Asst. Commissioner of Income Tax, Central Circle-3(2), Hyderabad V. PVK Engineers Private Limited , Hyderabad

ITA 09/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8444 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 19-07-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 03-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL S
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Unexplained cash credit; Earning of tax free income; Additional evidence; Onus to prove; Rule 8D; Set aside
• Section: 14A; 143(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT A NO. 9 /H/20 18 ASSESSMENT YEAR: 2 0 1 4 - 1 5 ASST. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 3 ( 2 ), HYDERABAD. VS. PVK ENGINEERS PVT. LTD., HYDERABAD. PAN AA BCP 9391D (APPELLANT) (RESPONDENT) REVENUE BY: SHRI ANIL S ASSESSEE BY: S HRI P. MURALI MOHANA RAO DATE OF HEARING: 1 9 /0 7 /2021 DATE OF PRONOUNCEMENT: 18 /0 8 /2021 O R D E R PER L.P. SAHU, A.M. : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST CIT(A) - 4 , HYDERABAD S ORDER DATED 2 0 / 10 /20 1 7 FOR AY 20 1 4 - 15 INVOLVING PROCEEDINGS U/S 14 3(3) OF THE INCOME - TAX ACT, 1961; IN SHORT THE ACT ON THE FOLLOWING GROUNDS OF APPEAL: (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ER RED IN DELETING THE I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 2 - : DISALLOWANCE MADE U/S 14A RWR 8D WITHOUT APPRECIATING THE FACT THAT THE DISALLOWANCE U/S 14A CAN BE MADE EVEN IN A YEAR IN WHICH NO EXEMPT INCOME W AS EARNED OR RE CEIVED BY THE ASSESSEE? (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE U/S 14A RWR 8D WITHOUT APPRECIATING THE FACT THAT THE METHOD FOR DETERMINING AMOUNT OF DISALLOWANCE U/S 1 4A AS GIVEN IN RULE 8D(II) NOT ONLY INCLUDES THE INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF THE TOTAL INCOME BUT ALSO THE INVESTMENT, INCOME FROM WHICH SHALL NOT FORM PART OF THE TOTAL INCOME? (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE U/ S 14A RWR 8D WITHOUT APPRECIATING THE FACT THAT THE BOARD VIDE CIRCULAR NO. CIRCULAR NO.5/2014 HAS MADE IT CLEAR THAT THE RUL E READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLO WANCE OF THE EXPENDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. (IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE U/S 68 RS. 1,76,57,458/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE THE BURDEN TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE CREDITOR WHICH CASTED UPON HIM U/ S 68 OF THE ACT. (V) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CI T (A) FAILED TO APPRECIATE THE CATEGORICAL FINDING OF THE AO THAT THE ASSESSEE HAS NOT PRODUCED EVEN A CONFIRMATION LETTER LEAVING ASIDE MINIMUM DETAILS LIKE PAN/ RETURN OF INCOME AND BANK ACCOUNT REFLECTING THE SAID TRANSACTION. I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 3 - : (VI ) WHETHER ON THE FACT S AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT (A) ERRED IN ADMITTING NEW EVIDENCE IN CONTRAVENTION OF RULE 46A . (VII ) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT (A) FAILED TO APPRECIATE THAT RE - PAYMENT IN EARL IER IS NOT AN EXPLANATION FOR THE SUM CREDITED DURING THE YEAR? (VIII ) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BU SINESS OF MANUFACTURING AND TRADING OF THERMAL POWER PLANTS, GAS POWER PLANTS, HYDRO POWER PLANTS AND GATES, FILED ITS RETURN OF INCOME FOR THE AY 2014 - 15 ON 01/10/2014 ADMITTING TOTAL INCOME OF RS. 1,35,85,100/ - , WHICH WAS PROCESSED U/S 143(1) OF THE IT A CT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY, STATUTORY NOTICES WERE ISSUED. 2. 