Messung Systems Private Limited, Pune V. Deputy Commissioner of Income tax, Pune

ITA 1129/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5240 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1129/PUN/2017 / ASSESSMENT YEAR : 2011-12 MESSUNG SYSTEMS PVT. LTD., 501, LUNKAD SKYVISTA, SR.NO.230/A/3/2, VIMAN NAGAR, PUNE 411 014. PAN : AABCM1832E. . / APPELLANT. V/S THE DY.COMMISSIONER OF INCOME TAX , CIRCLE 9, PUNE. . / RESPONDENT ASSESSEE BY : SHRI P.D. KUDVA. REVENUE BY : SHRI PANKAJ GARG. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 7, PUNE DATED 31.01.2017 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUS INESS OF TRADING OF PROGRAMMABLE LOGIC CONTROLLERS (PLC) AND ITS PART S. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2011-12 ON 30.09.2011 DECLA RING TOTAL / DATE OF HEARING : 25.07.2019 / DATE OF PRONOUNCEMENT: 19.08.2019 2 INCOME OF RS.15,11,04,121/-. THE CASE WAS SELECTED FOR SCRU TINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT V IDE ORDER DT.20.03.2014 AND THE TOTAL INCOME WAS DETERMINED AT RS.15,14,70,020/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.31.01.2017 (IN APPE AL NO.PN/CIT(A)-7/CIR-9/1099/2014-15) GRANTED PARTIAL RELIEF T O THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND : THE HONBLE CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF RS.3,55,902/- MADE BY THE AO AS RELATABLE TO EXEMPT DIVIDEND INCO ME OF RS.20,92,021/- UNDER SEC.14A R.W. RULE 8D(2)(III) O F THE I.T. RULES. THE APPELLANT PLEADS THAT THE DISALLOWANCE MADE BY THE AO IS NOT JUSTIFIED AND IS NOT VALID. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.20,92,021/- WH ICH WAS CLAIMED AS EXEMPT INCOME AND SUOMOTO DISALLOWED RS.10,000/ - U/S 14A OF THE ACT. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY PART OF ADMINISTRATIVE EXPENSES SHOULD NOT BE CONSIDERED TO HAV E BEEN INCURRED FOR EARNING EXEMPT INCOME AND BE DISALLOWED U/S 14A OF THE ACT. THE ASSESSEE MADE THE SUBMISSIONS WHICH WERE NOT FOUND ACCE PTABLE TO THE AO. AO THEREAFTER BY FOLLOWING THE METHODOLOGY PRESCRIBED UNDER RULE 8D OF I.T. RULES WORKED OUT THE DISALLOWANCE AT RS.3,65,902 /- U/S 14A OF THE ACT AND MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDE R OF AO BUT HOWEVER DIRECTED THE AO TO GRANT RELIEF OF RS.10,000/- TH AT WAS SUOMOTO DISALLOWED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF L D.CIT(A), ASSESSEE IS NOW BEFORE US. 3 4. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND SUBMITTED THAT THE DIVIDEND RECEIVED FROM MUT UAL FUNDS HAS BEEN EITHER CREDITED TO THE MUTUAL FUND ACCOUNT O R BANK ACCOUNT VIA ECS AND NO ADMINISTRATIVE COSTS HAS BEEN INCURRED. H E SUBMITTED THAT THERE WERE ONLY 61 ENTRIES OF DIVIDEND AND IN SUCH A SITUATION, THE ADMINISTRATIVE EXPENSES THAT WERE ESTIMATED AT RS.800/ - PER MONTH I.E., 10,000/- PER YEAR WAS FULLY JUSTIFIED. HE FURTHER SUBMIT TED THAT AO HAS NOT RECORDED PROPER SATISFACTION AND HAS NOT COME TO A CONCLUSION AS TO HOW THE WORKING OF DISALLOWANCE MADE BY THE ASSES SEE WAS INCORRECT. HE THEREFORE SUBMITTED THAT NO ADDITION BE CA LLED FOR IN THE PRESENT CASE. LD. D.R. ON THE OTHER HAND SUBMITTED THAT AO HAD RECORDED A PROPER SATISFACTION BEFORE INVOKING THE PROVISIO NS OF SEC.14A OF THE ACT AND ONCE IT IS HELD THAT THE PROVISIONS OF SEC.1 4A OF THE ACT ARE APPLICABLE, THEN THE DISALLOWANCE HAS TO BE WORKED AS PER THE MANDATE OF RULE 8D OF I.T. RULES. HE THUS SUPPORTED THE ORDER OF AO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DISALLOWANCE U/S 14A OF THE ACT. IT IS ASSESSEES CONTENTION THAT N O PROPER SATISFACTION WAS RECORDED BY THE AO BEFORE INVOKING THE P ROVISIONS OF SEC.14A OF THE ACT. WE DO NOT FIND ANY MERIT IN THE ARGU MENT OF THE LD.A.R. WE FIND THAT ASSESSEE HAD SUOMOTO DISALLOWED RS.1 0,000/- AS EXPENSES U/S 14A OF THE ACT. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS AO HAD ASKED THE ASSESSEE TO JUSTIFY THE WORKING OF DISALLOWANCE. HE THEREAFTER AND AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE CONCLUDED THAT THE WORKING MADE BY THE ASSESSEE WAS NOT PROPER. HE THEREAFTER PROCEEDED TO DISALLOW THE EXPENS ES AS PER THE MANDATE OF RULE 8D. CONSIDERING THE AFORESAID FACTS, WE A RE OF THE VIEW 4 THAT NO ERROR COULD BE FOUND IN THE ACTION OF THE AO. W E THUS CONFIRM THE ACTION OF THE AO. THUS, THE GROUND OF THE ASSESSEE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 19 TH DAY OF AUGUST, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 19 TH AUGUST, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-7, PUNE. PR. CIT-6, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.