Likhami Leasing Limited, New Delhi V. The Dy.CIT., New Delhi

ITA 1236/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9869 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 13-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 31-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: MRS MANJU SISODIA ADVS; V S WALI
• Keywords: Set aside
• Section: 271(1)(c); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `D : NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NOS.2469/DEL./2008 & 1236/DEL./2009 (ASSESSMENT YEAR : 2005-06) LIKHAMI LEASING LIMITED, VS. DCIT, CIRCLE 4(1), 407, ASHOKA ESTATE, NEW DELHI. 24, BARAKHAMBA ROAD, NEW DELHI-110 001. (PAN/GIR NO.AAACL2059H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.S. WALI & MRS. MANJU SISODIA, ADVS. REVENUE BY : SHRI B.K. GUPTA, SR.DR ORDER PER K.D. RANJAN: AM THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEAR 2 005-06 ARISE OUT OF TWO SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX ( APPEALS)-VII, NEW DELHI. APPEAL IN I.T.A. NO.2469/DEL./2008 IS DIRECTED AGAINST THE QUANTUM ADDITION WHEREAS THE APPEAL IN I.T.A. NO.1236/DEL./2009 IS DIRECTED AGAINST THE CONFIRMING THE PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT. I.T.A. NO.2469/DEL./2008 2. THE ONLY ISSUE FOR CONSIDERATION IN THIS APPEAL RELATES TO CONFIRMING HE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A IN RESPECT OF ADMINISTRATIVE AND OFFICE EXPENSES INCURRED FOR EARNING DIVIDEND INCOM E. BRIEF FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE COMPANY IS DEALING IN T RADING AND INVESTMENT IN SHARES. THE TOTAL INCOME SHOWN BY THE ASSESSEE COMPANY WAS OF R S.5,36,10,737 WHICH INCLUDED DIVIDEND INCOME OF RS.3,77,34,576. THE RATIO OF DI VIDEND INCOME TO TOTAL INCOME WAS 70.39%. THE ASSESSING OFFICER APPORTIONED THE ADMI NISTRATIVE AND GENERAL EXPENSES TOWARDS EARNING OF DIVIDEND INCOME IN THE RATIO OF 70.39%. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED EXPENSES OF RS.6 LAKH IN RESPECT OF PAYMENT MADE TO MRS. M. BANGUR FOR HER ADVISORY SERVICES ON INVESTMENT MATTERS. T HE ASSESSING OFFICER DISALLOWED 70.39% OF SUCH EXPENSES WHICH AMOUNTED TO RS.12,40, 232 REMAINING THE BALANCE OF RS. 8,73,000.THUS, THE TOTAL AMOUNT DISALLOWED BY THE A SSESSING OFFICER STOOD AT RS.14,73,000. 3. ON APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEA LS) DID NOT AGREE WITH THE VIEW OF THE ASSESSING OFFICER THAT RS.6 LAKH PAID T O MRS. M. BANGUR FOR HER ADVISORY SERVICES WAS IN RESPECT OF ONLY EXEMPTED DIVIDEND I NCOME. HER ADVICE PERTAINED TO PURCHASE AND SALE OF SHARES WHICH HAS RESULTED INTO BOTH EARNING THE EXEMPTED DIVIDEND INCOME AS ALSO BUSINESS PROFITS. ACCORDINGLY, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS OF THE VIEW THAT THE PAYMENT OF RS.6 LAKH MADE TO MRS. M. BANGUR SHOULD BE ALLOCATED IN THE PROPORTION OF 70.39% AND 29.61% ONLY. THE COMMISSIONER OF INCOME-TAX (APPEALS) ACCORDINGLY ALLOWED PART RELIE F IN RESPECT OF DISALLOWANCE OF RS.6 LAKH. AS REGARDS OTHER BALANCE OF ADMINISTRATIVE E XPENSES, THE COMMISSIONER OF INCOME- TAX (APPEALS) UPHELD THE DISALLOWANCE. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE IS NOW COVERED BY THE DECIS ION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. DAGGA CAPITAL MANAGEMENT PVT. L TD., REPORTED IN 312 ITR 81 (MUM.) (SB), WHEREIN THE ISSUE INVOLVED IN THIS APPEAL WAS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 5. SINCE NEITHER THE ASSESSING OFFICER NOR THE COMM ISSIONER OF INCOME-TAX (APPEALS) HAVE EXAMINED THE MATTER IN THE LIGHT OF THE DECISION OF SPECIAL BENCH IN THE CASE OF ITO VS. DAGGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA), WE FEEL IT APPROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFIC ER WITH THE DIRECTION TO EXAMINE THE CASE IN THE LIGHT OF RULE 8B OF I.T. RULES, 1962 AND DEC IDE THE ISSUE ON MERITS AFTER ACCORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEAR D. I.T.A NO.1236/DEL./2009 6. SINCE WE HAVE SET ASIDE THE QUANTUM ADDITION TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED ON MERITS IN ACCORDANCE WITH THE DECI SION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE CITED SUPRA, WHICH IS THE BASIS OF LEVY OF PENALTY. SINCE, THE APPEAL RELATING TO QUANTUM ADDITION HAS BEEN SET ASIDE, THE VERY BASIS OF LEVY OF PENALTY DOES NOT EXIST. HON'BLE APEX COURT IN THE CASE OF K.C. BUILDERS & A NOTHER VS. ACIT, 265 ITR 562 HAS HELD THAT WHERE ADDITIONS MADE IN THE ASSESSMENT OR DER ON THE BASIS OF WHICH PENALTY IS LEVIED, ARE DELETED, THERE REMAINS NO BASIS AT ALL FOR LEVYING THE PENALTY FOR CONCEALMENT AND, THEREFORE, IN SUCH A CASE NO PENALTY CAN SURVI VE AND PENALTY IS LIABLE TO BE CANCELLED. ORDINARILY, PENALTY CANNOT STAND IF ASSESSMENT ITSE LF IS SET ASIDE. RESPECTFULLY FOLLOWING THE SAID DECISION, WE CANCEL THE PENALTY, AS THE VE RY BASIS OF IMPOSITION OF PENALTY IS NOT IN EXISTENCE. WE WOULD LIKE TO CLARIFY THAT ON RE- ASSESSMENT IF ASSESSING OFFICER IS OF THE VIEW THAT PENALTY IS LEVIABLE, HE WILL BE FREE TO I NITIATE PENALTY PROCEEDINGS AFRESH. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 8. ORDER PRONOUNCED IN OPEN COURT ON (C.L. SETHI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, AUGUST ,2009. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT