Raja Rani Overseas (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 150/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77817 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 14-07-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 08-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Assessee Lawyers: P N MONGA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F, NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 150 & 4764/DEL/2013 ASSESSMENT YEAR : 2002-03 RAJA RANI OVERSEAS P. LTD., VS. DCIT, CIRCLE 15(1 ), F-29, SOUTH EXTENTION-II, NEW DELHI NEW DELHI-110 049 GIR / PAN:AAACR1378P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. N. MONGA & MANU MONGA, ADV. RESPONDENT BY : SHRI MANOJ KUMAR CHOPRA, SR. DR ORDER PER T.S. KAPOOR, AM: THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINS T SEPARATE ORDERS OF LD. CIT(A) DATED 10.10.2012 AND 31.05.2013 RESPECTI VELY. IN I.T.A.NO. 150/DEL/2013, THE ASSESSEE IS AGGRIEVED WITH THE AC TION OF LD. CIT(A) BY WHICH HE HAD UPHELD THE ADDITION MADE BY THE ASSESS ING OFFICER U/S 14A AMOUNTING TO RS.6,18,010/- AND IN I.T.A.NO. 4764/DE L/2013, THE ASSESSEE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) BY WHICH HE HAD CONFIRMED THE PENALTY OF RS.2,20,700/- IMPOSED BY THE ASSESSING O FFICER U/S 271(1)(C) OF THE ACT. 2. AT THE OUTSET, LD. A.R. SUBMITTED THAT THE CHALL ENGE UNDER I.T.A.NO. 150/DEL/2013 IS DUE TO SECOND ROUND OF LITIGATION B EFORE LD. CIT(A) AND SUBMITTED THAT EARLIER, LD. CIT(A) VIDE HIS ORDER D ATED 27.09.2010 HAD REMITTED BACK THE APPEAL OF THE ASSESSEE TO THE ASS ESSING OFFICER FOR READJUDICATION. IN THIS RESPECT, OUR ATTENTION WAS INVITED TO PARA 6.5 OF THE SAID ORDER AND IT WAS SUBMITTED THAT LD. CIT(A) HAD DIRECTED THE ASSESSING ITA NOS.150 & 4764/DEL/2013 2 OFFICER TO VERIFY THE COMPLETE FACTS AND ACCORDINGL Y DISALLOW THE EXPENDITURE U/S 14A ON A REASONABLE ESTIMATE. BUT THE ASSESSIN G OFFICER IN HIS ORDER PASSED U/S 250/143(3) ON DATED 20.03.2012 AGAIN DIS ALLOWED THE SAME AMOUNT AND, THEREFORE THE ASSESSEE HAD AGAIN FILED APPEAL BEFORE LD. CIT(A) WHO WITHOUT CONSIDERING THE EARLIER LD. CIT(A)S OR DER HAS UPHELD THE ADDITION. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER WHILE PASSING THE CONSEQUENTIAL ORDER IN RESPONSE TO FIRST APPEAL ORD ER, DID NOT GIVE ANY OPPORTUNITY TO THE ASSESSEE AND MOREOVER, IMPUGNED ORDER IS IN CONFLICT WITH EARLIER CIT(A)S ORDER AND IT WAS PRAYED THAT THE A SSESSING OFFICER SHOULD BE DIRECTED TO CALCULATE REASONABLE AMOUNT OF DISAL LOWANCE AND IN RESPECT OF REASONABLE AMOUNT, OUR ATTENTION WAS INVITED TO ONE DECISION OF DELHI BENCH ORDER IN I.T.A.NOS.3463 & 4697/DEL/2011 REPORTED IN 43 TAXMAN.COM 109 WHEREIN IT HELD THAT 0.05% OF AVERAGE INVESTMENT WA S A REASONABLE AMOUNT OF DISALLOWANCE IN THE CASES WHERE RULE 8D WAS NOT APPLICABLE. OUR SPECIFIC ATTENTION WAS INVITED TO PARA 22 OF THIS ORDER. 3. IN RESPECT OF OTHER APPEAL NO.4764/DEL/2013, THE LD. A.R. SUBMITTED THAT THIS WAS THE APPEAL FILED AGAINST PENALTY IMPO SED U/S 271(1)(C) OF THE ACT IN CONNECTION WITH THE DISALLOWANCE UPHELD BY L D. CIT(A) U/S 14A OF THE ACT AND THEREFORE, IT WAS A CONSEQUENTIAL APPEA L. 4. LD. D.R. ON THE OTHER HAND HEAVILY RELIED UPON T HE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS UNDISPUTED FACT THAT RULE 8D IS NOT APPLICABLE IN THE PRESENT YEAR AND, THEREFORE, FOR MAKING DISALLO WANCE U/S 14A, THE ASSESSING OFFICER HAS TO TAKE A REASONABLE AMOUNT K EEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE. EARLIER THERE WAS A DIRECTION OF CIT(A) IN HIS ORDER DATED 27.09.2010 TO CALCULATE A REASONABLE AM OUNT OF DISALLOWANCE ITA NOS.150 & 4764/DEL/2013 3 AGAINST THE PROPORTIONATE DISALLOWANCE MADE BY ASSE SSING OFFICER. THE ASSESSING OFFICER VIDE ORDER DATED 20.03.2012 HAD A GAIN DISALLOWED THE SAME AMOUNT HOLDING THAT IN VIEW OF THE NON APPLICA TION OF RULE 8D, THE PROPORTIONATE AMOUNT WITH RESPECT TO RECEIPT OF THE EXEMPT INCOME WAS A REASONABLE BASIS FOR WORKING OUT THE DISALLOWANCE. HOWEVER, WE FEEL THAT THIS IS NOT A REASONABLE METHOD OF ARRIVING AT THE DISALLOWANCE U/S 14A. THE ASSESSING OFFICER SHOULD HAVE ARRIVED AT THE AMOUNT OF DISALLOWANCE BY POINTING OUT SPECIFIC ITEMS OF EXPENDITURE WHICH IN HIS OPINION HAD RELATED TO EARNING OF EXEMPT INCOME OR IN THE ALTERNATIVE, THE ASSESSEE SHOULD HAVE CALCULATED THE DISALLOWANCE ON THE BASIS OF RULE 8D WHICH THOUGH WAS NOT APPLICABLE BUT SHOULD HAVE BEEN USED AS A GUIDING F ORCE TO ARRIVE AT THE DISALLOWANCE. THE ASSESSEE BEFORE LD. CIT(A) HAD S UBMITTED THE CALCULATION OF DISALLOWANCE AS PER RULE 8D OF THE I. T. RULES, WHICH LD. CIT(A) HAS ALSO NOTED IN HIS ORDER. THE ARGUMENT OF LD. A.R. TO AR RIVE AT REASONABLE AMOUNT AS PER ITAT DECISION IN I.T.A.NO.3463, @ 0.05% ON A VERAGE INVESTMENT IS NOT APPLICABLE AS IN THAT CASE, THE ASSESSING OFFIC ER ON THE BASIS OF FACTS AND FIGURES HAD HELD THAT 0.05% WAS REASONABLE ESTIMATE OF EXPENDITURE. WE ARE OF THE OPINION THAT THOUGH RULE 8D IS NOT APPLICABL E IN THE PRESENT CASE YET THE ASSESSING OFFICER SHOULD HAVE BEEN GUIDED BY TH E PROVISIONS OF RULE 8D. THEREFORE, WE RESTRICT THE ADDITION U/S 14A TO THE EXTENT OF RS.1,18,244/- AS NOTED BY LD. CIT(A) AS DISALLOWANCE U/S 14A AS PER PROVISIONS OF RULE 8D. 6. IN VIEW OF ABOVE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. AS REGARDS THE APPEAL FILED BY THE ASSESSEE AGAI NST IMPOSITION OF PENALTY U/S 271(1)(C), WE ARE OF THE OPINION THAT S ECTION 271(1)(C) CAN BE ENFORCED AGAINST A PERSON IF THAT PERSON HAD FURNIS HED INACCURATE PARTICULARS OF HIS INCOME OR HAD CONCEALED HIS INCOME. MERE NO N ADMISSION OF A CLAIM MADE BY THE ASSESSEE, CANNOT BE THE CRITERIA FOR IM POSITION OF PENALTY U/S ITA NOS.150 & 4764/DEL/2013 4 271(1)(C) OF THE ACT SPECIFICALLY IN THE PRESENT SE T OF CIRCUMSTANCES WHERE DISALLOWANCE HAS BEEN CALCULATED ON THE BASIS OF ES TIMATE ONLY AND NOT ON THE BASIS OF ANY FURNISHING OF WRONG / INACCURATE PARTI CULARS OF INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS HAS HELD AS UNDER: MERELY BECAUSE THE ASSESSEE CLAIMED WHICH HAS NOT B EEN ACCEPTED BY HE REVENUE, PENALTY UNDER SECTION 271(1 )(C) IS NOT ATTRACTED. IF THE CONTENTION OF THE REVENUE IS ACC EPTED, THE ASSESSEE WOULD BE LIABLE FOR PENALTY UNDER SECTION 271(1)(C) IN EVERY CASE WHERE THE CLAIM MADE BY THE ASSESSEE IS NOT ACCEPTE D BY THE ASSESSING OFFICER FOR ANY REASON-THAT IS CLEARLY NOT THE INTE NDMENT OF LEGISLATURE. 8. IN VIEW OF THE ABOVE, PENALTY IMPOSED AND UPHELD BY LD. CIT(A) IS DIRECTED TO BE DELETED AND THE APPEAL FILED BY THE ASSESSEE IN I.T.A.NO. 4764/DEL/2013 IS ALLOWED. 9. IN VIEW OF THE ABOVE, I.T.A.NO. 150/DEL/2013 IS PARTLY ALLOWED WHEREAS I.T.A.NO. 4764/DEL/2013 IS ALLOWED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014. SD./- SD./- (I. C. SUDHIR ) (T.S. KAPO OR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 25 TH JULY, 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NOS.150 & 4764/DEL/2013 5 DATE OF HEARING DATE OF DICTATION DATE OF TYPING DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.