Adurjee & Bros. Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1327/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9201 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S ABHYANKAR
• Keywords: Business expenditure; Search and seizure; Earning of tax free income
• 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.1327/PUN/2015 [ [ / ASSESSMENT YEAR : 2011-12 ADURJEE & BROS. PVT. LTD., SAROSH BHAVAN, 16-B/1, DR. AMBEDKAR ROAD, PUNE 411 001. PAN : AABCA4890J. . / APPELLANT V/S DY.COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PMT COMMERCIAL BUILDING, SWARGATE, PUNE. . / RESPONDENT / APPELLANT BY : SHRI R.S. ABHYANKAR / RESPONDENT BY : SHRI AJAY MODI / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 11, PUNE DT.31.07.2015 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- 2.1 ASSESSEE IS AN INVESTMENT COMPANY. IT FILED THE RETU R N OF INCOME FOR A.Y. 2011 - 12 ON 30 . 9 . 201 1 DECLARING TOTAL INCOME OF / DATE OF HEARING : 29.06.2017 / DATE OF PRONOUNCEMENT: 14.07.2017 2 RS.5,70,85,966/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 05 .0 3 . 2014 AND THE TOTAL INCOME WAS DETERMINED AT RS.6,89,81,617/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 31.07.2015 (IN APPEAL NO.PN/CIT(A)-11/DCIT CNTRL.CIR- 1(1), PN/128/14015) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND : . 1. A) DISALLOWANCE OF A SUM OF RS.1,18,95,651/- BEING DISALLOWANCE U/S 14A BY APPLYING RULE 8D. B) WITHOUT PREJUDICE TO GROUND NO 1(A), THE LEARNED CIT(A) OUGHT TO HAVE RESTRICTED THE DISALLOWANCE TO RS.79,33 , 455/- BEING THE RESIDUAL AMOUNT REMAINED TO BE DISALLOWED OUT OF THE TOTAL EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT . HE FAILED TO APPRECIATE THAT THE AMOUNT DISALLOWED IN THE ASSESSMENT PROCEEDINGS AND DISALLOWANCE U/S 14A TAKEN TOGETHER COULD NOT EXCEED THE AMOUNT DEBITED TO PROFIT & LOSS ACCOUNT . 2. A) NOT GRANTING SET OFF OF THE AMOUNT OFFERED TOWARDS CONTINGENCY OF RS.75,00,000 AGAINST DISALLOWANCE U/S 14A . HE ERRED IN CONFIRMING THAT CONTINGENCY OF RS . 75,00,000 WAS CORRECTLY ADDED BY THE LEARNED AO EVEN THOUGH THE LEARNED AO HAD NOT IDENTIFIED ANY FURTHER DISALLOWANCE AND THUS EXTENDING THE SCOPE OF DISALLOWANCE BEYOND THE EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT . B) ALTERNATELY THE LEARNED CIT(A) OUGHT TO HAVE G R ANTED R EL I E F BY R EDUCING THE TOTAL INCOME ASSESSED BY RS . 75,00,00,000/- BEING THE CONTINGENCY OFFERED TO TAX I N T HE RETURN OF INCOME AS NO EVIDENCE WAS FOUND DUR I NG THE COURSE OF SEARCH AND/OR I N ASSESSMENT PROCEEDINGS REGARDING UNDISCLOSED I NCOME . 3. THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT ' I NCOME OFFERED DURING SEARCH AND SEIZURE ACTION ON ACCOUNT OF CONTINGENCY HAS NOTHING TO DO WITH STATUTO R Y DISALLOWANCE U/S 14A AND THERE IS NO NEXUS BETWEEN DISCLOSURE ON ACCOUNT O F CON T INGENCY AND ADDITION U/S 14A . 3. BEFORE US, LD AR AT THE OUTSET SUBMITTED THAT THE SOLE CONTROVERSY IS WITH RESPECT TO DISALLOWANCE U/S 14A OF TH E ACT . 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS EARNED EXEMPT INCOME TO THE EXTENT OF RS.2,62,83,541/- AND HAD ATTRIBUTED RS.29,63,271/- BEING EXPENDITURE INCURRED TOWARDS EARNING EXEMPT INCOME U/S 14A OF THE ACT . AO NOTICED THAT THE DISALLOWANCE U/S 14A HAS BEEN MADE BY THE ASSESSEE ON ADHOC BASIS AND NOT BY APPLYING RULE 8D OF THE I.T. RULES . HE ALSO NOTICED THAT ASSESSEE HAS INCURRED HEAVY EXPENDITURE ON SALARY AND MISCELLANEOUS EXPENSES WHICH ACCORDING TO HIM WAS FOR EARNING EXEMPT AS WELL AS TAXABLE INCOME . THE ASSESSEE WAS THEREFORE ASKED TO SHOW CAUSE AS TO WHY THE EXPENDITURE FOR EARNING EXEMPT INCOME NOT BE DISALLOWED U/S 14A BY APPLYING THE FORMULA PRESCRIBED UNDER RULE 8D OF THE I.T. RULES. ASSESSEE F I LED DETAILED SUBMISSIONS WHICH ARE NARRATED BY THE AO I N HIS ORDER . THE ASSESSEE ALSO MADE SUBMISSIONS TO THE EFFECT THAT SOME OF THE EXPENSES HAVE ALREADY BEEN DISALLOWED AND THEREFORE THE SAME CANNOT BE DISALLOWED ONCE AGAIN U/S 14A OF THE ACT AND IT SUBMITTED THE WORKING OF DISALLOWANCE U/S 14A AS PE R ITS CALCULATION. ANOTHER SUBMISSION THAT WAS MADE WAS THAT DURING THE COURSE OF SEARCH IN THE ASSESSEES GROUP ON 21.06.2011 RS.75 LACS WAS OFFERED IN ASSESSEES HAND TOWARDS CONTINGENCIES TO COVER TOWARDS THE DISALLOWANCE OF THE EXPENSES/ CLAIMS/OTHER ADDITIONS ETC. THE AFORESA I D AMOUNT OF CONTINGENCY BE SET OFF AGAINST THE DISALLOWANCE OF EXPENSES U/S 14A . THE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTAB L E INCLUDING THE SUBMISSION THAT ASSESSEE HAS EARNED TAX FREE INCOME WITHOUT INCURRING ANY EXPEND I TURE . AO WAS ALSO OF THE V I EW THAT THE I NCOME OFFERED DUR I NG SEARCH ON ACCOUNT O F CONTINGENCY CANNOT 4 BE SET OFF AGAINST THE DISALLOWANCE BEING WORKED OUT AS PER RULE 8D . HE THEREAFTER , BY APPLYING THE FORMULA PRESCRIBED UNDER RULE 8D R.W.S. 14A WORKED OUT THE DISALLOWANCE A T RS.1 , 18 , 95 , 651/- . AGGRIEVED BY THE ORDER OF AO , ASSESSEE CARRIED THE MATTER BEFORE CIT(A), WHO UPHELD TH E ORDER OF AO BY HOLDING AS UNDER: 6.2 I HAVE CONS I DERED THE ABOVE SUBMISSIONS OF THE APPELLANT . I DO NOT THINK T HAT ANY COMMENTS A R E NECESSARY ON THE L EGISLATIVE HISTO R Y OF THE SECT I ON 14A. THE SECTION IS T HE R E ON THE STATU T E AND I T HAS TO BE APPLIED WHEREVER R EQUIRED. 6 . 3. THE APPELLANT HAS CLAIMED THAT DIVIDEND INCOME SHOULD NOT BE CONSIDERED AS EXEMPT INCOME BECAUSE THE COMPANY DISTRIBUTING T HE D I VIDENDS PAYS DDT U/S 115. I DO NOT AGREE WITH THE APPEL L ANT . I T IS UNDISPUTED FACT THAT EXEMPT DIVIDENDS DO NOT FORM PAR T OF THE TO T AL INCOME OF T HE APPE L LANT AND HENCE IN HIS CASE DISALLOWANCE U/S 14A CA N BE CONTEMPLATED. THE R E I S NOTH I NG I N SEC T ION 1150 TO SUGGEST T H A T DDT I S A LIABILITY OF T HE PE R SON R ECEIVING THE DIVIDENDS. THE DDT I S A LIABI LI TY O F THE COMPANY DISTRIBUTING THE DIVIDENDS AND IN NO WAY THE COMPANY CAN BE TREATED AS AN AGENT OF THE SHARE HOLDERS FOR PAYMENT OF THE DDT . 6 .4. IT IS APPARENT FROM THE RELEVANT PART OF THE ASSESSMEN T O R DE R, REP R ODUCED ABOVE THAT THE AO DID RECORD H I S SAT I SFAC T ION FOR I NVOKING PROV I S I ONS OF SECT I ON 14A R . W. RULE 8D . IN MY MIND IT WAS I NCUMBENT F IRST ON THE APPELLAN T TO EXPLAIN HOW HE HAD ARRIVED AT THE DISALLOWANCE OF RS.29,63 , 271/ . IN THE ASST ORDER IT IS MENTIONED THAT THE FIGU R E HAD BEEN ARRIVED AT IN AN AD HOC MANNER . IT I S SEEN THAT THE DISAL L OWANCE CONTEMPLATED BY THE APPELLANT ACTUALLY COMPR I SES OF THE STT PAID , PMS FEES AND D- MAT CHA R GES . NO PART OF THE ADM I N I STRATIVE O R FINANCIAL EXPEND I T UR E WAS DISALLOWED. IF THE APPELLANT FAILED TO JUSTIFY OR AT L EAST SAT I SFACTORILY EXPLAIN THE BASIS OF THE D I SALLOWANCE MADE SUO-MOTTO OR NOT MADE, THE ASSESSING OFFICER CANNOT BE FAULTED FOR INVOKING PROVIS I ONS OF SECTION 14A AND RULE 8D. 6 . 5 . THE APPELLANT HAS ALSO ARGUED THAT INVESTMENTS MADE IN THE GROUP COMPANIES SHOULD NOT BE CONSIDERED BECAUSE THE PRIMARY OBJECT OF INVESTMENT WAS HOLDING CONTROLLING STAKE IN GROUP CONCERN AND NOT EARNING ANY INCOME OUT OF INVESTMENT - FURTHER INVESTMENT WAS MADE LONG BACK AND NOT IN THE YEAR UNDER CONSIDERATION. IN THIS REGARD THE APPE L LANT HAS PLACED RELIANCE ON THE ITAT DECISIONS IN THE CASE OF GARWARE WALL ROPES VS . CIT ETC. 6.6 . I FIND THAT THE FACTS IN THE APPELLANT'S CASE ARE DIFFERENT FROM THOSE CONSIDERED BY THE HONORABLE TRIBUNAL IN THE CITED CASES. IT IS SEEN FROM THE DETA I LS ON PAGE 11 OF THE ASST ORDER THAT THE APPE L LANT'S I NVESTMENT IN UNQUOTED SHARES OF GROUP COMPANIES WENT UP DURING THE YEAR FROM RS 12.43 CR TO RS. 41 . 39 CR . APPARENTLY SUBSTANTIAL INVESTMENT HAS BEEN MADE DURING THE 5 YEAR AND IT IS NOT OLD I NVESTMENTS . FU R THER A S REGARDS THE INVESTMENT IN PREFERENT I AL SHARES OF THE GROUP COMPANIES THE SAME CAME DOWN FROM RS. 272 . 19 CR TO RS. 203.53 CR. THUS THERE WAS LOT OF CHURNING EVEN IN THIS ACCOUNT . THE CHURNING OF INVESTMENT AND N EW INVESTMENTS REQU I RE ADMINISTRATIVE SUPPORT. IT CANNOT BE CONS I DERED A PASS I VE INVESTMENT . FU R THER THE APPELLANT HAS PRODUCED NOTHING T O SHOW THAT TH I S CHURNING OR THE NEW INVESTMENT WAS REQUIRED FOR ACQU I R I N G A CONTROLLING INTEREST IN THE GROUP COMPANIES. THERE IS NO EVIDENCE OF ANY COMPETITOR HAVING ANY HOSTILE INTEREST IN THE GROUP COMPANIES WHICH NECESSITATED THIS INVESTMENT. THE PRIMARY AND DIRECT PURPOSE OF THE INVESTMENT WAS TO HELP BUSINESS OF THOSE COMPANIES AND EARN DIVIDEND . THE GROUP COMPAN I ES WERE APPARENTLY NOT SET UP FOR PHILANTHROPI C AL PURPOS E . IT MAY BE T HAT SOME COMPANI E S DID NOT MAKE PRO FIT O R DID NOT DECLARE DIVIDEND TO AVOID DDT . BUT THAT WOULD NOT CHANGE THE PURPOSE FO R WHICH INVESTMENT WAS MADE IN THE SHARES OF A BUSINESS COMPANY . THU S THIS ARGUMENT OF THE APPELLANT FAI L S IN THE FACTS OF TH E CASE . 