DCIT, CEN. CIR-2(3), KOLKATA, Kolkata V. Shri Vikash Jain, Kolkata

ITA 1282/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1687 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 09-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 234B; 14A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI J.SU DHAKAR REDDY, AM] I.T.A NO. 1282/KOL/2 015 ASSESSMENT YEAR : 2012-1 3 D.C.I.T., CENTRAL CIRCLE-2(3) -VS- SHRI VIKASH JAIN KOLKATA. KOLKATA [PAN : ACTPJ 6174 D] (APPELLANT) (RESPONDENT) I.T.A NO. 1283/KOL/2015 ASSESSMENT YEAR : 2012-1 3 D.C.I.T., CENTRAL CIRCLE-2(3) -VS- SHRI VIVEK J AIN KOLKATA. KOLKATA [PAN : ACTPJ 6173 E] (APPELLANT) (RESPONDENT) C.O.NOS.58&59/KOL/2015 (A/O ITA NOS.1282 & 1283/KOL/2015) SHRI VIKASH JAIN & SHRI VIVEK JAIN -VS- D.C.I.T., CENTRAL CIRCLE-2(3) KOLKATA KOLKATA [PAN : ACTPJ 6174D & ACTPJ 6173 E] (CROSS OBJECTORS) (RESPONDENT) FOR THE REVENUE : SHRI SALLONG YADEN, ADDL. C IT FOR THE ASSESSEE : NONE DATE OF HEARING : 14.08.2017. DATE OF PRONOUNCEMENT : 18.08.2017. ORDER PER N.V.VASUDEVAN, JM ITA NOS.1282/KOL/2015 & 1283/KOL/2015 ARE APPEALS FILED BY THE REVENUE AGAINST TWO ORDERS BOTH DATED 28.08.2015 OF CIT(A)- 20, KOLKATA RELATING TO A.Y.2012- 13. ITA NO.1282/KOL/2015 IS IN RELATION TO AN ASSES SEE BY NAME SHRI VIKASH JAIN. ITA NO.1283/KOL/2015 IS AN APPEAL IN RELATION TO AN ASS ESSEE BY NAME SHRI VIVEK JAIN. BOTH THE ASSESSEES HAVE FILED CROSS OBJECTION AGAIN ST THE VERY SAME ORDERS OF CIT(A). 2 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 2 2. GROUNDS OF APPEAL RAISED BY THE REVENUE IN THES E APPEALS ARE COMMON AND THEY READ AS FOLLOWS :- 1. LD. CIT(A) ERRED IN HIS ORDER TO TREAT THE AMO UNT SEIZED IN COURSE OF SEARCH AS ADVANCE TAX IN CONTRARY TO PROVISIONS OF 132 B OF T HE I.T.ACT. 2. THAT DEPARTMENT CRAVES LEAVE TO ADD, ALTER, AMEN D OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE CASE. 3. AS FAR AS THE CROSS OBJECTION IS CONCERNED, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF EXPENSES MADE U/S 14A OF THE INCOME TAX ACT, 1961 (ACT) ON THE GROUND THAT SINCE THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE PREVIOUS YEAR THERE CANNOT BE ANY DISALLOWANCE U/S 14A OF THE ACT. 4. THE GROUNDS RAISED IN THE CROSS OBJECTIONS IN C ASE OF SHRI VIKASH JAIN READ AS FOLLOWS :- 1. FOR THAT THE LD. C.1.T(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 6000/- UNDER SEC. 14A OF THE 1. T. ACT, 1961. 2. FOR THAT THE LD. C.I.T(A)'S ORDER IS OTHERWISE I N ACCORDANCE WITH LAW EXCEPT WHAT HAS BEEN STATED IN GROUND NO. 1 3. FOR THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 5. THE GROUNDS RAISED IN THE CROSS OBJECTIONS IN C ASE OF SHRI VIVEK JAIN READ AS FOLLOWS :- 1. FOR THAT THE LD. C.1.T(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.156000/- UNDER SEC. 14A OF THE 1. T. ACT, 1961. 