MAFATLAL FABRICS P. LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 1061/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48576 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Assessee Lawyers: NISHA GOPALANI
• Section: 14A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.1061/MUM/2010 A.Y 2005-06 MAFATLAL FABRICS PVT. LTD., 4 TH FLOOR, MAFATLAL HOUSE, BACKBAY RECLAMATION, MUMBAI 400 020. PAN: AAAGP 4133 C VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. NISHA GOPALANI. RESPONDENT BY : MS. VANDANA SAGAR. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BU T THE ONLY DISPUTE IS REGARDING DISALLOWANCE OF ` `` ` .4,38,331/- U/S.14A R.W.R. 8D. 2. BRIEF FACTS OF THE CASE ARE THAT ORIGINALLY A DI SALLOWANCE U/S.14A WAS MADE AT ` `` ` .3,10,000/- BY THE AO. THE ASSESSEE TOOK THE MATTER IN APPEAL TO THE CIT[A] WHO GAVE DIRECTION TO RECOMPUT E THE DISALLOWANCE U/S.14A R.W.R. 8D VIDE ORDER DATED 24-11-2008. THE MATTER WAS FURTHER TAKEN BEFORE THE TRIBUNAL AND THE TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF THE AO VIDE PARA-3 TO RECOMPUTE THE DIS ALLOWANCE U/S.14A IN THE LIGHT OF THE DECISION OF THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. VS. DCIT [43 DTR 171 ]. PARA-3 OF THE TRIBUNALS ORDER READS AS UNDER: 3. AS REGARDS GROUND NO. 2 TO 5, CONCERNING DISALL OWANCE OF EXPENDITURE U/S. 14A OF THE ACT, LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS LEARNED DR SUBMITTED THAT IN THE LIGHT OF THE DECISION OF HON' BLE BOMBAY HIGH COURT IN 2 THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LT D., VS. DCIT AND ANOTHER (2010) 328 ITR 81 (BOM.) MATTER REQUIRES TO BE RECONSIDERED BY THE ASSESSING OFFICER. BY RESPECTFULLY FOLLOWING AFOREC ITED DECISION WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE AMOUNT DISALLOWA BLE U/S. 14A OF THE ACT. 3. IN CONSEQUENCE TO THE ORDER OF THE CIT[A] AO PAS SED ORDER DATED 13-1-2009 WHEREIN DISALLOWANCE U/S.14A R.W.R 8D WAS MADE AT 4,38,331/- AFTER REDUCING THE EARLIER ADDITION OF ` `` ` .3,10,000/- AND FURTHER ADDITION OF ` `` ` .1,28,331/- WAS MADE TO THE INCOME OF THE ASSESSEE. THIS MATTER WAS AGAIN TAKEN BEFORE THE CI T[A] WHO DECIDED THE ISSUE VIDE PARA-2 WHICH IS AS UNDER: 2. THIS IS AN APPEAL AGAINST ORDER PASSED BY ASSESS ING OFFICER GIVING EFFECT TO THE ORDER OF THE FIRST APPELLATE COMMISSI ONER. THE FIRST GROUND OF APPEAL IS AGAINST DISALLOWANCE OF SF4A OF THE INCOME-TAX PCT. IT IS CONTENDED THAT THE ASSESSING OFFICER HAS ERRED IN COMPUTING DISALLOWANCE U/S14A READ WITH RULE 8D OF THE INCOME -TAX RULES. IT IS CONTENDED THAT ASSESSING OFFICER OUGHT TO HAVE PROV IDED THE DERAILS OF COMPUTATION OF DISALLOWANCE U/S. 14& READ WITH RULE 8D IN THE GROUNDS APPEAL. A REQUEST HAS ALSO BEEN MADE TO INVOKE THE DECISION OF HONBLE ITAT MUMBAI IN THE CASE OF INDEXPORT LTD. T HESE ARE THE FIRST GROUNDS OF APPEAL ON THE ISSUE OF DISALLOWANCE OF S ECTION 14K A PERUSAL OF THE ORDER OF THE APPELLATE COMMISSIONER, EFFECT TO WHICH HAS BEEN GIVEN BY ASSESSING OFFICER4 REVEALS THAT T HE APPELLATE COMMISSIONER HAD DIRECTED ASSESSING OFFICER TO INVO KE RULE 8D AND MAKE A DISALLOWANCE U/S. 14A ACCORDINGLY: I FIND TH AT THIS IS EXACTLY WHAT THE ASSESSING OFFICER HAS DONE. HE HAS INVOKED RULE 8D AND HAS COMPUTED THE DISALLOWANCE ACCORDINGLY. ONCE THIS HA S BEEN DONE BY ASSESSING OFFER; THERE SHOULD BE NO CAUSE OF GRIEVA NCE TO THE APPELLANT TO. THE EXTENT IT THAT DIRECTIONS BF THE APPELLATE COMMISSIONER ARE STRICTLY FOLLOWED BY THE ASSESSING OFFICER AS FAR A S THE CONTENTION THAT ASSESSING OFFICER HAS ERRED IN INVOKING RULE BU OF THE INCOME-TAX RULES IS CONCERNED, I FIND THAT THE RULE HAS TO BE INVOKED MECHANICALLY AND DOES NOT REQUIRE ANY IN-DEPTH APPLICATION OF MI ND. IF AT ALL MISTAKE HAS BEEN COMMITTED BY ASSESSING OFFICER, APPELLANT COULD HAVE APPROACHED ASSESSING OFFICER REQUESTING FOR RECTIFI CATION OF THE MISTAKE. IT IS NOT KNOWN WHETHER APPELLANT HAS RESO RTED TO THIS APPROACH OR NOT. IN ANY SITUATION, SINCE RULE 8D HA S BEEN INVOKED, THE DIRECTION OF THE FIRST APPELLATE COMMISSIONER HAVE BEEN STRICTLY FOLLOWED BY ASSESSING OFFICER LEADING TO NO CAUSE O F GRIEVANCE AS PER THE DIRECTIONS OF THE FIRST APPELLATE AUTHORITY. AP PELLANTS CONTENTION THAT ASSESSING OFFICER HAD TO INFORM THE CALCULATIO N FOR MAKING THE DISALLOWANCE UNDER RULE SD IS BASELESS SINCE ALL TH E TRANSACTIONS HAVE 3 BEEN PROVIDED BY ASSESSING OFFICER IN THE ORDER ITS ELF. LASTLY, A FRESH REQUEST TO INVOKE DECISION OF HON'BLE MUMBAI ITAT O N THE ISSUE UNDER CONSIDERATION CANNOT BE ACCEDED TO SINCE THE ISSUE HAS ALREADY BEEN DELIBERATED UPON AND ADJUDICATED BY MY PREDECESSOR APPELLATE COMMISSIONER. AS A RESULT OF THIS FIRST FOUR GROUND S OF APPEAL DO NOT SURVIVE AND ARE REJECTED. 4. AGGRIEVED BY THE ORDER ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. WHEN IT WAS POINTED OUT THAT THE MATTER H AS ALREADY BEEN REMITTED BACK TO THE FILE OF THE AO BY THE TRIBUNAL IN I.T.A.NO.972/MUM/2009, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT SHE HAS NO PROBLEM IF THE ISSUE IS AGAIN REMITTED B ACK TO THE FILE OF THE AO TO MAKE A REASONABLE DISALLOWANCE IN THE LIGHT O F THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. VS. DCIT [SUPRA]. BUT AT THE SAME TIME, IN THAT CASE, DIRECTION MAY BE GIVEN TO THE AO THAT IN NO CASE THE ADDITION SHOULD EXCEED THE ADDITION OF ` `` ` .3,10,000/- WHICH WAS MADE IN THE ORIGINAL ASSESSME NT. SHE SUBMITTED THAT IN NO CASE ASSESSEE SHOULD LAND IN A WORST SITUATION AFTER FILING THE APPEAL, THAN IT WAS THERE ORIGINAL LY. 5. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF THE CIT[A] AND SUBMITTED THAT ASSESSEE SHOULD NOT HAVE ANY GRIEVANCE FROM THE ORDER OF THE CIT[A] BECAUSE THE TRIBUNAL H AS ALREADY SET ASIDE THE MATTER TO THE AO FOR THE CONSIDERATION OF DISALLOWANCE U/S.14A R.W.R. 8D IN THE LIGHT OF THE DECISION OF T HE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. VS. DCIT [SUPRA]. IN ANY CASE, TRIBUNAL HAS NO SUCH POWERS T O RESTRICT THE POWERS OF THE AO WHILE SETTING ASIDE THE PROCEEDING S. 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND FORCE IN THE SUBMISSIONS OF THE LD. DR THAT WHEN A PARTICULAR DISALLOWANCE OR ASSESSMENT IS REMITTED BACK TO THE FILE OF THE AO TO BE DECIDED DENOVO, PARTICULARLY IN THE LIGHT OF A DECI SION OF THE HON'BLE HIGH COURT, THEN THE TRIBUNAL HAS NO POWER TO RESTR ICT OR CURTAIL THE POWERS OF THE AO. ON THIS VIEW, WE ARE SUPPORTED BY THE DECISION OF THE HON'BLE HIMACHAL PRADESH HIGH COURTS DECISION IN THE CASE OF CIT VS. H.P. STATE FOREST CORPORATION LTD. [320 ITR 53] . IN THAT CASE, THE FACTS WERE AS UNDER: THE ACCOUNTS OF THE ASSESSEE, A STATE GOVERNMENT C ORPORATION, NOT HAVING BEEN AUDITED BY THE OFFICE OF THE COMPTROLLE R AND AUDIT GENERAL, THE ASSESSING OFFICER TREATED THE ASSESSE ES RETURNS FOR THE ASSESSMENT YEARS 1993-94 AND 1994-95 AS NON EST AND PASSED AN ASSESSMENT ORDER UNDER SECTION 144 OF THE INCOME-TA X ACT, 1961. THE COMMISSIONER [APPEALS] AFFIRMED THIS, BUT ON FURTHE R APPEAL, THE TRIBUNAL SET ASIDE THE ASSESSMENT AND DIRECTED ASSE SSMENT AFRESH WITH THE AUDITED ACCOUNTS SUBMITTED BY THE ASSESSEE, WIT H A FURTHER DIRECTION THAT THE INCOME TO BE ASSESSED WAS NOT TO BE AT A F IGURE LESS THAN THAT DECLARED BY THE ASSESSEE IN ITS RETURN. ON A RECTIF ICATION APPLICATION, BY THE ASSESSEE, THE TRIBUNAL ALLOWED THE APPLICATION, BUT DIRECTED THAT THE INCOME SHOULD NOT BE ASSESSED AT A FIGURE MORE THAN THAT ASSESSED BY THE ASSESSING OFFICER UNDER SECTION 144. ON THE ABOVE FACTS IT WAS HELD AS UNDER: HELD, THE ONCE THE RETURNS WERE TREATED AS NON EST , SUCH RETURNS COULD NOT BE USED EVEN AGAINST THE ASSESSEE. WHEN THE TRI BUNAL WAS DIRECTING ASSESSMENTS DE NOVO, NO FETTERS AS TO THE UPPER OR LOWER LIMIT OF INCOME TO BE ASSESSED COULD HAVE BEEN PLACED BY THE TRIBUNAL ON THE ASSESSING OFFICER. HE HAD TO GO THROUGH THE AUDITED ACCOUNTS, APPLY HIS MIND AND FRAME THE ASSESSMENTS AFRESH IN ACCORDANCE WITH THE DULY AUDITED ACCOUNTS PLACED ON RECORD. THE TRIBUNALS D IRECTIONS, FIRSTLY, TO ASSESS THE INCOME AT A FIGURE NOT LESS THAN THAT DE CLARED IN ASSESSEES RETURNS AND UPON THE RECTIFICATION APPLICATION, TO ASSESS THE INCOME AT A FIGURE NOT HIGHER THAN THAT ASSESSED UNDER SECTION 144, WERE UNSUSTAINABLE. 5 THUS, IT IS CLEAR THAT TRIBUNAL HAS NO POWER TO RES TRICT THE POWERS OF THE AO IN FRESH PROCEEDINGS. THEREFORE, WE SET ASID E THE ORDER OF THE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION THAT RULE 8D COULD NOT BE APPLIED BECAUSE SAME HAS BEEN HELD TO BE ONLY OF PROSPECTIVE APPLICATION BY THE H ON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. VS . DCIT [SUPRA]. HOWEVER, AO IS FREE TO WORK OUT THE REASONABLE DISA LLOWANCE IN THE LIGHT OF THE ABOVE DECISION OF THE HON'BLE BOMBAY H IGH COURT. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9/4/2011. SD/- SD/- (D.K.AGARWAL) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI:29/4/2011. P/-*