6.7. THE APPELLANT HAS ARGUED THAT SHORT TERM INVESTMENT IN SHARES SHOULD NOT BE TREATED AS INTENDED FOR EARNING TAX EXEMPT INCOME. HOWEVER THERE ARE NO DETAILS OF ANY SHORT TERMS GAINS MADE BY THE APPELLANT OR TAXES PAID ON SUCH GAINS . HENCE THIS ARGUMENT IS ALSO REJECTED . 6.8 . THE APPELLANT HAS ALSO ARGUED THAT NO DISALLOWANCE UNDER SECTION 14A SHOULD BE MADE IF THERE IS NO EXEMPT INCOME. I DO NOT SEE MUCH RELEVANCE OF THIS ARGUMENT BECAUSE THE APPELLANT HAS ADMITTED THAT HE HAD EARNED EXEMPT INCOME TO THE EXTENT OF RS. 2.62 CR AND HAD EVEN SUO MOTTO MADE A DISALLOWANCE OF EXPENDITURE U/S 14A . 6.9 . THE APPELLANT HAS ALSO ARGUED THAT DISALLOWANCE U/S 14A CAN BE MADE ON A REASONABLE BASIS WITHOUT RECOURSE TO RULE 8D. HOWEVER THE APPELLANT HAS NOT FURNISHED ANY REASONABLE BASIS FOR MAKING SUCH DISALLOWANCE IN HIS CASE . THE ARGUMENT THEREFORE FAILS . 6.10. THE APPELLANT HAS MADE AN ALTERNATE SUBMISSION THAT THE DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE TOTAL EXPENDITURE CLAIMED IN THE RETURN OF INCOME. THE APPELLANT HAS FURNISHED WORKING OF THE SAME AS UNDER: SNO PARTICULARS AMOUNT 1 TOTAL EXPENSES DEBITED TO 5,61,61,861/ - LOSS ACCOUNT LESS: 2 EXPENSES DISALLOWED 3 , 59,65,135/ - THE RETURN OF INCOME OTHER DISALLOWANCE U/S 14A 3 DISALLOWANCE U/S 14A PER 29 , 63,271/ - OF INCOME 4 EXPENSES DISALLOWED AS PER 93,00,000 / - DECLARATION 6 5 TOTAL DISALLOWANCE 4,82,28,406/ - 6 (1-5) BALANCE EXPENDITURE 79,33,455/ - 7 DISALLOWANCE U/S 14A PER 1,18,95,651/ - U/S 143(3) 8 BALANCE EXPENDITURE AS ABOVE 79,33,455/ - 9 ( 7-8) EXCESS DISALLOWANCE 39,62,196/ - 6.11 . I . FIND FROM FOLLOWING DISCUSSION IN THE ASST ORDER THAT THE FIGURES IN THE ABOVE WORKING ARE NOT DISPUTED BY THE AO. THE RELEVANT PARAS ARE REPRODUCED AS UNDER: 'THE SUBMISSION OF ASSESSEE IS DULY CONSIDERED THE CLAIM OF ASSESSEE THAT RS . 19,19 , 220/- ON ACCOUNT OF AIRCRAFT EXPENDITURE SHOULD FIR S T BE DISALLOWED FROM THE EXPENDITURE PROPOSED TO DISALLOW U / S 14 A AND EXPENDITURE ALREADY DISALLOWED SUCH AS DEMAT FEES, PMS FEES WERE ALSO TO BE REDUCED NOT ACCEPTED HOWEVER , THE CLAIM OF THE ASSESSEE THAT SUM OF RS . 75,00 , 000/- ON ACCOUNT OF CONTINGENCIES SHOULD ALSO BE ALLOWED BEFORE DETERMINING QUANTUM OF DISALLOWANCE U/S 14A IS NOT ACCEPTABLE . INCOME OFFERED DURING SEARCH AND SEIZURE ACTION ON ACCOUNT OF CONTINGENCY HAS NOTHING TO DO WITH STATUTORY DISALLOWANCES S UCH AS DISALLOWANCE U/S 14A AND THERE IS NO NEXUS BETWEEN DISCLOSURE ON ACCOUNT OF CONTINGENCY AND ADDITION U / S 14A . ACCORDINGLY, DISALLOWANCE U/S 14A IS WORKED OUT APPLY I NG RULE 8D WHICH COMES TO RS . 1,18,95,651/-(WORKIN G ATTACHED AS SEPARATE ANNEXURE) . ' 6.12. NOW HAVING CONSIDERED THE FACTS OF THE CASE AND AFTER GOING THROUGH VARIOUS JUDICIAL DECISIONS CITED BY THE APPELLANT, IN PRINCIPLE I F I ND IT DIFFICULT TO AGREE WITH THE ASSESSING OFFICER . THE EXPENDITURE WHICH HAS BEEN DISALLOWED FOR SOME OR OTHER REASON SUCH AS AIR CRAFT EXPENDITURE CANNOT AGAIN BE PART OF A DISALLOWANCE U/S 14A. THE ASSESSING OFFICER HAS ADMITTED THAT THE EXPENDITURE ON ACCOUNT OF AIRCRAFT TO THE EXTENT OF RS.19,19,220/ ADMITTED TO BE NON GENUINE OR OTHERWISE UNALLOWABLE HAS ALREADY BEEN DISALLOWED. IT CANNOT BE SAID THAT THIS EXPENDITURE HAS BEEN CLAIMED AS BUSINESS EXPENDITURE AND THUS CAN BE SUBJECTED TO FURTHER DISALLOWANCE U/S. 14A. 6.13. IT IS APPARENT THAT SECTION 14A TALKS ABOUT DISALLOWANCE, AND DISALLOWANCE CAN BE ONLY OUT OF WHAT HAS BEEN CLAIMED . THERE CANNOT BE A DISALLOWANCE IN EXCESS OF WHAT HAS BEEN CLAIMED. 6 . 14. THEREFORE, I AGREE WITH THE APPELLANT THAT THE EXPENDITURE OF RS. 19,19,220/- MAY NOT BE CONSIDERED AGAIN FOR DISALLOWANCE U/S , 14A OF I NCOME - TAX ACT . BUT IT I S APPARENT THAT EVEN AFTER EXC L UDING THE AMOUN T OF RS. 19,19,220/- AND RS. 29,63,271/- 7 BALANCE EXPENDITURE CLAIMED IN THE RETURN COMES TO RS. 1,54,33 , 455/- AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 14A IS LESS THAN THIS AMOUNT. HENCE, THERE IS NO DOUBLE DISALLOWANCE OF THE SAME EXPENDITURE. 6 . 15. HOWEVER AS REGARDS THE ADDITIONAL INCOME OF RS. 75,00,000/- DISCLOSED IN THE RETURN OF INCOME, I FIND THAT THE ISSUE IS COVERED AGAINST THE APPELLANT BY MY PREDECESSOR'S DECISION IN THE APPELLANT'S OWN CASE FOR ASST YEAR 2010-11 . THE RELEVANT PART OF THE APPELLATE ' ORDER IN THE APPE LL ANT'S CASE FOR THE ASST YEAR 2010-11 IS REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE: 'T HE APPELLANT HAS FURTHER SUBMITTED THAT OUT OF THE AFORESAID ALLOWABLE EXPENDITURE OF RS . 1,00,30,594/- AS PER DECLARATION MADE BY POONAWALA GROUP THEY HAVE AGREED TO OFFER FOLLOWING DISALLOWANCES I . E. 1. TRAVELLING EXPENSE RS. 7,05,920/- 2. CONTINGENCIES RS 75 , 00,000/ - THUS IT HAS BEEN CONTENDED THAT THE DISALLOWANCE U/S 14A SHOULD BE RESTRICTED TO RS. 18,24,674/ - (1,00,30,594 - 82 , 05 , 920) AND THE DISALLOWANCE OF RS . 5380/- ON ACCOUNT OF LEAVE ENCASHMENT BE ALSO CONSIDERED AND THE SAME BE RESTRICTED TO RS. 18,19,294/-. THE APPELLANT HAS FURTHER STATED THAT THE APPELLANT-COMPANY HAD OFFERED A SUM OF RS . 75,00,000/- AS ADDITIONAL INCOME UNDER THE HEAD CONTINGENCIES TOWARDS DISALLOWANCE OF EXPENSES CLAIMED, ERRORS, OMISSIONS FOR CURRENT ASSESSMENT YEAR HENCE ANY DISALLOWANCE MADE IN THE ASSESSMENT PROCEEDINGS SHOULD BE SET OFF AGAINST THIS CONTINGENCY. THUS IT HAS BEEN SUBMITTED THAT THE SUM OF RS . 75 , 00,000/- ON ACCOUNT OF CONTINGENCY AND RS. 7,05,920/- ON ACCOUNT OF AIRCRAFT EXPENDITURE SHOULD FIRST BE DISALLOWED FROM THE EXPENDITURE CLAIMED TO THE EXTENT OF RS. 1,10,25,344/- AND ALSO THE DISALLOWANCE U/S 14A MADE OF RS. 9,94,750/- BE ALSO REDUCED . THE APPELLANT HAS ALSO SUBMITTED THAT THE ASSESSING OFFICER WHILE MAKING THE DISALLOWANCE AT RS. 93,24 , 674/- U / S 14A HAS INCLUDED 75,00 , 000/ - AND A FURTHER SUM OF RS . 75,00 , 000/- WAS ADDED BEING CONTINGENCY AND IN THE PROCESS THERE WAS AN E X CESS DISALLOWANCE OF RS . 75 , 05,380/- , WHICH WAS MADE WITHOUT CONSIDERING THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT. IT HAS THUS BEEN CONTENDED BY THE APPELLANT THAT E X CESS DISALLOWANCE OF RS . 75,05 , 380/- BE REDUCED SO AS TO RESTRICT THE SAME TO THE EXTENT OF EXPENDITURE CLAIMED UNDER THE HEAD 'INCOME FROM BUSINESS ' AND THE DISALLOWANCE U/S 14A IS EXCEEDING THE E X PENDITURE INCURRED IN V IEW OF THE FORMULA PRESCRIBED UNDER RULE 8D IN VIEW OF THE DECISION IN THE CASE OF GILLETTE GROUP INDIA PVT. LTD. VS. ACIT, 22 TAXMANN.COM 61, THE SAME BE RESTRICTED TO THE CLAIMED EXPENDITURE. 3.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND PERUSED MATERIAL ON RECORD. THE BASIC ISSUE CONTESTED BY THE APPELLANT IS WITH RESPECT TO THE CLAIM OF SET OFF OF THE DECLARATION MADE AS ADDITIONAL INCOME ON ACCOUNT OF 8 CONTINGENCIES AND TRAVELLING EXPENSES AGAINST THE DISALLOWANCE MADE U/S 14A AND THEREBY THE EXCESS DISALLOWANCE OF RS. 75,05,380/- BE REDUCED TO RESTRICT THE SAME TO THE EXTENT OF EXPENDITURE CLAIMED UNDER THE HEAD INCOME FROM BUSINESS. THE APPELLANT HAS, HOWEVER, NOT DISPUTED THE WORKING OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A R.W. RULE 8D. IT IS NOTICED THAT THE APPELLANT IN THE PROFIT & LOSS ACCOUNT HAS CLAIMED TOTAL EXPENDITURE OF RS. 1,97,00,854/- AND IN THE COMPUTATION OF INCOME HAS DISALLOWED THE EXPENSES AMOUNTING TO RS. 96,70,260/-. IN ADDITION, THE APPELLANT HAS ALSO DISALLOWED A SUM OF RS. 9,94,750/- BEING 10% OF DIVIDEND RECEIVED OF COMPANIES OTHER THAN GROUP COMPANIES U/S 14A ON AN ADHOC BASIS I.E. WITHOUT THE APPLICATION OF RULE 8D. THE ASSESSING OFFICER, THEREFORE, APPLYING RULE 8D WORKED OUT THE TOTAL DISALLOWANCE U/S 14A AT RS. 1,34,69,308/-. HOWEVER AFTER CONSIDERING THE DISALLOWANCE MADE BY THE APPELLANT IN THE COMPUTATION OF RS. 86,75,510/- AND RS. 9,94,750/- THE EXPENDITURE CLAIMED WORKED OUT TO RS. 96,70,260/-, AND THE SAME AFTER BEING REDUCED FROM THE TOTAL EXPENDITURE CLAIMED AS PER BOOKS OF ACCOUNT OF RS. 1,97,00,854/- IN THE PROFIT & LOSS ACCOUNT WORKS OUT TO RS. 1,00,30,594/-. THE ASSESSING OFFICER, HOWEVER, HAS DISALLOWED RS. 93,24,674/- U/S 14A AS AGAINST RS. 1,34,69,308/- ACTUALLY WORKED OUT BY HIM. IT IS THUS SEEN THAT THE ASSESSING OFFICER HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXPENDITURE CLAIMED UNDER THE HEAD INCOME FROM BUSINESS AND IS NOT EXCEEDING THE EXPENDITURE CLAIMED BY THE APPELLANT. 3.5 IN VIEW OF THE ABOVE FACTS, THE DECISION OF THE ITAT DELHI IN THE CASE OF GILLETTE GROUP INDIA PVT. LTD VS ACIT (CITED SUPRA) IS NOT APPLICABLE AS THE ASSESSING OFFICER HAS ALREADY MADE DISALLOWANCE WHICH IS BELOW THE CLAIMED EXPENDITURE. SO FAR AS THE CONTENTION RAISED BY THE APPELLANT REGARDING THE ADDITIONAL INCOME OFFERED ON ACCOUNT OF CONTINGENCIES AND TRAVELLING EXPENSES IS CONCERNED, IT IS NOTICED THAT THE APPELLANT HAD ACTUALLY MADE A DECLARATION U/S 132(4) OF THE ACT WHEREIN DR. C S POONAWALA HAD OFFERED ADDITIONAL INCOME ON BEHALF OF THE APPELLANT-COMPANY FOR A.Y. 2010-11 AMOUNTING TO RS. 1,89,96,743/- WHICH WAS NOT OFFERED IN THE RETURN OF INCOME, BUT DURING THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER IN PARA-4 HAS GIVEN THE BREAK-UP OF THE DECLARATION MADE BY THE APPELLANT AND HAS TAXED THE ENTIRE DECLARATION AS UNDISCLOSED INCOME, HOWEVER WHILE COMPUTING THE INCOME HAS ADDED THE INCOME DECLARED UNDER DIFFERENT HEADS SEPARATELY, AS AGAINST ONE CONSOLIDATED ADDITION OF THE ENTIRE DECLARATION OF RS. 1,89,96,743/-. THE APPELLANT HAS HOWEVER, CONTENDED THAT THE ASSESSING OFFICER ADDED THE SUM OF RS. 75 LACS DECLARED UNDER THE HEAD CONTINGENCY TWICE IS NOT CORRECT AS THE ADDITION MADE WHILE MAKING THE DISALLOWANCE U/S 14A IS A RESULT OF THE DISCUSSION AND THE CONTENTION RAISED BY THE APPELLANT WITH RESPECT TO THE DISCLOSURE MADE DURING THE COURSE OF SEARCH ACTION. IT WAS IN THIS CONTEXT THAT THE ASSESSING OFFICER HAS ALSO NOTED THAT THE INCOME OFFERED DURING SEARCH ACTION ON ACCOUNT OF CONTINGENCY DID NOT HAVE ANY CONNECTION WITH THE STATUTORY DISALLOWANCE U/S 14A AND THERE WAS NO NEXUS BETWEEN THE SAID DISCLOSURE ON ACCOUNT OF CONTINGENCY AND 9 ADDITION U/S 14A HENCE ADDED BACK. THE ASSESSING OFFICER WHILE WORKING OUT THE DISALLOWANCE U/S 14A HAS STARTED WITH THE FIGURE ARRIVED AT BY THE APPELLANT OF RS. 18,24,674/- (1,00,30,594 82,05,920) AND ADDED THERETO THE SUM OF RS. 75,00,000/- AS THE SAME WAS AN UNDISCLOSED INCOME DECLARED BY THE APPELLANT AND AT THE SAME TIME HAS ALSO CONSIDERED THE OTHER DISALLOWANCE MADE BY THE APPELLANT IN THE COMPUTATION TO ARRIVE AT THE FIGURE OF DISALLOWANCE U/S 14A INCLUDING THE TRAVELLING EXPENSES OF RS.7,05,920/-, WHICH HAS BEEN INCLUDED IN THE EXPENSES CLAIMED BY THE APPELLANT IN PROFIT & LOSS ACCOUNT. THE APPELLANT IN THE SUBMISSION HAS ALSO TRIED TO INCLUDE THE DISCLOSURE MADE DURING SEARCH ACTION ON ACCOUNT OF EXPENSES FOR THE WORKING OF DISALLOWANCE U/S 14A WHICH IS NOT LEGALLY CORRECT. THE APPELLANT HAD DECLARED THE SUM OF RS. 75 LACS AS ADDITIONAL INCOME UNDER THE HEADING CONTINGENCIES WITH A REQUEST THAT THE SAME BE SET OFF AGAINST ANY DISCREPANCIES FOUND OVER AND ABOVE WHICH WERE COVERED BY SPECIFIC DECLARATION IN THAT YEAR. IN THE PRESENT CASE NO SUCH DISCREPANCIES HAVE BEEN FOUND WHICH COULD BE SET OFF AGAINST CONTINGENCIES. THIS IS BECAUSE THE DISCLOSURE MADE U/S 132(4) AS ADDITIONAL INCOME HAS ALREADY BEEN ASSESSED AS UNDISCLOSED INCOME AND THE CLAIM OF EXPENSES (DISCLOSED AS UNDISCLOSED INCOME) CANNOT BE SET OFF AGAINST THE INCOME UNDER REGULAR RETURN. THE TELESCOPY OF SUCH DECLARATION CAN ONLY BE MADE AND CONTEMPLATED AGAINST FURTHER ADDITION IF ANY OF UNDISCLOSED INCOME, WHICH IS NOT THE FACT IN THE PRESENT CASE. MOREOVER, THE SUM OF RS. 75 LACS DISCLOSED BY THE APPELLANT IS NOT AGAINST ANY SPECIFIC EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT. THUS, DISALLOWANCE MADE BY THE ASSESSING OFFICER IS FOUND TO BE PERFECTLY IN ORDER AND DOES NOT CALL FOR ANY INTERFERENCE AND IS, THEREFORE, LIABLE TO BE SUSTAINED. 3.6 IN VIEW OF THE ABOVE, THE GROUNDS OF APPEAL NO 1, 2 & 3 RAISED BY THE APPELLANT ARE DISMISSED. 