2. FOR THAT THE LD. C.I.T(A)'S ORDER IS OTHERWISE I N ACCORDANCE WITH LAW EXCEPT WHAT HAS BEEN STATED IN GROUND NO. 1 3 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 3 3. FOR THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 6. WE MAY CLARIFY THAT GROUND NO.2 RAISED BY THE A SSESSEE IN BOTH THE CROSS OBJECTIONS ARE ONLY SUPPORTIVE OF THE ORDERS OF CIT(A) ON THE QUESTION OF LEVY OF INTEREST U/S 234B OF THE ACT AND THEREFORE DOES NOT REQUIRE ANY SPECI FIC ADJUDICATION. 7. AS FAR AS THE APPEALS BY THE REVENUE ARE CONCER NED, THE QUESTION IS WITH REGARD TO THE ADJUSTMENT OF SEIZED CASH TOWARDS EXISTING TAX LIAB ILITY OF THE ASSESSEE AND CONSEQUENT DETERMINATION OF INTEREST CHARGEABLE U/S 234B OF TH E ACT. AS FAR AS INTEREST U/S.234-B OF THE ACT IS CONCERNED, THE STARTING POINT OF TIME AN D THE TERMINAL POINT OF TIME FOR LEVY OF INTEREST, AS PER THE PROVISIONS OF SEC.234B IS THE PERIOD FROM THE 1ST DAY OF APRIL NEXT FOLLOWING SUCH FINANCIAL YEAR TO THE DATE OF DETERM INATION OF TOTAL INCOME UNDER SUB- SECTION (1) OF SECTION 143 AND WHERE A REGULAR ASSE SSMENT IS MADE, TO THE DATE OF SUCH REGULAR ASSESSMENT. INTEREST HAS TO BE LEVIED FOR BOTH THE A.Y.S U/S.234-B ON AN AMOUNT EQUAL TO THE ASSESSED TAX OR, AS THE CASE MAY BE, O N THE AMOUNT BY WHICH THE ADVANCE TAX PAID AS AFORESAID FALLS SHORT OF THE ASSESSED TAX. EXPLANATION 1 TO SEC.234-B (1) LAYS DOWN THAT 'ASSESSED TAX' MEANS,- (A) FOR THE PURPOSES OF COMPUTING THE INTEREST PAYA BLE UNDER SECTION 140A, THE TAX ON THE TOTAL INCOME AS DECLARED IN THE RETURN REFERRED TO IN THAT SECTION; (B) IN ANY OTHER CASE, THE TAX ON THE TOTAL INCOME DETERMINED UNDER SUB-SECTION (1) OF SECTION 143 OR ON REGULAR ASSESSMENT, AS REDUCED BY THE AMOUNT OF TAX DEDUCTED OR COLLECT ED AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII ON ANY INCOME WHICH IS S UBJECT TO SUCH DEDUCTION OR COLLECTION AND WHICH IS TAKEN INTO ACCOUNT IN COMPU TING SUCH TOTAL INCOME. 4 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 4 8. THE PLEA OF THE ASSESSEE WAS THAT THE SEIZED CA SH HAS TO BE ADJUSTED AND SHOULD BE TREATED AS ADVANCE TAX ON THE DATE WHEN THE ASSESSE E GAVE A DECLARATION OF INCOME AND ALSO GAVE A LETTER TO THE AO TO TREAT THE CASH SEIZ ED AS ADVANCE TAX AND PAYMENT ON THE INCOME DECLARED IN THE DECLARATION AFTER THE SEARCH . ON THE ABOVE ISSUE THE CIT(A) TOOK A VIEW THAT THE ADJUSTMENT OF SEIZED CASH TOWARDS A DVANCE TAX AS CLAIMED BY THE ASSESSEE OUGHT TO HAVE BEEN GIVEN BY THE AO. THE FO LLOWING WERE THE CONCLUSIONS OF CIT(A) ON THIS ISSUE (IN THE CASE OF VIKASH JAIN) : - AN ADDITIONAL GROUND REGARDING CHARGING OF INTERE ST U/S 234B AND 234C OF THE I T ACT HAS BEEN TAKEN BY THE AR. DURING THE APPELLATE PROCEEDINGS THE AR HAS BROUGHT ON RECORD THAT A LETTER DATED 24-11-2011 WA S GIVEN BY THE ASSESSEE TO THE AO TO TREAT CASH SEIZED DURING THE SEARCH AND SEIZ URE OPERATION AS ADVANCE TAX. THE AR HAS FURTHER SUBMITTED THAT A SUM OF RS.12 LA KHS WAS PAID BY THE ASSESSEE DURING THE FINANCIAL YEAR ITSELF AS ADVANCE TAX. TH E GRIEVANCE OF THE ASSESSEE IS THAT WHILE CALCULATING INTEREST U/S 234B AND 234C THE AO HAS NOT TAKEN INTO CONSIDERATION THIS FACTS. THE AO IS DIRECTED TO CAL CULATE INTEREST U/S 234B AND 234C A FRESH AFTER ALLOWING CREDIT OF THE SAID AMOUNT AS ADVANCE TAX ON 24-11-2011. AN ADDITIONAL GROUND REGARDING CHARGING OF INTERE ST U/S 234B AND 234C OF THE I T ACT HAS BEEN TAKEN BY THE AR. DURING THE APPELLATE PROCEEDINGS THE AR HAS BROUGHT ON RECORD THAT A LETTER DATED 24-11-2011 WA S GIVEN BY THE ASSESSEE TO THE AO TO TREAT CASH SEIZED DURING THE SEARCH AND SEIZ URE OPERATION AS ADVANCE TAX. THE AR HAS FURTHER SUBMITTED THAT A SUM OF RS.13 LA KHS WAS PAID BY THE ASSESSEE DURING THE FINANCIAL YEAR ITSELF AS ADVANCE TAX. TH E GRIEVANCE OF THE ASSESSEE IS THAT WHILE CALCULATING INTEREST U/S 234B AND 234C THE AO HAS NOT TAKEN INTO CONSIDERATION THIS FACTS. THE AO IS DIRECTED TO CAL CULATE INTEREST U/S 234B AND 234C A FRESH AFTER ALLOWING CREDIT OF THE SAID AMOUNT AS ADVANCE TAX ON 24-11-2011. IDENTICAL REASONS HAVE BEEN GIVEN IN THE CASE OF VI VEK JAIN BY CIT(A). AGGRIEVED BY THE ORDERS OF CIT(A) THE REVENUE HAS PREFERRED THE APPEALS BEFORE THE TRIBUNAL. 9. IN THE CASE OF MR.VIKASH JAIN, THERE WAS A SEAR CH U/S.132 OF THE ACT ON 29.9.2011 AT THE RESIDENCE OF THE ASSESSEE. CASH OF RS.50 LACS WAS FOUND. THE ASSESSEE FILED A DISCLOSURE PETITION ON 24.11.2011 OFFERING UNDISCLO SED INCOME OF RS.2,40,89,200 TOWARDS UNDISCLOSED LOOSE DIAMONDS AND RS.50 LACS C ASH IN ALL TOTALING RS.2,90,89,200. 5 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 5 THE ASSESSEE ALSO REQUESTED IN THE SAID DISCLOSURE PETITION TO ADJUST THE SUM OF RS.50 LACS CASH SEIZED TOWARDS THE TAX PAYABLE ON THE INC OME DISCLOSED IN THE DISCLOSURE PETITION. IN THE RETURN OF INCOME FILED ON 30.9.20 12 FOR AY 2012-13, THE ASSESSEE OFFERED THE SUM DISCLOSED IN THE DISCLOSURE PETITIO N DATED 24.11.2011. 10. IN THE CASE OF MR.VIVEK JAIN, THERE WAS A SEAR CH U/S.132 OF THE ACT ON 29.9.2011 AT THE RESIDENCE OF THE ASSESSEE. CASH OF RS.50 LACS WAS FOUND. THE ASSESSEE FILED A DISCLOSURE PETITION ON 24.11.2011 OFFERING UNDISCLO SED INCOME OF RS.2,60,01,790 TOWARDS UNDISCLOSED LOOSE DIAMONDS AND RS.50 LACS C ASH IN ALL TOTALING RS.3,10,01,790. THE ASSESSEE ALSO REQUESTED IN THE SAID DISCLOSURE PETITION TO ADJUST THE SUM OF RS.50 LACS CASH SEIZED TOWARDS THE TAX PAYABLE ON THE INC OME DISCLOSED IN THE DISCLOSURE PETITION. IN THE RETURN OF INCOME FILED ON 30.9.20 12 FOR AY 2012-13, THE ASSESSEE OFFERED THE SUM DISCLOSED IN THE DISCLOSURE PETITIO N DATED 24.11.2011. 11. THE HON'BLE ITAT, E BENCH, KOLKATA, IN ITA NO. 101/KOL/2007 IN THE CASE OF DC/T, CC-V VS SITARAM AGARWAL (HUF) HELD THAT NO IN TEREST U/S 234A, 2348 & 234C CAN BE LEVIED, WHERE SEIZED CASH WAS WITH DEPARTMEN T AND FOR THEIR DELAY IN APPLYING THE SEIZED CASH FOR TAX DUES OF THE ASSESSEE, THE A SSESSEE CANNOT BE HELD RESPONSIBLE. HON'BLE ITAT, B' BENCH, KOLKATA, IN IT(SS) A NO. 1 141KO/12008 IN THE CASE OF ACIT VS PURANMAL AGARWAL FOR ASST. YEAR 2003-04 LAI D DOWN SIMILAR PROPOSITION. THE HON'BLE ITAT, RAJKOT BENCH IN THE CASE OF BACHU BHAI S.ANTROLIA VS ACIT (2006) 103 TTJ (RAJKOT) 73 IN THE CONTEXT OF LEVY OF INTER EST U/S158BF(A) (1) HELD THAT SUCH A LEVY WAS NOT JUSTIFIED WHEN THE FAULT IS NOT RELATA BLE TO THE ASSESSEE. IN THE SAID JUDGMENT IT WAS OBSERVED, 'PENAL PROVISIONS OF THE ACT SHOULD NOT BE CONSTRUED IN A MANNER TO MAKE THEM AN INSTRUMENT OF OPPRESSION.' SEVERAL DECISIONS RENDERED BY VARIOUS BENCHES OF ITAT ALSO LAY DOWN IDENTICAL PRO POSITION VIZ., HON'BLE ITAT, AMRITSAR BENCH IN THE CASE OF JASWANT SINGH & CO. V S ACIT (2003) SOT 545 (ASR) 6 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 6 MESCO AIRLINES LTD. VS ACIT (2008) 24 SOT-384 (DELH I). THEREFORE INTEREST CHARGED U/S 234B OF THE ACT MUST BE CALCULATED BY TREATING THE SEIZED CASH AS TAX PAID. 12. THE PROCEDURE OF TREATMENT OF A SEIZED ASSET I S DESCRIBED IN SECTION 132B OF INCOME TAX ACT. THERE WAS SEIZURE OF CASH OF RS.50 LACS BY DEPARTMENT DURING THE SEARCH. SUCH SEIZURE BY ITSELF CANNOT BECOME PAYME NT OF TAX BY THE ASSESSEE. THE SEIZED CASH MAY REPRESENT THE INCOME OR PROPERTY OF THE ASSESSEE BUT IT CAN BE APPROPRIATED ONLY TOWARDS THE EXISTING TAX LIABILIT Y UNDER I.T. ACT, OR W.T.ACT. THE DISPUTE IN THIS REGARD POSES TWO QUESTIONS. THE FIR ST QUESTION IS WHETHER ANY INCOME TAX LIABILITY CAN BE SAID TO BE EXISTING BEFORE THE DETERMINATION OF SUCH LIABILITY BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE SECO ND QUESTION IS WHETHER ASSESSING OFFICER IS OBLIGED TO ADJUST THE SEIZED MONEY AGAIN ST SUCH EXISTING LIABILITY. THE ASSESSEE SUBMITTED IN HIS PETITION DATED 24.11.201 1 THAT THE CASH OF RS50 LACS FOUND ON THE DATE OF SEARCH MAY BE ADJUSTED AGAINST THE T AX LIABILITIES PAYABLE ON UNDISCLOSED INCOME OF THE ASSESSEE. THE SECTION 132B(L)(II) OF THE I.T.ACT GIVES A DISCRETION TO THE ASSESSING OFFICER TO ADJUST THE SEIZED CASH AGAINS T THE EXISTING TAX LIABILITIES. HOWEVER, THE COURT DECISIONS ON WHICH THE ASSESSEE HAS RELI ED, HAVE OPINED THAT SUCH ADJUSTMENT CANNOT BE LEFT TO THE SWEET WILL OF THE ASSESSING O FFICER BEYOND THE DATE OF EXISTENCE OF TAX LIABILITIES, WHEN SUCH DELAYED ADJUSTMENT BY T HE ASSESSING OFFICER IS RESULTING IN EXCESSIVE CHARGING OF INTEREST U/S 234B, FOR NO FAU LT OF THE ASSESSEE. CBDT IN CIRCULAR NO.20/2017 DATED 12.06.2017 HAS MADE IT CLEAR THAT EXPLANATION 2 TO SECTION 132B OF THE ACT INSERTED BY THE FINANCE ACT 2013 W.E.F. 01. 06.2013 WILL HAVE ANY PROSPECTIVE EFFECT AND THEREFORE ADVANCE TAX PAYABLE CAN ALSO B E CONSIDERED AS EXISTING LIABILITY. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE I SSUE AND ARE OF THE VIEW THAT THE ORDER OF CIT(A) ON THIS ISSUE DOES NOT REQUIRE ANY INTERFERENCE. IT HAS BEEN HELD IN THE DECISION RENDERED BY VARIOUS BENCHES OF THE ITAT RE FERRED TO IN THE EARLIER PART OF THIS ORDER THAT ADVANCE TAX LIABILITY CAN ALSO BE CONSID ERED AS EXISTING LIABILITY. THEREFORE DATE ADJUSTMENT OF SEIZED CASH SHOULD BE MADE BEFOR E COMPUTING THE LIABILITY OF INTEREST 7 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 7 U/S 234B OF THE ACT. FOLLOWING THE SAID DECISIONS, WE UPHOLD THE CONCLUSION OF CIT(A) WHICH ARE IN ACCORDANCE WITH THE RULING OF THE TRIB UNAL REFERRED TO ABOVE. CONSEQUENTLY THE APPEALS BY THE REVENUE ARE DISMISSED. 13. AS FAR AS THE CROSS OBJECTION OF THE ASSESSEE IS CONCERNED THE CIT(A) IN THE CASE OF SHRI VIKASH JAIN SUSTAINED THE DISALLOWANCE U/S 14A OF THE ACT IN PART FOR THE FOLLOWING REASONS :- 5. APPEAL ON GROUNDS NO.2 AND 3 ARE AGAINST THE A DDITION U/S 14A OF RS.40,505/-. DURING THE APPELLATE PROCEEDINGS THE AR HAD SUBMITT ED THE AVAILABLE FUND WITH THE ASSESSEE IS MORE THAN THE AMOUNT OF INVESTMENT MAD E. THUS THE AR HAD ARGUED THAT THE DISALLOWANCE OF INTEREST ON ACCOUNT OF INV ESTMENT IS NOT JUSTIFIED. THE AR HAS ALSO BROUGHT ON RECORD THAT DURING THE ASSESSME NT YEAR FRESH INVESTMENT WAS OF RS.250/- LAKHS ONLY AND THIS AMOUNT WAS ALSO INVEST ED BY THE ASSESSEE FROM ITS OWN AVAILABLE FUND. SO NOTHING WAS BORROWED IN ORDER TO MAKE INVESTMENT. I HAVE CONSIDERED THE FINDING OF THE AO AND THE SUBMISSION S MADE BY THE AR. I FIND THERE IS NO DIVIDEND INCOME TO THE ASSESSEE DURING THE YE AR. HOWEVER ADMINISTRATIVE EXPENSES FOR THE PURPOSE OF MAINTAINING BOOKS ETC C ANNOT BE DENIED OF THE RULED OUT. ACCORDINGLY RS.6000 IS CONFIRMED FOR THIS PURP OSE. 14. IN THE CASE OF SHRI VIVEK JAIN SUSTAINED THE D ISALLOWANCE U/S 14A OF THE ACT IN PART FOR THE FOLLOWING REASONS :- 7. APPEAL ON GROUNDS NO.4 TO 6 ARE AGAINST THE AD DITION U/S 14A OF RS.4,20,302/-. DURING THE APPELLATE PROCEEDINGS THE AR HAD SUBMITT ED THE AVAILABLE FUND WITH THE ASSESSEE IS MORE THAN THE AMOUNT OF INVESTMENT MAD E. THUS THE AR HAD ARGUED THAT THE DISALLOWANCE OF INTEREST ON ACCOUNT OF INV ESTMENT IS NOT JUSTIFIED. THE AR HAS ALSO BROUGHT ON RECORD THAT DURING THE ASSESSME NT YEAR FRESH INVESTMENT WAS OF RS.24/- LAKHS ONLY AND THIS AMOUNT WAS ALSO INVESTE D BY THE ASSESSEE FROM ITS OWN AVAILABLE FUND. SO NOTHING WAS BORROWED IN ORDER TO MAKE INVESTMENT. I HAVE CONSIDERED THE FINDING OF THE AO AND THE SUBMISSION S MADE BY THE AR. I FIND THERE IS NO DIVIDEND INCOME TO THE ASSESSEE DURING THE YE AR. HOWEVER ADMINISTRATIVE EXPENSES FOR THE PURPOSE OF MAINTAINING BOOKS ETC C ANNOT BE DENIED OF THE RULED OUT. ACCORDINGLY RS.15000 IS CONFIRMED FOR THIS PUR POSE. 15. AGGRIEVED BY THE ORDERS OF CIT(A) SUSTAINING THE DISALLOWANCE U/S 14A OF THE ACT IN PART THE ASSESSEES HAVE FILED CROSS OBJECTIONS. 