The ACIT, C.C-1(3), Ahmedabad V. Jagat Foods Pvt.Ltd., Ahmedabad

ITA 1548/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6669 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 18-04-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUMAR HRISHIKESH
• Assessee Lawyers: M K PATEL
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.1548/AHD/2007 A. Y: 2001-02 THE A. C. I. T., CENT. CIRCLE-1(3), ROOM NO.304, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD VS JAGAT FOODS PVT. LTD., 804, AVADESH HOUSE, SARKHES GANDHINAGAR HIGHWAY, SARKHES, AHMEDABAD PA NO. AAACJ 3859 M (APPELLANT) (RESPONDENT) APPELLANT BY KUMAR HRISHIKESH, DR RESPONDENT BY SHRI M. K. PATEL, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VII, AHMEDABAD DAT ED 09-01-2007 FOR ASSESSMENT YEAR 2001-02, CHALLENGING THE CANCEL LATION OF PENALTY LEVIED U/S 271 (1) ( C ) OF THE IT ACT IN A SUM OF RS.2,09,588/-. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.13,68,080/-. TH E AO COMPLETED THE ASSESSMENT COMPUTING THE TOTAL INCOME AT RS.17,19,5 50/-, WHEREBY DISALLOWANCE OF RS.5,29,932/- BEING INTEREST ON LOA N WAS MADE U/S 14A OF THE IT ACT. THE DISALLOWANCE WAS MADE BECAUSE TH E AO WAS OF THE VIEW THAT THE ASSESSEE HAS INVESTED BORROWED FUNDS IN SH ARES FROM WHICH IT HAS EARNED DIVIDEND INCOME. AS THE DIVIDEND INCOME WAS NOT TAXABLE, THE AO HELD THAT INTEREST ON BORROWED FUNDS TO THE EXTE NT OF RS.5,59,932/- ARE NOT ALLOWABLE EXPENDITURE U/S 14A OF THE IT ACT . VIDE SEPARATE ORDER PENALTY U/S 271 (1) ( C ) OF THE IT ACT WAS IMPOSED IN THE ABOVE MATTER. ITA NO. 1548/AHD/2007 JAGAT FOODS PVT. LTD. 2 THE LEARNED CIT(A) CANCELLED THE PENALTY BECAUSE TH E ISSUE OF DISALLOWANCE OF INTEREST U/S 14A OF THE IT ACT WAS A DEBATABLE ISSUE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET SUBMITTED THAT INTEREST U/S 14A OF THE IT ACT ON QUANTUM HAS BEEN RESTORED TO THE FILE OF THE AO BY ITAT AHMEDABAD BENCH IN THE CASE OF THE S AME ASSESSEE VIDE ORDER DATED 23-01-2009. COPY OF THE ORDER IS ALSO F ILED ON RECORD. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT THE MATTE R MAY BE RESTORED TO THE FILE OF THE AO FOR RECONSIDERATION BECAUSE THE QUANTUM MATTER IS PENDING BEFORE HIM AS PER THE ORDER OF THE TRIBUNAL . 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL WHILE DECIDING TH E APPEAL OF THE ASSESSEE ON QUANTUM IN ITA NO.3149/AHD/2004 FOR ASS ESSMENT YEAR UNDER APPEAL VIDE ORDER DATED 23-01-2009 ON THE ISS UE OF DISALLOWANCE OF INTEREST U/S 14A OF THE IT ACT NOTED THAT BOTH THE PARTIES AGREED THAT THE ISSUE WOULD REQUIRE FRESH CONSIDERATION BY THE AO I N THE LIGHT OF THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF ITO VS DAGA CAPITAL MANAGEMENT PVT. LTD. (2008) 26 SOT 603 (SB) . THE TRIBUNAL ACCORDINGLY RESTORED THE MATTER TO THE FILE OF THE AO AND DIRECTED HIM TO RE-DECIDE THE ISSUE IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH. SINCE, THE QUANTUM ISSUE IS RESTORED TO THE FILE OF THE AO AND THE ORDER OF THE AO DID NOT SURVIVE WHEREBY PENALTY WAS IMPOSED AGAINST THE ASSESSEE, IT WOULD BE REASONABLE AND PROPER TO REST ORE THE PENALTY ISSUE TO THE FILE OF THE AO ACCORDINGLY. WE ACCORDINGLY S ET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE ISSUE OF PENA LTY TO THE FILE OF THE AO WITH A DIRECTION TO RE-DECIDE THE ISSUE IN ACCORDAN CE WITH LAW AFTER DECIDING THE QUANTUM ISSUE ON MERIT BY GIVING REASO NABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 1548/AHD/2007 JAGAT FOODS PVT. LTD. 3 5. AS A RESULT, THE DEPARTMENTAL APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01-04-2010. SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 01- 04-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD