HSBC INVEST DIRECT (INIDA) LTD ( PREVIOUSLY KNOWN AS IL & FS INVESTMART LTD), MUMBAI V. ADDL CIT RG 4(1), MUMBAI

ITA 1285/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84457 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 08-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-02-2011
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE SR
• Assessee Lawyers: D V LAKHANI
• Keywords: Opportunity of being heard; Earning of tax free income; Bad and doubtful debts; Revised return
• Section: 234B; 14A

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I. T.A. NO.1285/M/2011 (ASSESSMENT YEAR: 2007 - 2008) HSBC INVEST DIRECT (I) LTD., (PREVIOUSLY KNOWN AS IL&FS INVESTMENT LTD) DHANASINGH PROCESSOR PREMISES, J.B. NAGAR, ANDHERI KURLA ROAD, MUMBAI - 59. VS. ADDL.CIT, RANGE 4(1), MUMBAI. ./ PAN : AAACI 3364 A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI D.V. LAKHANI / RESPONDENT BY : SHRI SACHCHIDANAND DUBE, SR. AR / DATE OF HEARING : 12.11.2014 / DATE OF PRONOUNCEMENT : 17 .12.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 11.2.2011 IS AGAINST THE ORDER OF THE CIT (A) - 11, MUMBAI DATED 13.12.2010 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS . 5 , 20,000 / - TREATING THE SAME AS FINE AND PENALTY. THE APPELLANT SUBMIT THAT THE DISALLOWANCE CONFIRMED BY THE LEARNED COMMISSI ONER OF INCOME TAX (A) IS NOT JUSTIFIED AND BE DELETED . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLANT PRA Y S THAT THE ADDITION MADE OF RS . 5,20 , 000 / - MAY BE DELETED. 3. T HE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1 , 60,63 , 968 / - U / S 14A READ WITH RULE 8D. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLANT SUBMIT THAT THE DISALLOWANCE OF EXPENDITURE U L S 14A READ WITH RULE 8D IS NOT JUSTIFIED AND BE DELETED . 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX ( A) HAS ERRED IN CONCLUDING THAT THE SUM OF RS.1 , 60 , 63 , 968 / - IS ATTRIBUTABLE TO EARNING INCOME WHICH IS NOT CHARGEABLE TO TAX. THIS CONCLUSION IS ERRONEOUS AND IS CONTRARY TO THE FACTS OF THE CASE. THE APPELLANT PRAYS THAT THE ADDITION OF RS . L , 60 , 63 , 968 / - MAY BE DELETED. 2 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX ( A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 14 , 41,072 / - A S BAD DEBTS . THE CONFIRMATION MADE B Y THE LEARNED COMMISSIONER OF INCOME T A X (A) IS NOT JUSTIFIED AND BE DELETED . 6. WITHOUT PREJUDICE TO GROUND NO . 5 , THE APPELLANT PRAYS THAT THE SUM OF RS. 14 , 41 , 072 / - MAY BE ALLOWED AS BUSINESS LOSS U L S 28 OF INCOME TAX ACT , 1961 . 7. THE LEARNED ASSESSING OFFICER HAS ERRED IN CONFIRMING THE LE VY OF INTEREST U / S 234B . ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLANT SUBMITS THAT THEY ARE NOT LIABLE TO PAY INTEREST U / S 234B . THE APPELLANT DENIES THE LIABILIT Y F OR PA Y MENT OF INTEREST U L S 234B OF INCOME TAX ACT , 1961 AND INTEREST LE V IED U / S 2 34B MA Y BE DELETED . 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE FILED A CHART AND MENTIONED THAT ALL THE ISSUES RAISED IN THIS APPEAL STAND COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS FO THE TRIBUNAL IN ASSESSEES OWN CASE AND IN THE CASE OF ITS SISTER CONCERNS. THE SU MMARY OF THE ASSESSEES SUBMISSION ON THE CHART READS AS UNDER: 4. AFTER HEARING BOTH THE PARTIES, WE HAVE PERUSED THE ORDERS OF THE TRIBUNAL AND OUR ADJUDICATION WITH REGARD TO EACH OF THE ISSUES RAISED IN THE GROUNDS IS GIVEN IN THE FOLLOWING PARAGRAPH S OF THIS ORDER. 