1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE BALANCE SHEET THAT THE ASSESSEE COMPANY HAD INVESTED AN AMOUNT OF RS. 2,60,00,000/ - AS ON 31/03/2014 . ACCORDINGLY, THE AO ASKED THE ASSESSEE TO SHOW THE CAUSE AS TO WHY THE PROVISIONS OF SECTION 14A SHALL NOT BE APPLIED AS THE ASSESSEE COMPANY HAD MADE INVESTMENTS RELATING TO EXEMPT INCOME. IN THIS REGARD, THE ASSESSEE COMPANY FILED DETAILED WRITTEN SUBMISSIONS AND AFTER EXAMINING THE ABOVE SUBMISSIONS AND ALSO REFERRING TO I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 4 - : THE CBDT CIRC ULAR NO. 5/2011 IN F.NO. 225/182/2013 - ITA.II, DATED 11/02/2014, THE AO OBSERVED THAT THE ASSESSEE HAD INCURRED INTEREST EXPENDITURE OF RS. 2,04,71,543/ - . ACCORDINGLY, APPLYING RULE 8D, THE AO COMPUTED THE DISALLOWANCE OF EXPENDITURE OF RS. 9,84,556/ - U/S 1 4A AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 2. 2 FURTHER, THE AO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE - COMPANY HAS INTRODUCED SHARE APPLICATION MONEY TO THE TUNE OF RS, 1,76,57,458/ - . THE ASSESSEE - COMPANY WAS REQUESTED TO FURNISH THE DETAILS IN SUPPORT OF THE SAID INTRODUCTION OF SHARE APPLICATION MONEY SUCH AS CONFIRMATION LETTERS ALONG WITH IDENTITY AND CREDIT WORTHINESS OF THE PERSON WHO INTRODUCED THE SHARE APPLICATION MONEY AND BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE TRANSACTION. IN RESPONSE THERETO, THE ASSESSEE - COMPANY HAS NOT SUBMITTED ANY DETAIL S IN RESPECT OF THE INTRODUCTION OF SHARE APPLICATION MONEY. SEVERAL OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE - COMPANY THROUGH THE AUTHORIZED REPRESENTATIVE TILL THE MAXIMUM POSSIBLE TIME KEEPING THE STATUTORY LIMITATION DATE IN VIEW. HOWEVER, THE ASSES SEE - COMPANY HAS NOT PRODUCED EVEN A CONFIRMATION LETTER LEAVING ASIDE MINIMUM DETAILS LIKE PAN , RETURN OF INCOME AND BANK ACCOUNT REFLECTING THE SAID TRANSACTION AND AS SUCH NEITHER IDENTITY AND CREDITWORTHINESS NOR GENUINENESS OF THE TRANSACTION IS I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 5 - : ESTA BLISHED. IN THE ABSENCE OF ANY EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SUM SO CREDITED / INTRODUCED IN THE GUISE OF SHARE APPLICATION MONEY, THE SUM SO CREDITED OF RS. 1,76,57,458/ - CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE - COMPANY FOR THE YEAR UNDER CONSIDERATION TREATING THE SAME AS UNEXPLAINED CREDITS U/ S 68 OF THE ACT AND ACCORDINGLY ADDED TO THE TOTAL INCOME OF THE ASSESSEE . 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE DISALLOWANCES MADE BY THE AO U/S 14A AND U/S 68 OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE ITAT. 5. AS REGARDS THE DISALLOWANCE U/S 14A, THE LD. DR SUBMITTED THAT THE AO HAS RIGHTLY MADE THE DISALLOWANCE U/S 14A AS THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE DURING THE YEAR AND HAS MADE INVESTMENTS ALSO. HE FURTHER SUBMITTED THAT THE ASSESSEE DID NOT FURNISH THE DETAILS OF INVESTMENTS MADE WHETHER THE ASSESSEE HAD SUFFICIENT OWN FUNDS IS N OT PROVED AND THEREFORE, THE AO WAS JUSTIFIED IN MAKING DISALLOWANCE U/S 14A OF THE ACT. 5.1 WITH REGARD TO THE ISSUE OF SHARE APPLICATION MONEY, THE LD. DR SUBMITTED THAT THE CDIT(A) HAS IGNORED THE I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 6 - : FINDING OF THE AO AND WITHOUT EXAMINING THE DETAILS S UBMITTED BY THE ASSESSEE BEFORE HIM AS ADDITIONAL EVIDENCE , DELETED THE ADDITION MADE BY THE AO. EVEN THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WAS NOT REMANDED TO THE AO FOR VERIFICATION/EXAMINATION, WHICH IS NOT PROPER ON THE PART OF THE CIT(A). HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO IS RESTORED. 6. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT NO ADDITIONAL EVIDENCE WAS FILED BEFORE THE CIT(A) IN RESPECT OF ADDI TION OF SHARE APPLICATION MONEY . IN SUPPORT OF HIS ARGUMENTS, HE RELIED ON THE FOLLOWING CASE LAW: 1. SMT. N. SASIKALA, 151 TAXMAN 42 2. LOKESH AGARWAL, ITA NO. 1021/HYD/2013 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. 7.1 WITH REGARD THE DISALLOWANCE U/S 14A, ON GOING THROUGH THE FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY, WE OBSERVE THAT DURING THE IMPUGNED AY, THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME, THEREFORE, THE ADDITION CANNOT BE MADE U/S 14A. THERE ARE CATENA OF JUDGEMENTS OF HONBLE TRIBUNAL THAT IF THERE IS NO EXEMPT INCOME, NO I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 7 - : DISALLOWANCE CAN BE MADE U/S 14A OF THE ACT. THE CASE LAW RELIED UPON BY THE LD. AR OF THE ASSESSEE QUOTED SUPRA SUPPORTS THE CASE OF THE ASSESSEE. WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUND NOS. (I) TO (III) RAISED BY THE REVENUE ON THIS ISSUE. 7.2 WITH REGARD TO THE GROUND NOS. (IV) TO (VII) REGARDING SHARE APPLICATION MONEY, ON PERUSAL OF THE ORDERS OF BOTH THE AUTHORITIES BELOW, THE AO CATEGORICALLY STATED THAT THE ASSESSEE COMPANY HAS NOT SUBMITTED ANY DETAILS IN RESPECT OF THE INTRODUCTION OF SHARE APPLICATION MON EY EVEN THOUGH SEVERAL OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE COMPANY, WHEREAS THE CIT(A) AS STATED THAT THE DETAILS OF THE LOAN CREDITORS WERE SUBMITTED BY THE ASSESSEE BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS, WHICH WERE VERIFIED BY THE AO. B EFORE THE CIT(A), THE ASSESSEE HAS STATED THAT THESE ARE THE EIGHT PARTIES FROM WHOM THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 6,82,07,836/ - , THE DETAILS OF WHICH WERE EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGE 8 IN A TABULAR FORM. IT IS CLEAR FROM THE FINANCIAL STATEMENTS THAT DURING THE YEAR THERE IS AN INCREASE IN SHARE APPLICATION MONEY PENDING FOR ALLOTMENT OF RS. 1,76,57,458/ - . THEREFORE, IN OUR VIEW, SECTION 68 IS SQUARELY APPLICABLE AS IT IS IMMATERIAL THAT SHARE APPLICANTS ARE OLD FROM WHOM CURR ENT YEAR SHARE APPLICATION MONEY HA S RECEIVED. THE ASSESSEE HAS NOT DISCHARGED ITS ONUS LIES AS PER SECTION 68 OF THE ACT AND THE CIT(A) ERRED IN ACCEPTING I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 8 - : THE ARGUMENTS OF THE ASSESSEE AGAINST THE CONDITIONS LAID DOWN IN SECTION 68 OF THE ACT. THEREFORE , WE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSIONS OF THE LD. AR AND THE CASE LAW RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS TO THE CASE OF THE ASSESSEE. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN TH E INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THIS ISSUE BACK TO THE FILE OF THE AO FOR A LIMITED PURPOSE FOR VERIFICATION OF THE ISSUE U/S 68 OF THE ACT. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE ITS CASE BY FILING DOCUMENTARY EVID ENCE BEFORE THE AO. NEEDLESS TO SAY THAT REASONABLE OPPORTUNITY IS GIVEN TO TH E ASSESSEE AND THE ASSESSEE IS DIRECTED NOT TO SEEK UNNECESSARY ADJOURNMENTS FOR EARLY COMPLETION OF THE ASSESSMENT. THE GROUNDS RAISED ON THIS ISSUE ARE ALLOWED FOR STATISTICAL P URPOSES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST , 2021 . SD/ - SD/ - ( S.S. GODARA ) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 18 TH AUGUST , 20 2 1 . K V I TA NO. 9/ /HYD /20 18 M/S PVK ENGINEERS PVT. LTD., HYDERABAD. : - 9 - : C OPY TO : 1 A CIT, CENTRAL CIRCLE 3 (2) , 7 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 0 04 2 M/S PVK ENGINEERS PVT. LTD., 8 - 3 - 293/82/A, 270/R/A/1, PLOT NO. 270/E/A, ROAD NO. 10, JUBILEE HILLS, HYDERABAD. 3 C I T(A) 4 , HYDERABAD. 4 PR. CIT - 4 , HYDERABAD. 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.