Shonan Engineering Works Pvt.Ltd, Pune V. Deputy Commissioner of Income tax, Pune

ITA 1379/PUN/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7736 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GOPAN ASWANI
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIK AS AWASTHY, JM . / ITA NO. 1379 /PUN/ 201 7 / ASSESSMENT YEAR : 20 08 - 09 SHONAN ENGINEERING WORKS PVT. LTD., 4, SAI COMPLEX, F.C. ROAD, PUNE 411004 PAN: AA ICS6507K . / APPELLANT VS. D CIT, CIRCLE 6 , PUNE . / RESPONDENT ASSESSEE BY : SHRI GOPAN ASWANI REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 20 .0 6 . 2018 / DATE OF PRONOUNCEMENT: 27 . 0 6 .2018 / ORDER PER D. KARUNAKARA RAO , AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 4 , PUNE , DATED 0 1.0 1 .201 7 FOR THE ASSESSMENT YEAR 20 08 - 09 . 2. AT THE OUTSET, THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF TURNKEY PROJECTS FOR SUPPLYING & LAYING OF PIPELINES FOR WATER SUPPLY AND FILED THE RETURN OF INCOME DECLARING INCOME OF RS.9,78,000/ - . IN THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER MADE ADDITION OF RS. 5,30,564/ - UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (IN SHORT ITA NO. 1379 /PUN/201 7 SHONAN ENGINEERING WORKS PVT. LTD. 2 THE ACT) READ WITH RULE 8D(2) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES ). THIS AMOUNT INCLUDES DISALLOWANCE OF RS.5,06,391/ - UNDER CLAUSE ( I I) OF RULE 8D(2) AND RS. 24,173/ - UND ER CLAUSE ( II I) OF THE SAID RULE. 3. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE RELIED HEAVILY ON THE DECISIONS OF JURISDICTIONAL HIGH COURT IN THE CASES OF CIT VS. RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340 (BOM) AS WELL AS IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 (BOM) . APART FROM THIS AND SUBMITTED THE ASSESSEE HAD ADEQUATE INTEREST FREE ADVANCES AND RESERVES / FUNDS . I N THAT CASE, IN VIEW OF THE PRESUMPTION LAID DOWN BY SAID DECISIONS IN FAVOUR OF ASSESSEE, THE INVESTMENT IN THE EXEMPT INCOME - YIELDING SHARES SHOULD HAVE BEEN CONSIDERED BY THE AUTHORITIES, IS MADE OUT OF SAID INTEREST FREE FUNDS / RESERVES. BUT THE CIT(A) IGNORED ENTIRELY THE SUBMISSIONS OF ASSESSEE AND RELIED ON THE HONBLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT ( 2010) 328 ITR 81 (BOM) . THE CIT(A) DID NOT CONSIDER THE SAID DECISIONS RELEVANT. HE ALSO NOT BOTHERED TO DISTINGUISH THE SAID BINDING JUDGMENTS BEFORE DISMISSING THE APPEAL OF ASSES SEE ON THIS ISSUE. 4. BEFORE US, THE LEARNED COUNSEL BROUGHT OUR ATTENTION TO THE ABOVE SAID FACTS AND SUBMITTED THAT THE ASSESSEE IS BLESSED WITH INTEREST FREE FUNDS / RESERVES / OWN FUNDS. HOWEVER, IN THE ABSENCE OF THE FINDING OF FACT ON THIS ISSUE, B OTH THE LEARNED REPRESENTATIVES SUBMITTED THAT THE MATTER CAN BE REMANDED TO THE FILE OF ASSESSING OFFICER / CIT(A) FOR FRESH ADJUDICATION AND FURTHER, CONSIDERING THE EXISTENCE OF INTEREST FREE ITA NO. 1379 /PUN/201 7 SHONAN ENGINEERING WORKS PVT. LTD. 3 FUNDS AND THE RATIO RELATING TO THE PRESUMPTION LAID DOWN IN THE ABOVE REFERRED BINDING JUDGMENTS OF JURISDICTIONAL HIGH COURT. 5. ON HEARING BOTH THE PARTIES, WE FIND THAT THE SAID PROPOSAL OF REMANDING IS FAIR AND REASONABLE. IT IS H IGHLY UNFORTUNATE THAT THE CIT(A) DID NOT CONSIDER IMPORTANT TO APPLY THE JURISD ICTIONAL HIGH COURT JUDGMENT IN THE CASE. THERE IS NO POINT IN REMANDING THE ISSUES TO THE FILE OF THE CIT(A) AS THERE IS NEED FOR ESTABLISHING THE FACTS ABOUT THE EXISTENCE OF THE INTEREST FREE FUNDS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER RE - ADJU DICATE THE ISSUE AFTER GIVING CATEGORICAL FINDING ON THE FACT WITH REFERENCE TO THE EXISTING INTEREST FREE FUNDS & RESERVES / OWN FUNDS. IN PRINCIPLE, WE FIND THE CASE SHOULD BE DECIDED IN FAVOUR OF ASSESSEE BUT FOR THE FINDING OF THE FACT RELATING TO THE EXISTENCE OF ADEQUATE OWN FUNDS / RESERVES. ACCORDINGLY, THE ISSUE RAISED BY THE ASSESSEE IN ALL THE GROUNDS IN THIS APPEAL STANDS REMANDED TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. THE ASSESSING OFFICER SHALL AFFORD REASONABLE OPPORTUNIT Y OF HEARING TO THE ASSESSEE WHILE DECIDING THE ISSUES. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 27 TH D AY OF JUNE , 2018. SD/ - SD/ - ( VIKAS AWASTHY ) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE ; DATED : 27 TH JUNE , 2018 GCVSR ITA NO. 1379 /PUN/201 7 SHONAN ENGINEERING WORKS PVT. LTD. 4 / COPY OF THE ORDER FORWAR DED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) - 4 , PUNE 4. THE PR CIT - 3 , PUNE 5. , , SMC PUNE; 6. / GUARD FILE .