8 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 8 16. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NO T IN DISPUTE THAT BOTH THE ASSESSEES DID NOT EARN ANY EXEMPT INCOME DURING THE RELEVANT PREV IOUS YEAR. THE CBDT CIRCULAR NO.5 OF 2014 DATED 11.2.2014 HAS OPINED THAT THE DI SALLOWANCE U/S 14A OF THE ACT CAN BE MADE EVEN IN THE YEAR WHERE THERE IS NO EXEMPT I NCOME EARNED OR RECEIVED BY THE ASSESSEE AND THE ITAT SPECIAL DECISION IN THE CASE OF CHEMINVEST LTD. [2009] 121 ITD 318 (SB) (DELHI) ALSO TOOK THE VIEW THAT DISALLOWAN CE UNDER SEC.14A OF THE ACT CAN BE MADE EVEN WHEN THERE IS NO EXEMPT INCOME. BEFORE US IT WAS NOT DISPUTED BY THE REVENUE THAT THE CBDT CIRCULAR ON WHICH HAS BEEN RE FERRED TO IN THE CBDT CIRCULAR AND THE DECISION OF THE SPECIAL BENCH IN THE CASE O F CHEMINVEST LTD. (SUPRA) IS CONTRARY TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT 317 ITD 33 (DELHI) WHEREIN IT WAS HELD THAT THERE CAN B E NO DISALLOWANCE OF EXPENSES U/S.14A OF THE ACT, IF THERE IS NO EXEMPT INCOME DU RING THE RELEVANT PREVIOUS YEAR. IT WAS BROUGHT TO OUR NOTICE THAT THE HONBLE ITAT KOL KATA IN THE CASE OF REI AGRO LTD. VS. DCIT 144 ITD 141 (KOL-TRIB) HAS HELD THAT IT IS ONLY THE INVESTMENTS WHICH YIELDS DIVIDEND DURING THE PREVIOUS YEAR THAT HAS TO BE CO NSIDERED WHILE ADOPTING THE AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF RULE 8D(2)( III) OF THE RULES. THE AFORESAID VIEW OF THE TRIBUNAL HAS SINCE BEEN AFFIRMED AS CORRECT BY THE HONBLE CALCUTTA HIGH COURT IN G.A.NO.3581 OF 2013 IN THE APPEAL AGAINST THE OR DER OF THE TRIBUNAL IN THE CASE OF REI AGRO LTD. (SUPRA). IN THE LIGHT OF THE AFORESAI D DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF REI AGRO (SUPRA), WE ARE OF THE VIEW THAT THE DIRECTIONS GIVEN BY THE CIT(A) ARE CONTRARY TO THE DECISIONS RENDERED BY TH E HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA). THEREFORE THERE C ANNOT BE ANY DISALLOWANCE U/S.14A OF THE ACT, IF THERE IS NO EXEMPT INCOME. 17. THUS THE RELEVANT GROUNDS OF CROSS OBJECTIONS ARE ALLOWED. 9 ITA NO.1282 & 1283/KOL/2015 SHRI VIKASH JAIN & SHRI VIVEK JAIN A.YR..2012-13 9 18. IN THE RESULT THE APPEALS BY THE REVENUE ARE D ISMISSED AND THE CROSS OBJECTIONS BY THE ASSESSEES ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE CO URT ON 18.08.2017. SD/- SD/- [J.SUDHAKAR REDDY] [ N.V.VASUDEV AN ] ACCOUNTANT MEMBER JUD ICIAL MEMBER DATED : 18.08.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI VIKASH JAIN, 39, BURTOLLA STREET, KOLKATA-7 00007. 2.SHRI VIVEK JAIN, 39, BURTOLLA STREET, KOLKATA-700 007. 3. A.C.I.T., CIRCLE-37, KOLKATA. 3. CIT(A)-20, KOLKATA. 4. CIT-CENTRAL-I,, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PR IVATE SECRETARY HEAD OF OFFICE/D.D.O., I.T.A.T., KOLKATA BENCHE S