AMOUNT CREDITED, INTEREST OF RS.11,58,840/- IS ADDE D AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASSESSEE. 12. THE ASSESSEE FILED APPEAL BEFORE LD. CIT(APPEAL S) AND SUBMITTED THAT ASSESSEE HAD CREDITED THE ACCOUNT OF ITS FOREIGN BUYERS OF RS.11 ,58,840/- BEING THE INTEREST IN ITS BOOKS ACCOUNTS AS PER AGREEMENT ENTERED INTO PENDING REMI TTANCE OF THE SAID AMOUNT TO THE FOREIGN BUYERS AFTER OBTAINING PERMISSION FROM RBI. THE ASS ESSEE CONTENDED THAT THE SIMILAR ISSUE ON IDENTICAL FACTS AND CIRCUMSTANCES AROSE IN THE PREC EDING ASSESSMENT YEARS AND WHEN THE REVENUE TOOK THE MATTER BEFORE THE HONBLE HIGH COU RT IN A REFERENCE, THE HONBLE HIGH ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 6 COURT VIDE ITS ORDER DATED 9.9.1986 REPORTED IN (19 87) 166 ITR 867 HELD THAT ANY ACCRETION TO THE SAID AMOUNT BY WAY OF INTEREST OR OTHERWISE COU LD NOT BE HELD TO BE INCOME OF THE ASSESSEE. 13. LD. CIT(APPEALS) AFTER CONSIDERING THE ABOVE SU BMISSION OF THE ASSESSEE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER VIDE PARA 18 OF THE IMPUGNED ORDER, WHICH READS AS UNDER :- 18. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND SUBMISSIONS MADE BY THE APPELLANT STATED AS ABOVE. I HAVE ALSO PERUSED THE ORDER OF THE LD. CIT(A.), HONBLE ITAT AND THE HONBLE HIGH COURT AND I AM OF THE VIEW THAT JUDICIAL DISCIPLINE REQUIRES THAT ORDER O F THE HIGHEST COURT MUST BE FOLLOWED. IN THE CASE OF THE APPELLANT THE AO HA S NOT FOLLOWED THE JUDICIAL DISCIPLINE AND THEREFORE I HOLD THAT SINCE THE HONBLE HIGH COURT HAS ALREADY GIVEN ITS FINDING IN THE ASSESSEES OWN CASE, THE SAME MUST BE FOLLOWED. THE ADDITION MADE BY AO IS DELETED. HENCE, DEPARTMENT IS IN FURTHER APPEAL BEFORE THE T RIBUNAL. 14. AT THE TIME OF HEARING, LD. D.R. RELIED ON THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. AR SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF HONBLE HIGH COURT IN THE ASSESSEES OWN CASE REPORTED IN 166 ITR 867. HE SUB MITTED THAT THE SAME ISSUE AGAIN AROSE IN AN APPEAL FILED BY THE DEPARTMENT UNDER SECTION 260 A OF THE ACT IN ITA NO. 153 OF 2009 AND HONBLE HIGH COURT VIDE ITS ORDER DATED 03.12.2010 DISMISSED THE APPEAL OF THE DEPARTMENT BY FOLLOWING ITS EARLIER ORDER AND ALSO THE LATER ORDE R DATED 09.11.1990 IN INCOME TAX REFERENCE NO. 58 OF 1988 WITH RESPECT TO ASSESSMENT YEARS 197 9-80 TO 1982-83. LD. AR SUBMITTED THAT THE FACTS IN THE ASSESSMENT YEAR UNDER CONSIDERATION AR E IDENTICAL TO THOSE ASSESSMENT YEARS, WHICH WERE CONSIDERED BY THE HONBLE HIGH COURT IN ASSESS EES OWN CASE (SUPRA). HE SUBMITTED THAT LD. CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER. LEARNED AR ALSO FURNISHED A COPY OF THE ORDER OF ITAT, C BEN CH, KOLKATA DATED 21.10.2008 RELATING TO ASSESSMENT YEAR 1988-89 IN ITA NO. 1654/KOL./2007 A ND SUBMITTED THAT THE TRIBUNAL BY FOLLOWING THE ORDER OF THE HONBLE HIGH COURT (SUPR A) DELETED THE SIMILAR ADDITION MADE BY THE ASSESSING OFFICER. 15. ON CAREFUL CONSIDERATION OF THE ORDERS OF THE A UTHORITIES BELOW AND THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES AND ALSO CONSIDE RING THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE DATED 03.12.2010 READ WITH ORDER DATED 09.11.1990 (SUPRA) ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 7 AND ALSO THE ORDER OF ITAT DATED 21.10.2008 (SUPRA) , WE AGREE THAT THE FACTS ARE IDENTICAL IN THE ASSESSMENT YEAR UNDER CONSIDERATION THAT ANY ACCRET ION TO THE SAID AMOUNT BY WAY OF INTEREST OR OTHERWISE, PENDING REMITTANCE TO THE FOREIGN BUYERS AS PER AGREEMENTS BELONGED TO THEM AND COULD NOT BE HELD TO BE THE INCOME OF THE ASSESSEE. TILL THE AMOUNT IS REMITTED/ PAID TO THE FOREIGN BUYERS, THE ASSESSEE WAS KEEPING SUCH AMOUN T FOR AND ON BEHALF OF THE FOREIGN BUYERS AND, THEREFORE, THE INTEREST ACCRUING ON SUCH AMOUN T IS NOT THE INCOME OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE AGREE WITH LD. CIT(APPEALS) THAT T HE ISSUE IS COVERED IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS (SUPRA) AND ACCO RDINGLY THE ASSESSING OFFICER WAS NOT JUSTIFIED TO MAKE THE SAID ADDITION ON ACCOUNT OF I NTEREST OF RS.11,58,840/-. HENCE, WE UPHOLD THE ORDER OF LD. CIT(APPEALS) AND REJECT GROUND NO. 2 OF THE APPEAL TAKEN BY THE DEPARTMENT. 16. NOW COMING TO THE CROSS OBJECTION OF THE ASSESS EE, WE OBSERVE THAT ASSESSING OFFICER AFTER CONSIDERING THAT THE EXEMPTED INCOME OF THE A SSESSEE IS TO THE TUNE OF RS.12,86,40,870/-, MADE DISALLOWANCE OF RS.2,56,64,238/- AS EXPENSES U NDER SECTION 14A OF THE INCOME TAX ACT. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE F IRST APPELLATE AUTHORITY. 17. LD. CIT(APPEALS) AFTER CONSIDERING THE DECISION OF ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF ITO VS.- DAGA CAPITAL MANAGEMENT PVT. LTD. [119 TTJ 289] HELD THAT THE DISALLOWANCE IS TO BE MADE BY APPLYING RULE 8D OF T HE INCOME TAX RULES. HENCE, ASSESSEE HAS FILED THIS CROSS OBJECTION. 18. AT THE TIME OF HEARING, LD. A.R. SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. - DCIT [328 ITR 81] HAS REVERSED THE ORDER OF SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. AND HAS HELD THAT RULE 8D IS PROSPECTIVE IN NATURE AND IS APPLICABLE FROM ASSESSMENT YEAR 2008- 09. LD. AR FURTHER SUBMITTED THAT THE INVESTMENT OF THE ASSESSEE IS HANDLED BY KOTAK SECURITIES AND THE ASSESSEE PAID PORTFOLIO MANAGEMENT SERVICES FEES OF @ 2% PER ANNUM. LD. AR FURNISHED A COPY OF THE LETTER OF KOTAK SECURITIES DATED 18.04.2011 TO SUBSTANTIATE HIS SUBMISSION. HE SUBMITTED THAT THE ASSESSEE IS NOT I NCURRING ANY OTHER EXPENDITURE IN RESPECT OF ITS EXEMPTED INCOME AND HENCE, THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER IS ON AN ESTIMATE BASIS. LD. AR RELYING ON THE DECISION OF T HE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS.- HERO CYCLES LTD. (2010) [323 ITR 518] HAS HELD THAT THE DISALLOWANCE ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 8 UNDER SECTION 14A IS REQUIRED TO BE MADE IN RESPECT OF THE ACTUAL EXPENSES INCURRED ON EXEMPTED INCOME. HE SUBMITTED THAT THE HONBLE ITAT , DELHI BENCH HAS ALSO HELD IN ITA NO. 238/DELHI/2009 VIDE ORDER DATED 11.12.2009 THAT NO DISALLOWANCE UNDER SECTION 14A SHOULD BE MADE ON AN ESTIMATE BASIS. LD. AR ALSO SUBMITTED TH AT THE HONBLE APEX COURT HAS HELD IN THE CASE OF CIT VS.- PRINTERS HOUSE (SLP (C) NO. 4359 OF 2010 [322 ITR (STATUTE) 7] THAT NO EXPENDITURE SHOULD BE DISALLOWED ON AN ESTIMATE BAS IS. LD. AR SUBMITTED THAT ONUS IS ON THE ASSESSING OFFICER TO STATE THE EXPENDITURE ACTUALLY INCURRED BY THE ASSESSEE FOR EARNING EXEMPTED INCOME BEFORE MAKING ANY DISALLOWANCE, WHI CH THE ASSESSING OFFICER FAILED TO DISCHARGE. HE SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 19. ON THE OTHER HAND, LD. D.R. SUBMITTED THAT THE ISSUE COULD BE RESTORED TO LD. CIT(APPEALS) AS LD. CIT(APPEALS) HAS DIRECTED TO MA KE DISALLOWANCE AS PER RULE 8D OF INCOME TAX RULES, BUT THE SAME IS NOT APPLICABLE TO THE AS SESSMENT YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA). 20. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE AL SO GONE THROUGH THE CASES CITED BY LD. A.R. IN SUPPORT OF HIS SUBMISSION. WE OBSERVE THAT THE A SSESSING OFFICER MADE DISALLOWANCE OF RS.2,56,64,238/- UNDER SECTION 14A OF THE ACT BEING THE EXPENSES INCURRED TO EARN EXEMPTED INCOME OF RS.12,86,40,870/-. THE SAID DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER AFTER CONSIDERING THE TOTAL EXPENSES DEBITED BY THE ASSESSEE IN ITS PROFIT & LOSS A/C. AND ALSO CONSIDERING THE SPECIFIC EXPENSES INCURRED BY THE A SSESSEE IN RESPECT OF ITS TEA BUSINESS. WE OBSERVE THAT LD. CIT(APPEALS) HAS DIRECTED TO MAKE THE DISALLOWANCE BY APPLYING RULE 8D. IT IS A FACT THAT RULE 8D IS NOT APPLICABLE TO THE ASSESS MENT YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA) VIDE WHICH IT HAS BEEN HELD BY THEIR L ORDSHIPS THAT RULE 8D, WHICH HAS BEEN INSERTED W.E.F. 24.03.2008, IS PROSPECTIVE IN NATUR E AND IS APPLICABLE FROM ASSESSMENT YEAR 2008-09. DURING THE COURSE OF HEARING, LD. A.R. SUB MITTED THAT NO DISALLOWANCE SHOULD BE MADE AS THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE IN EARNING THE EXEMPTED INCOME. THE ASSESSEE HAS FURNISHED A COPY OF THE LETTER DATED 18.04.2011 FROM ITS PORTFOLIO MANAGEMENT. WE ARE OF THE CONSIDERED VIEW THAT THE SAID CONTENTION OF THE ASSESSEE COULD NOT BE ACCEPTED THAT IF THE ITA NO. 290/KOL./2011 &C.O. NO. 20-KOL.-2011 9 ASSESSEE HAS GIVEN ITS PORTFOLIO MANAGEMENT TO KOTA K SECURITIES, WHO CHARGES PORTFOLIO MANAGEMENT SERVICES FEES PER ANNUM, IN THAT CASE, I T COULD NOT BE SAID THAT THE ASSESSEE HAS NOT INCURRED ANY OTHER EXPENDITURE IN KEEPING A TRA CK OF ITS INVESTMENT AND THAT TOO WHEN THERE IS AN INCOME TO THE ASSESSEE OF RS.12,86,40,870/-. THE ASSESSEE HAS TO MAINTAIN THE REQUISITE STAFF TO KEEP A TRACK. BE THAT AS IT MAY, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE SHOULD BE RESTORED TO THE FILE OF LD. CIT(APPEALS) AND AFTER CONSIDERING THE DETAILS, AS MAY BE FURNISHED BY THE ASSESSEE, HE WILL MAKE DISALLOWANCE UNDER SECTI ON 14A OF THE ACT IN RESPECT OF EXPENSES, WHICH THE ASSESSEE HAS ACTUALLY INCURRED IN EARNING THE EXEMPTED INCOME IN VIEW OF THE DECISION, CITED BY LD. A.R. (SUPRA). HENCE, THE GRO UNDS OF CROSS OBJECTION TAKEN BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES BY RESTORING T HE ISSUE TO THE FILE OF LD. CIT(APPEALS). 21. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED AND WHEREAS CROSS OBJECTION OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.05. 2011. SD/- SD/- [S.V. MEHROTRA/ . .. . . .. . !' !' !' !' , ,, , ] [ B.R. MITTAL / . . ] ACCOUNTANT MEMBER/ $ $ $ $ JUDICIAL MEMBER/ DATED : 27 / 05/ 2011 COPY OF THE ORDER FORWARDED TO: 1. M/S. A. TOSH & SONS (INDIA) LTD., TOSH HOUSE, P-32/ 33, INDIA EXCHANGE PLACE, KOLKATA-1, 2 DCIT, CIRCLE-4 AAYAKAR BHAWAM, 5 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-69, 3. COMMISSIONER OF INCOME-TAX (APPEALS)- , KO LKATA, 4 CIT, KOLKATA- 5 . DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSIS TANT REGISTRAR, I.T.A.T., KOLKATA LAHA, SR. P.S.