6.16 . THUS IT CAN BE SEEN THAT THE ISSUE RAISED BY THE APPELLANT REGARDING SET OFF OF THE ADDITIONAL INCOME DISCLOSED DURING THE SEARCH OR EXCLUDING THE SAME FROM THE DISALLOWANCE U/S 14A IS ALREADY DECIDED AGAINST THE APPELLANT BY MY PREDECESSOR . THERE HAS BEEN NO CHANGE IN THE FACTS AND C I RCUMSTANCES OF THE CASE , HENCE CONSISTENCY REQUIRES THAT FOLLOWING THE APPEAL DECISION IN ASST YEAR 2010-11 IN APPELLANT'S OWN CASE, THE G R OUNDS OF APPEAL RAISED BY THE APPELLANT AS ABOVE ARE DECIDED AGAINST THE APPELLANT. THE GROUND NO.1 AND VARIOUS CONTENTIONS RAISED IN THIS GROUND ARE ACCORDINGLY DISMISSED. 7. GROUND 2 : DISALLOWANCE OF RS.75,00,000/- ON ACCOUNT OF CONTINGENCY THE APPELLANT COMPANY HAS MADE DECLARATION OF RS.75. LACS AS CONTINGENCIES TO COVER ANY DISCREPANCIES. IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.139 THE APPELLANT COMPANY HAS MADE THE ADDITION OF THE DECLARED AMOUNT RELEVANT FOR THIS ASSESSMENT YEAR OF RS.75 LACS. THE APPELLANT WANTS THAT THIS SELF ADMITTED DISALLOWANCE OF RS.75,00,000/- BE SET OFF AGAINST THE DISALLOWANCE UNDER RULE 14A. THE APPELLANTS SUBMISSION IN THIS REGARD ARE REPRODUCED BELOW : 10 1. THERE WAS A SEARCH ACTION U/S.132 ON 21/06/2011 ON POONAWALLA GROUP IN WHICH APPELLANT IS PART OF : I. IN CONNECTION WITH THIS SEARCH OPERATION, THE FIRST STATEMENT OF CHAIRMAN AND MD, DR. C.S. POONAWALLA U/S.132(4) WAS RECORDED ON 24/06/2011 IN WHICH DR. C.S. POONAWALLA MADE A DECLARATION OF RS.100 CRORES. 2. SUBSEQUENTLY A STATEMENT WAS RECORDED ON 20.07.2011 (REFER ANNEXURE NO.3) WHERE IN BREAK UP WAS FINALIZED WHICH INCLUDES THE AMOUNT TOWARDS CONTINGENCIES OF RS.12.22 CRS. THE EXACT WORKING IN THE STATEMENT MADE BY DR. C.S. POONAWALLA IS RE-PRODUCED BELOW FOR YOUR READY REFERENCE : Q.16: PLEASE GIVE THE DETAILS OF BIFURCATION OF REMAINING AMOUNT OF DECLARATION. ANS. I OFFER RS.12.22 CR AS ADDITIONAL INCOME IN THE HANDS OF SIIL, PIIPL AND ADURJEE BR. PVT. LTD. AND RS. 1 CR IN THE HANDS OF MR. ADAR POONAWALLA TO COVER ANY DISCREPANCY IN THE JEWELLERY AND CASH I DECLARE THE ADDITIONAL INCOME TO COVER ANY OTHER ERRORS, OMISSIONS OR DISCREPANCIES IN THE HANDS OF SIIL, PIIPL, ADAR AND ADURJEE. FIGURES IN RUPEES FINAN - CIAL YEAR SIIL ADURJEE PIIPL ADAR POONAWALLA 2005 - 06 1,00,00,000 2006 - 07 1,00,00,000 2007 - 08 0 2008 - 09 0 75,00,000 60,00,000 2009 - 10 0 75,00,000 60,00,000 2010 - 11 3,82,00,000 75,00,000 60,00,000 1,00,00,000 2011 - 12 1,00,00,000 75,00,000 60,00,000 TOTAL 6,82,00,000 3,00,00,000 2,40,00,000 1,00,00,000 ABOVE AMOUNT S A RE OFFER E D I N DIFFER E NT FINAN C IAL Y E AR S V OLUNTARILY AS ADD I TION A L INCOME UNDER THE H E ADIN G ' CONTINGENC IE S '. IT I S REQU E STED THAT THI S MAY BE SET OFF AG A IN S T ANY DI SC REPANCIES FOUND OVER A ND AB OV E THOSE WHICH ARE COVERED B Y SPE CI FIC D EC L A RAT I ON I N THAT YEAR , IF AMOUNT O F SUC H DIS C REPAN C IES E XC EE D S T H E AMOUNT OFFERED UN DE R ' CONTINGEN C IES ', THE E X CESS NAY BE S ET OFF A GAINS T ' CONTIN G EN CI ES ' O F FER E D IN A NY O T HER Y EAR FALLING IN THE BLO CK OF SE V EN YEARS (PR EV I O US Y EA R 2005-06 TO 2011-12) FOR THE SA M E E NTITY AND IF A N Y E XC E SS STILL R E M AI N S TO BE S E T OFF , TH E S AM E MAY BE S E T O FF A G A INST UN A DJUST E D CONTING E NCI E S DECLARED B Y OTHER A S S E S SE E ( S ) IN THE CSP GROUP . FURTHER, TO THE EX T E NT OF UN A DJUSTED AMOUNT OF C ONTINGEN C I E S I N ANY YEA R, APPROPRI ATE C A PITALI Z AT IO N M AY PLEA SE BE ALLOWED . ' FURTHER , TO TH IS A FINAL L E TTER W AS G I V E N BY DR . C S POONAWALLA O N 8 TH S E PTEMBER 20 11 C O PY OF WHICH I S ENCLOS E D INCLUDING CHART -A LONGWITH THIS SUBMISS IO N AT ANNEXURE NO. 4 WHICH IS READ S A S UNDER : 11 I AM ENCLOSING HEREWITH THE BREAK-UP OF AMOUNT OF RS . 100 CRORES OFFERED TO TAX . THE DECLARAT I ON INCLUDES FOLLOWING AMOUNTS AS CONTINGENCIES . SERUM INSTITUTE OF INDIA 5 CRORES POONAWALLA INVESTMENT & INDUSTRIES PVT LTD 2.4 CRORES ADURJEE BROTHERS PVT LTD 3 CRORES THESE CONTINGENCIES ARE TOWARDS THE ADDITIONS ON ACCOUNT OF EXPENSES AND CLAIMS AS WELL AS ERRORS AND OMISSIONS. THE ABOVE AMOUNTS ARE OFFERED IN DIFFERENT FINANCIAL YEARS VOLUNTARILY, AS ADDITIONAL INCOME. IT IS REQUESTED THAT THIS MAY BE SET OFF AGAINST ANY DISCREPANCIES FOUND OVER AND ABOVE THOSE WHICH ARE COV E RED BY SPECIFIC DECLARATION IN THAT YEAR . IF AMOUNT OF SUCH DISCREPANCIES EXCEEDS THE AMOUNT OFFERED UNDER CONTINGENCIES, THE EXCESS MAY BE SET OFF AGAINST CONTINGENCIES OFFERED IN ANY OTHER YEAR FALL I NG IN A BLOCK FOR THE SAME ENTITY AND IF ANY EXCESS STILL REMAINS TO BE SET OFF, THE SAME MAY BE SET OFF AGAINST UNADJUSTED CONTINGENCIES DECLARED BY OTHER ASS E SS ES IN THE CSP GROUP . ' FURTHER ON GOING THROUGH TH E STATEMENT RECORDED ON 20 . 07 . 2011 I HAVE OBSERVED THAT CERTAIN MODIFICATIONS / CLARIFICATIONS ARE NEEDED IN ORDER TO AVOID MISUNDERSTANDING AND CORRECT OBVIOU S ERRORS . THE PLACES WHERE THE MODIFICATIONS / CLARIFICATIONS ARE NEEDED ARE AS FOLLOWS . 1. ------NOT RELEVANT 2. ------NOT RELEVANT 3. I REQUEST YOUR REFERENCE TO QUESTION NO ; 12 AT PAGE NO. 15 . AT PAGE NO. 15 AFT E R THE TABLE THAT I WILL DECLARE R S . 33 LAC S IN THE HANDS OF ADURJEE & BROTHERS PVT . LTD . AND R S . 47 LAC S IN THE HANDS OF PIIPL ON ACCOUNT OF NON- BUSINE SS EXPENSES. HOWEVER, THIS SENTENCES DOES NOT MENTION DISALLOWANCE ON ACCOUNT OF DEPRECIAT I ON ON BU I LDING , FURNITURE AND IMPORTED CAR INCLUDED IN THE TABLE . TH E SAME SHOULD BE TREATED A S PART OF D I SALLOWANCE ALONGWITH AIRCRA FT EXPENDITURE. 4. -----NOT RELEVANT 5. I REQUEST YOUR REFERENCE TO ANSWER TO QUESTION NO 16 AT PAGE NO 18 . AT PAGE NO 18 ANSWER TO QUESTION 16 WHI C H IS REPRODUCED BELOW : ' I OFFER RS 1 2 . 22 CROR E S AS ADDITION A L I NCOME IN THE HANDS OF PIIPL , ADURJEE & BROTH E RS PVT LTD AND RS 1 CRORE IN THE HAND OF ADAR POONAWALLA TO COVER ANY DI S CREPANCY IN THE JEWELLERY AND CASH . ' IT MAY GIVE AN IMPRESSION THAT RS 12 . 22 CRORE ALSO REFERS TO COVER THE DISCREPANCY IN RESPECT OF JEWELLERY AND CASH . HOWEVER , I WOULD LIKE TO CLARIFY THAT THE WORD 'TO COVER ANY DISCREPANCY IN THE JEWELLERY AND CASH ' IS APPLICABLE ONLY IN RESPECT OF RS 1 CRORE OF MR. A C POONAWALLA. 12 6. -- - ------ -- - -NOT RELEVANT----- - -- - --- 3. THE CHART A TT A CH E D WITH TH E A BOVE L E TTE R S P E C I FIES THE WORDIN G OF C O NTINGEN C I E S AS ' CONTING E NCY TOWARDS DISALLOWANCE OF EXPENSES, CLAIMS, OTHER ADDITION S , ERRORS, OMISS I ONS ETC . IT IS SUBMITTED THAT DECLARAT I ON OF ADDIT I ONAL INCOME BY ABPL , IS FOR DISALLOWANCE OF EXPENSES WHICH ARE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS ON ACCOUNT OF NON - BUSINE S S USE AND NOT TOWARDS ANY UNDISCLOSED RECEIPTS . IN VIEW OF THIS, I T IS AL S O SUBMITTED THAT W HER E V E R TH E RE IS AN A DDITION IN THE ASSE S SM E NT THEN IT SHOULD BE FIRST SE T OFF AGAIN S T THE CONTINGENCY OF TH A T Y EA R AND ONL Y TH E B A L A N CE R E MAINED OUT OF CONTINGEN CY R E MA I N E D TO B E S E T OF F S H O ULD B E ADDED TO THE I NCOM E . WE TH E R EFO RE REQ U EST YO U R H O N OR TO DI REC T TH E AS S E S S I N G O FFIC E R TO DELE TE TH E A D DI TION ON ACCOUNT OF C O NT I NG E NCI E S SI NCE THER E IS N O D ISC REP A N CY FOUN D A T THE T IME O F A SSESS MENT . ' 7.1 IN SUM AND SUBSTANCE THIS GROUND IS THE SAME AS THE LAST CONTENTION RAISED IN GROUND NO.1 I HAVE ALREADY DISCUSSED ABOVE THAT THE ISSUE OF SET OFF OF THE ADDITIONAL INCOME AGAINST THE DISALLOWANCE MADE U/S.14A WAS DECIDED BY MY PREDECESSOR CIT(A) AGAINST THE APPELLANT IN ASST. YEAR 2010-11. AS THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, FOLLOWING THE APPELLATE ORDER IN ASST. YEAR 2010-11, I DISMISS THIS GROUND OF APPEAL. AGGRIEVED BY THE ORDER OF CIT(A) , ASSESSEE IS NOW IN APPEAL BEFORE US . 5. BEFORE US , LD.A.R. REITERATED THE SUBM I SSIONS MADE BEFORE AO AND CIT(A) AND FURTHER PO I NTING TO THE WORK I NG PLACED AT PAGE 55 OF THE PAPER BOOK SUBM I TTED THAT OUT OF THE TOTAL EXPENSES OF RS.2 . 64 CRORES (ROUNDED OFF) THAT WERE DEBITED TO THE PROFIT AND LOSS ACCOUNT , RS.1 . 85 CRORES (ROUNDED OFF) HAVE ALREADY BEEN DISALLOWED I N THE ASSESSMENT PROCEEDINGS THUS LEAVING AS AMOUNT OF RS 79 . 33 LACS (RS 2.64 CRORES - RS 1 . 85 CRORES) , WHEREAS AS PER THE DISALLOWANCE WORKED U/S 14A, THE AMOUNT HAS BEEN WORKED OUT TO RS.1.19 CRORES MEANING THAT THERE IS AN EXCESS DISALLOWANCE OF RS.39 . 62 LACS . HIS OTHER ARGUMENT WAS THAT TOTAL DISALLOWANCE AS PER SEC.14A HAS BEEN WORKED OUT AT RS.1 . 19 13 CRORES AND THE OTHER DISALLOWANCES DURING THE ASSESSMENT WORKED OUT AT RS.1 . 85 CRORES RESULTING INTO TO T A L DISALLOWANCE OF EXPENSES OF RS.3 . 04 CRORES (RS.1 . 19 CRORES + 1 . 85 CRORES) AS AGAINST THE TOTAL EXPENSES DEB I TED TO PROFIT AND LOSS ACCOUNT OF RS.2.65 CRORES THEREBY DISALLOWING THE EXCESS EXPENSES (OF RS.39 . 62 LACS) WHICH IS MORE THAN WHAT IS INCURRED . HE THEREFORE SUBMITTED THAT THE DISALLOWANCE OF EXPENSES CANNOT BE MORE THAN WHAT HAS BEEN INCURRED BY THE ASSESSEE . HIS ANOTHER ARGUMENT WAS THAT THE CREDIT OF ADDITIONAL I NCOME OF RS.75 LACS THAT WAS OFFERED AT THE T I ME OF SEARCH TO COVER THE D I SALLOWANCE OF EXPENSES BE G I VEN WHI L E WORKING OUT THE DISALLOWANCE . HE SUBM I TTED THAT I N ASSESSEE'S OWN CASE FOR AY 2010 - 11 , SIMILAR CLAIM WAS ALLOWED BY THE CO-ORD I NATE BENCH IN THE ORDER DATED 10 . 8.2016 . HE POINTED TO THE RELEVAN T PORTION OF THE ORDER THAT WAS PLACED IN THE PAPER BOOK AT PAGE 34 ONWARDS . HE THEREFORE SUBMITTED THAT THE PRAYER OF THE ASSESSEE BE CONSIDERED AND IN THE ALTERNATE SUBMITTED THAT THE MATTER BE SENT BACK TO AO FOR VERIFYING THE CONTENTIONS OF ASSESSEE. LD DR ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORITIES . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD , THE ISSUE IN THE PRESENT CASE I S WITH RESPECT TO DISA L LOWANCE U/S 14A OF THE ACT . AO HAD WORKED OUT THE DISALLOWANCE U/S 1 4A BY APPLY I NG THE METHOD PRESCRIBED UNDER RULE 8D OF THE I NCOME TAX RULES . BEFORE US , IT I S ASSESSEES SUBMISSION THAT THE DISALLOWANCE OF EXPENSES BY APPLYING THE METHOD PRESCRIBED UNDER RULE 8D HAS RESULTED INTO THE 14 DISALLOWANCE OF EXPENSES MORE THAN THAT WHICH HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT AS DEMONSTRATED BY IT ON PAGE 55 OF THE PAPER BOOK. WE FIND THAT THERE IS NO F I NDING TO THE E F FECT OF DISALLOWANCE OF EXCESS EXPENSES BY THE LOWER AUTHORITIES . ANOTHER CONTENTION OF THE ASSESSEE IS THAT THE CREDIT OF RS.75 LACS ON ACCOUN T OF CONT I NGENCY TOWARDS EXPENSES ETC. BE GRANTED AS SIMILAR CREDIT WAS GRANTED BY TRIBUNA L TO I T IN A.Y.2010 - 1 1 . WE FIND FORCE IN THIS ARGUMENT OF THE ASSESSEE BECAUSE ON IDENTICAL ISSUE. THE CO-ORDINATE BENCH OF THE TRIBUNAL WHILE DEC I DING THE ISSUE IN EARLIER YEAR HAD OBSERVED AS UNDER : 12. WE FIND MERIT IN THE ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS OFFERED TO TAX IN THE STATEMENT RECORDED U/S.132(4) BE SET OFF AGAINST THE DISALLOWANCE CALCULATED UNDER THE PROVISIONS OF SECTION 14A R.W. RULE 8D. ADMITTEDLY, THE ASSESSEE HAD MADE DISCLOSURE OF RS.75 LAKHS VOLUNTARILY AS ADDITIONAL INCOME UNDER THE HEAD CONTINGENCIES TO COVER ANY OTHER ERRORS, OMISSIONS OR DISCREPANCIES. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS WAS VOLUNTARILY OFFERED AND THERE WAS NO DETECTION OF ANY INCRIMINATING MATERIAL OR UNDISCLOSED INCOME COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. WE, THEREFORE, FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS OFFERED BY THE ASSESSEE AS UNDISCLOSED INCOME TO COVER ANY ERRORS, OMISSIONS OR DISCREPANCIES IN COMPUTING THE TAXABLE INCOME SHOULD BE SET OFF AGAINST THE DISALLOWANCE MADE U/S.14A R.W. RULE 8D OF THE I.T. ACT. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S.14A R.W. RULE 8D TO RS.18,19,294/- I.E. (RS.93,24,674 RS.75,00,000/-). GROUNDS OF APPEAL NO.1 TO 3 BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 7. BEFORE US , NO MATERIAL HAS BEEN PLACED BY REVENUE AUTHORITIES TO SHOW THAT THE AFORESAID ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL FOR EARLIER YEAR IN ASSESSEES OWN CASE HAS BEEN SET ASIDE/OVERTURNED BY HIGHER JUDICIAL AUTHORIT I ES. CONSIDERING THE AFORESAID FACTS, WE RESTORE THE ISSUE BACK TO THE AO, TO CONSIDER THE FACTUAL ASPECTS AND COMPUTE THE BALANCE 15 EXPENSES AVAILABLE FOR DISALLOWANCE U/S 14A OF THE ACT. THE AO SHALL ALSO ALLOW BENEFIT OF RS.75 LACS OFFERED TO TAX BY ASSESSEE AND COMPUTE BALANCE DISALLOWANCE, IF ANY. NEEDLESS TO STATE THAT AO SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THE GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THUS, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 14 TH DAY OF JULY, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 14 TH JULY, 2017. YAMINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-11, PUNE. CIT(CENTRAL), PUNE. , , / DR, ITAT, B PUNE; [ / GUARD FILE. / BY ORDER // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE.