Charans Life Devices Pvt. Ltd., Hyderabad, Hyderabad V. DCIT, Central Circle-2, Hyderabad, Hyderabad

ITA 1545/HYD/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6006 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NAVEEN
• Assessee Lawyers: A V RAGHURAM
• Keywords: Additional evidence
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1545/HYD/2016 ASSESSMENT YEAR: 2011-12 M/S. CHARANS LIFE DEVICES PRIVATE LIMITED, HYDERABAD [PAN: AACCC0638H] VS DY.CIT, CENTRAL CIRCLE-2, HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR FOR REVENUE : SHRI M. NAVEEN, DR DATE OF HEARING : 10-05-2018 DATE OF PRONOUNCEMENT : 31-05-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-1, HYDERABAD, DATED 28-07-2016. ASSESSEE HAS RAISED TWO ISSUES IN FIVE GROUNDS ONE BEING THE DISALLOWANCE OF DISCOUNTS GIVEN TO THE C USTOMERS AND OTHER ONE IS APPLICATION OF PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT [ACT]. 2. BRIEFLY STATED, ASSESSEE IS A COMPANY IN THE BUSINESS OF TRADING IN PACE MAKERS, STENTS AND OTHER L IFE SAVING APPLIANCES. IT DECLARED INCOME OF RS. 1,26,0 8,960/- I.T.A. NO. 1545/HYD/2016 :- 2 - : AND WHILE SCRUTINIZING THE ASSESSMENT, AO NOTED THAT ASSE SSEE DEBITED AN AMOUNT OF RS. 85,73,800/- TOWARDS DISCOUNT OFFERED TO VARIOUS CUSTOMERS. AFTER VERIFYING THE VAR IOUS CREDIT NOTES SUBMITTED IN THE COURSE OF ASSESSMENT, AO DID NOT ACCEPT THE DISCOUNTS GIVEN AMOUNTING TO RS. 8,35,190/- AS THEY HAVE NOT BEEN ACKNOWLEDGED BY ASSESSEES CUSTOMER S. ANOTHER AMOUNT OF RS. 8,66,314/- WAS ALSO DISALLOWED AS DISCOUNT WAS GIVEN ONLY BY JOURNAL VOUCHERS AND NOT ACKNOWLEDGED BY THE OTHER PARTY. ACCORDINGLY, AN AM OUNT OF RS. 17,01,504/- WAS DISALLOWED BY THE AO. AO ALSO I NVOKED PROVISIONS OF SEC.14A AND DISALLOWED AMOUNT OF RS.10,99,431/- 3. BEFORE THE LD.CIT(A), ASSESSEE SUBMITTED THAT THE CERTIFICATES FROM OTHER PARTIES ONE FROM APOLLO HOSPI TALS AND OTHER FROM CARE HOSPITALS [QUALITY CARE INDIA LTD.,] C ERTIFYING THE DISCOUNT GIVEN TO THEM. LD.CIT(A), HOWEVER, DID NO T CONSIDER THE EVIDENCE AT ALL AND DISMISSED THE GROUNDS SIMPLY STATING THAT ASSESSEE COULD NOT SUBMIT ANY CONFIRMATION L ETTERS OR OTHERWISE PROOF FOR THE CREDIT NOTES FROM THE RECIPIE NTS. 4. IT WAS THE SUBMISSION OF LD. COUNSEL THAT THESE CONFIRMATIONS HAVE BEEN FILED BEFORE THE LD.CIT(A) AN D RELIED ON CERTIFICATES PLACED ON RECORD AT PAGES 2 AND 3 WIT H A LETTER SUBMITTED TO CIT(A) AT PG. 1 IN SUPPORT OF THE CONTENTIONS . 5. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THIS ISSUE CAN BE RE-EXAMINED BY THE A O AS I.T.A. NO. 1545/HYD/2016 :- 3 - : ASSESSEE HAS FURNISHED THE ADDITIONAL EVIDENCE BEFORE THE CIT(A), WHICH WAS NOT EVEN ACKNOWLEDGED BY THE LD.CIT (A) IN THE ORDER. IN ORDER TO GIVE AN OPPORTUNITY TO ASSESSEE TO EXPLAIN THE DISCOUNT GIVEN, WE REMIT THE ISSUE TO AO T O EXAMINE THE CERTIFICATES BEING FURNISHED BY ASSESSEE A ND ALLOW NECESSARY CREDIT AFTER DUE VERIFICATION. GROUND IS C ONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 6. THE OTHER ISSUE WHICH WAS AGITATED BEFORE THE LD.CIT(A) IS WITH REFERENCE TO DISALLOWANCE U/S. 14A OF RS. 10,99,431/-. AO INVOKED THE PROVISIONS OF SECTION 14 A EVEN THOUGH ASSESSEE HAS ONLY MADE THE INVESTMENT. LD.CIT( A) WITHOUT CONSIDERING THE SUBMISSIONS, CONFIRMED THE ADD ITION ON THE REASON THAT ASSESSEE HAS ACCEPTED INVESTMENTS M ADE TOWARDS SHARE APPLICATION TO GET DIVIDEND INCOME. 6.1. IT WAS THE SUBMISSION THAT ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME. HENCE, NO DISALLOWANCE U/S. 14 A IS WARRANTED. 6.2. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE O F THE OPINION THAT THIS ISSUE ALSO REQUIRES RE-EXAMINATIO N BY THE AO. THERE IS NO EVIDENCE ON RECORD THAT ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME. THIS ISSUE WAS NOT EVEN DISCUSSED BY THE AO OR CIT(A). WITHOUT CLAIM OF ANY EXEMPTION, THE PROVISIONS OF SECTION 14A CANNOT BE INV OKED, JUST BECAUSE ASSESSEE HAS MADE INVESTMENTS. EVEN FOR APPLICATION OF RULE 8D(II), IT IS NECESSARY TO ESTABLIS H THAT I.T.A. NO. 1545/HYD/2016 :- 4 - : INTEREST PAID IS NOT CONNECTED TO THE BUSINESS AND ASSES SEE HAS DIVERTED THE BORROWED FUNDS, SO AS TO ROPE IN SUC H INTEREST EXPENDITURE WITHIN THE PROVISIONS OF RULE 8D(2)(II). T HIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE AO. SINCE ASS ESSEE IN THE SUBMISSIONS MADE BEFORE AUTHORITIES ADMITS THAT SOME BORROWED FUNDS HAVE BEEN INVESTED, WHETHER THE PROVIS IONS OF SECTION 36(1)(III) WILL APPLY OR NOT WAS ALSO NOT EXA MINED. CONSEQUENTLY, WE SET ASIDE THE ISSUE TO THE FILE OF AO TO RECONSIDER THE ISSUE AFRESH BASED ON THE FACTS AND LAW . GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOS ES. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2018 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST MAY, 2018 TNMM I.T.A. NO. 1545/HYD/2016 :- 5 - : COPY TO : 1. M/S. CHARANS LIFE DEVICES PRIVATE LIMITED, C/O. A.V. RAGHU RAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 6 10, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. DY.CIT, CENTRAL CIRCLE-2, HYDERABAD. 3. CIT(APPEALS)-1, HYDERABAD. 4. PR.CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.