5. GROUND NOS.1 & 2 RELATE TO DISALLOWANCE OF AMOUNT PAID TO THE STOCK EXCHANGE BY WAY OF PENALTIES. SIMILAR DISALLOWANCE MADE IN THE EARLIER YEARS FOR TH E 3 AY 2006 - 2007 AND THE ISSUE TRAVELLED TO THE TRIBUNAL FOR ADJUDICATION VIDE ITA NO. 1102/M/2010. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PARA 14 TO 14.1 OF THE SAID ORDER OF THE TRIBUNAL AND DEMONSTRATED THAT THE ISSUE IS IDENTICAL AND THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE RELYING ON THE A NOTHER ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE AY 2005 - 2006 IN ITA NO.5372/M/2008 AND ITA NO.5992/M/2008, DATED 30.10.2012. BEING SATISFIED WITH THE FINDING OF THE TRIBUNAL AND RESPECTFULLY FOLLOWING THE SAME, WE FIND NO REASON TO DIFFER FROM THE SAID ORDERS OF THE TRIBUNAL. ACCORDINGLY, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO.1 AND 2 RAISED BY THE ASSESSEE ARE ALLOWED. 6. GROUND NO.3 AND 4 RELATE TO THE DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE ACT. IN THIS REGARD, LD COUNSEL DEMONSTRATED THAT THE ISSUE UNDER CONSIDERATION IS NOT COVERED BY THE AMENDED PROVISIONS OF RULE 8D OF IT RULES, 1962. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2006 - 2007 (SUPRA) PARA 5 OF THE ITA NO.168/M/2010, DATED 23.8.2013 AND MENTIONED THAT THE TRIBUNAL DECIDED THE ISSUE BY CONCLUDING THAT PERCENTAGE OF THE DIVIDEND INCOME IS REASONABLE AMOUNT FOR DISALLOWANCE U/S 14A OF THE ACT. REFERRING TO THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 OF 2011, DATED 8.1.2013 , WHEREIN IT WAS HELD THAT PERCENTAGE OF THE EXEMPT INCOME CAN CONSTITUTE A REASONABLE ESTIMATE FOR MAKING DISALLOWANCE FOR THE YEARS EARLIER TO THE ASSESSMENT YEAR 2008 - 09. 7. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. IT IS A SETTLED PROPOSITION IN LAW THAT THE RELEVANT ASSESSMENT YEAR 2007 - 08 IS OUTSIDE THE SCOPE OF PROVISIONS OF NEWLY INSERTED RULE 8D AS THEY APPLY PROSPECTIVELY FROM THE AY 2008 - 2009 ONWARDS. IT IS SO HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE O F GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, REPORTED IN (2010) 328 ITR 81(BOM) . THE HONBLE BOMBAY HIGH COURT ALSO IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 OF 2011, DATED 8.1.2013 , HAS 4 HELD THAT PERCENTAGE OF THE EXEMPT IN COME CAN CONSTITUTE A REASONABLE ESTIMATE FOR MAKING DISALLOWANCE FOR THE YEARS EARLIER TO THE ASSESSMENT YEAR 2008 - 09. THE RELEVANT PORTION OF THE SAID JUDGMENT OF THE BOMBAY HIGH COURT (SUPRA) READS AS UNDER: '4. SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUNAL IN ITS IMPUGNED ORDER DATED 17.9.2010 WHILE APPLYING THE DECISION OF THIS COURT IN THE MATTER OF GODREJ (SUPRA) HAS DISALLOWED THE EXPENDITURE ONLY TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE RESPONDENT - ASSESSEE ON THE BASIS ITS ORDER DATED 27.2.2009 FOR THE ASSESSMENT YEAR 2002 - 2003 AND ORDER DATED 10.9.2009 FOR THE ASSESSMENT YEARS 2003 - 2004 AND 2004 - 2005 WHEREIN DISALLOWANCE WAS RESTRICTED TO 2% OF THE EXEMPT INCOME. FURTHER; THE TRIBUNAL HAS REMANDED THE MATTER TO THE AO TO VERIFY THE DISALLOWANCE CLAIMED AND RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT TO 2% OF THE TOTAL EXEMPT INCOME. WE FIND NO FAULT WITH THE ORDER OF THE TRIBUNAL. ' 9. CONSIDERING THE BINDING NATURE OF THE JUDGMENT IN THE CASE OF GODREJ AGROVE (SUPRA) AND ALSO THE OVERALL FACTUAL MATRIX OF THE PRESENT CASE, WE RESTRICT THE DISALLOWANCE TO 2% OF THE TOTAL EXEMPT INCOME. ACCORDINGLY, GROUND NOS. 3 & 4 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 1 0. GROUND NOS.5 & 6 RELATE TO BAD DEBTS. THE DEBTS UNDER CONSIDERATION ARE RELATABLE TO TRAVELLING ADVANCES. IN THE ASSESSMENT ASSESSING OFFICER DISALLOWED THE CLAIM FOR WANT OF EVIDENCES AS THE ASSESSEE FAILED TO JUSTIFY AND FURNISH COMPLETE DETAILS. A SSESSING OFFICER CONCLUDED BY HOLDING THAT THE ASSESSEE FAILED TO QUALIFY THE CONDITIONS SPECIFIED IN SECTION 36(1)(VII) R.W.S 36(2) OF THE ACT. OTHERWISE, THE BAD DEBTS IN QUESTION RELATE TO THE VISIT OF THE EMPLOYEES TO INDONESIA (RS. 15,01,072/ - ) AND S AHARA MUTUAL FUND (RS. 15,000/ - ). ASSESSEE INCURRED EXPENDITURE ON THE AIR TICKETS, HOTEL STAY AND OTHER EXPENSES. THESE BILLS WERE PAID BY THE COMPANY AND RAISED DEBIT NOTE ON THE EMPLOYEES. HOWEVER, THE EMPLOYEES DENIED THE LIABILITY TO PAY ANY MONEY TO THE COMPANY. THEREFORE, THE EXPENSES WERE CLAIMED AS BAD DEBTS RECEIVABLE FROM THE SAID EMPLOYEES. ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED VS. CIT REPORTED IN 323 ITR 397 IN SUPPORT OF THE ITS CLAIM. DU RING THE FIRST APPELLATE PROCEEDINGS, CIT (A) HELD THAT THE EXPENSES ACTUALLY RELATE TO THE ASSESSMENT YEAR 2007 - 2008 AND THERE IS NO DEFINITE LIABILITY OR DEBT AND THEREFORE, THE QUESTION OF WRITE OFF OF DEBTS IN THIS YEAR DOES NOT ARISE. CIT (A) CONFIRM ED THE ADDITION BY STATING THAT THE ASSESSEE SHOULD HAVE CLAIMED THE SAME BY FILING THE REVISED RETURN FOR THE AY 2006 - 2007. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE US. 5 11. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF DECISION OF THE TRIBUNAL FOR THE AY 2006 - 2007 (SUPRA). HE ALSO MENTIONED THAT SIMILAR ISSUE WAS ADJUDICATED BY THE TRIBUNAL IN ASSESSEES SISTER CONCERNS CASE FOR THE AY 2008 - 2009 V IDE ITA NO.6273/M/2011. 12. ON THE OTHER HAND, LD DR BROUGHT OUR ATTENTION THE FACTS OF THE PRESENT CASE AND MENTIONED THAT THE DEBTS IN QUESTION IS SOMEWHAT DIFFERENT FROM THE ONES DECIDED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2006 - 2007 AN D ITS SISTER CONCERNS CASE (SUPRA). 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDERS OF THE TRIBUNAL (SUPRA). AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE CONTENTS OF PARA 9 AND 10 O F THE SAID ORDER OF THE TRIBUNAL FOR THE AY 20076 - 2007 (SUPRA) DATED 23.8.2013, WE FIND THERE IS A NEED FOR FINDING OF THE FACTS AT THE LEVEL OF THE CIT (A) AND DECIDE THE ISSUE AFRESH AND ALSO AFTER CONSIDERING THE CITED DECISIONS OF THE TRIBUNAL (ITA NO. 168/M/2010 AND ITA NO.6273/M/2011). ACCORDINGLY, WE REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND HE SHALL DECIDE THE ISSUE AFRESH ON THE ARGUMENTS RAISED BY THE ASSESSEE AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . ACCORDINGLY, GROUND NOS.5 AND 6 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.7 RELATES TO LEVY OF INTEREST U/S 234B OF THE ACT. CONSIDERING THE CONSEQUENTIAL NATURE OF THE INSTANT GROUND, THE SAME DISMISSED AS CONSEQUENTIA L. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC ED IN THE OPEN COURT ON 1 7 T H DECEMBER, 2014. S D / - S D / - ( JOGINDER SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 7 /12/2014 . . ./ OKK , SR. PS 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI