P.Gowtham Chand Jain, Vellore V. DCIT, Vellore

ITA 1199/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8821 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: SUDHEENDRA B R
• Keywords: Reopening of assessment; Earning of tax free income; Difference of opinion; Change of opinion
• Section: 143(3); 234B; 14A; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NOS.1199 & 1202/MDS/2016 ( / ASSESSMENT YEAR: 2009-10) MR. P.GOWTHAM CHAND JAIN, 280, THAZHAYATHAM BAZAAR, GUDIYATTAM, VELLORE-632 602. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-I VELLORE PAN: AA ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SUDHEENDRA B.R., C.A. /RESPONDENT BY : MR. SUPRIYO PAL, JCIT /DATE OF HEARING : 12 TH JULY, 2016 /DATE OF PRONOUNCEMENT : 15 TH JULY, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGGRIEVED BY THE TWO SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-13, CHENNAI D ATED 04.02.2016 & 07.01.2016 IN ITA NO.309 & 122/CIT(A )- 13/2009-10 PASSED UNDER SECTION 143(3) AND 143(3) R.W.S. 147 & 250(6) OF THE ACT RESPECTIVELY FOR THE SAME A SSESSMENT YEAR 2009-10. 2 ITA NOS.1199 & 1202 /MDS/2016 ITA NO.1202/MDS/2016:(A.Y.2009-10) I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.1,44,166 /- MADE BY THE LEARNED ASSESSING OFFICER BEING DIFFERENCE IN INTEREST INCOME. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 234B OF THE ACT. ITA NO.1199/MDS/2016: 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER, THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- (I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE VALIDITY OF REOPENING OF ASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT JUST BECAUSE OF MERE CHANGE OF OPINION. (II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER BY INVOKING T HE PROVISIONS OF SECTION 14A R.W.R. 8D OF THE I.T.RULE S. (III) THE LEARNED ASSESSING OFFICER HAS ERRED IN LE VYING INTEREST UNDER SECTION 234B OF THE ACT. 3. SINCE THE LEARNED AUTHORIZED REPRESENTATIVE DID NOT PRESS THE GROUND WITH RESPECT TO REOPENING OF ASSES SMENT 3 ITA NOS.1199 & 1202 /MDS/2016 UNDER SECTION 147 OF THE ACT, IN THE APPEAL ITA NO.1199/MDS/2016 THE GROUND IS DISMISSED AS SUCH. ITA NO.1202/MDS/2016:- 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL ENGAGED IN THE BUSINESS OF WHOLESALE DEA LER IN COCONUT FILED HIS RETURN OF INCOME FOR THE ASSESSME NT YEAR 2009-10 ADMITTING INCOME OF `54,44,375/-. THE CASE WAS SELECTED FOR SCRUTINY THEREAFTER ASSESSMENT WAS COM PLETED UNDER SECTION 143(3) OF THE ACT ON 25.11.2011 WHERE IN THE LEARNED ASSESSING OFFICER MADE ADDITION OF RS.1,44, 166/- BEING DIFFERENCE IN INTEREST INCOME. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LEAR NED ASSESSING OFFICER THAT THE ASSESSEE HAD EXTENDED LO AN OF `32,19,500/- TO K.ANAND HUF DURING THE MONTH OF OCT OBER, 2008 @ 18% INTEREST. THE INTEREST CHARGEABLE ON THI S LOAN WORKS OUT TO ` 2,89,755/-. HOWEVER, THE ASSESSEE HA S CHARGED ONLY `1,45,589/-. THEREFORE, THE LEARNED AS SESSING OFFICER ADDED THE DIFFERENCE AMOUNT OF `1,44,166/- (2,89,755 1,45,589) TO THE INCOME OF THE ASSESSEE. THE AFO RESAID AMOUNT WAS BROUGHT TO TAX UNDER THE HEAD INCOME FR OM 4 ITA NOS.1199 & 1202 /MDS/2016 OTHER SOURCE. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE LEA RNED ASSESSING OFFICER. 5. AFTER PERUSING THE ORDERS OF THE REVENUE AND HEA RING BOTH SIDES, WE FIND THAT THE FACTS ARE NOT BROUGHT OUT FULLY. ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSE E FOR CHARGING A LESSER INTEREST IF THE LOAN EXTENDED BY THE ASSESSEE IS FROM HIS OWN NON-INTEREST BEARING FUNDS . THE FACT THAT WHETHER THE LOAN IS EXTENDED FROM NON-INTEREST BEARING OR INTEREST BEARING FUNDS OF THE ASSESSEE IS NOT BR OUGHT ON RECORD. THEREFORE, WE REMIT THE ISSUE BACK TO THE F ILE OF THE LEARNED ASSESSING OFFICER TO CONSIDER THE ISSUE AFR ESH. ACCORDINGLY, THE GROUND WITH RESPECT TO LEVY OF INT EREST UNDER SECTION 234B IS ALSO REMITTED BACK TO THE FILE OF T HE LEARNED ASSESSING OFFICER FOR DENOVO CONSIDERATION AND BASE D ON OUR OBSERVATIONS HEREIN ABOVE. ITA NO.1199/MDS/2016: 6. IN THE CASE OF THE ASSESSEE ASSESSMENT WAS ONCE AGAIN REOPENED UNDER SECTION 147 OF THE ACT AND A N OTICE UNDER SECTION 148 WAS ISSUED ON 14.12.2011 AND THER EAFTER 5 ITA NOS.1199 & 1202 /MDS/2016 THE ASSESSMENT WAS COMPLETED ON 1.3.2013 WHEREIN TH E LEARNED ASSESSING OFFICER MADE CERTAIN ADDITIONS IN VOKING THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE RULES FOR HAVING MADE INVESTMENT IN SHARES OF `1,51,500/- AND IMMOV ABLE PROPERTIES OF RS.56,58,114/-. THE LEARNED ASSESSING OFFICER ALSO CALCULATED INTEREST UNDER SECTION 234B & 234C OF THE ACT ON THE ADDITIONAL TAX COMPUTED ARISING OUT OF THE A DDITIONS MADE BY INVOKING THE PROVISIONS OF SECTION 14A OF T HE ACT. 7. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESS ING OFFICER BY RELYING ON CERTAIN DECISIONS CITED IN H IS ORDER AND BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T. THE MAIN ARGUMENTS OF THE APPELLANT ARE THAT NO EXEMPT INCOM E WAS EARNED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND THAT OWN FUNDS HAVE BEEN UTILIZED FOR MAKING THE INVESTMENTS WHICH WOULD RESULT IN EXEMPT INCOME. TH E APPELLANT ARGUED BEFORE ME THAT WHERE THERE IS NO EXEMPT INCO ME THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE RELYING ON THE DE CISION OF HIGH COURT OF DELHI IN THE CASE OF CHEMINVEST LTD. (ITA NO.749 /2014 DATED 02.09.2015). IN THIS REGARD IT IS PERTINENT TO REFE R TO THE CBDT CIRCULAR NO.5 OF 2014 WHICH IS REPRODUCED BELOW:- CIRCULAR NO.5/2014 (F.NO.225/182/2013-ITA II) DATED 11.02.2014: . . THE CBDT CIRCULAR SUCCINCTLY EXPLAINS HOW THE PROVI SIONS OF SECTION 14A R.W.R 8D ARE APPLICABLE EVEN IN A CASE WHERE NO EXEMPT INCOME IS EARNED BY AN ASSESSEE. I FIND THAT THE CONTENTS OF THE CIRCULAR ISSUED BY THE CBDT WERE NOT BROUGHT TO THE NOTICE OF THE H ONBLE HIGH COURT. IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT THE APPELLANT IS LIABLE FOR 6 ITA NOS.1199 & 1202 /MDS/2016 DISALLOWANCE U/S.14A R.W.R 8D EVEN FOR THOSE YEARS IN WHICH NO EXEMPT INCOME WAS EARNED. THE APPELLANT FAILS ON TH IS GROUND. 8. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT THE ASSESSEE HAS NON-INTEREST BEARIN G FUND AND OWN FUND FOR MORE THAN THE INVESTMENT MADE IN S HARES AND IMMOVABLE PROPERTIES. FURTHER NO EXPENDITURE WA S CLAIMED FOR EARNING ANY EXEMPT INCOME. THEREFORE, HE PLEADED THAT THE ADDITION MADE BY INVOKING PROVISIO NS OF SECTION 14A R.W.R 8D MAY BE DELETED. HE FURTHER SU BMITTED THAT ONCE THESE ADDITIONS ARE DELETED, CHARGE OF IN TEREST UNDER SECTION 234B & C OF THE ACT WILL NOT ARISE. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND VEHEMENTLY RELIED IN THE ORDERS OF THE REVENUE . 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS AVAILABLE ON RECORD. ON EXAMI NING THE PAPER BOOK SUBMITTED BY THE ASSESSEE AT THE TIME OF HEARING, WE FIND THAT THE ASSESSEE HAS OWN CAPITAL OVER `90. 00 LAKHS WHICH IS WELL ABOVE THAN THE INVESTMENTS MADE BY TH E ASSESSEE IN SHARES AND IMMOVABLE PROPERTIES. FURTHE R, THE REVENUE HAS NOT BROUGHT ON RECORD ANY EXPENDITURE I NCURRED 7 ITA NOS.1199 & 1202 /MDS/2016 BY THE ASSESSEE, WHICH IS CLAIMED AS DEDUCTION, FOR EARNING EXEMPT INCOME. THEREFORE, AS RIGHTLY POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE INVOKING SECTION 14A OF THE ACT IN THE CASE OF THE ASSESSEE WILL NOT ARISE. HENCE WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LEA RNED ASSESSING OFFICER FOR THE LIMITED PURPOSES OF VERIF YING WHETHER THE ASSESSEE HAS OWN CAPITAL OR NON-INTERES T BEARING FUNDS OR BOTH OF WHICH EXCEEDING THE INVESTMENT MAD E BY THE ASSESSEE IN SHARES & IMMOVABLE PROPERTIES AND IF FO UND SO, DELETE THE ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT, CONSEQUENTLY DELETE THE INTEREST CH ARGED UNDER SECTION 234B & 234C OF THE ACT. IF FOUND OTHE RWISE PASS APPROPRIATE ORDER AS PER LAW AND MERIT. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREI N ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 15 TH JULY, 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 15 TH JULY, 2016 SOMU 8 ITA NOS.1199 & 1202 /MDS/2016 *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF