ACIT CIR 4(2), MUMBAI V. NUPOOR CAPITALS P. LTD, MUMBAI

ITA 16/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3045 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 02-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI B.R. BASKARAN, AM AND SHRI RAM LAL NEGI , JM ./ I.T.A. NO.16/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) ACIT, CIR.4(2), ROOM NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. / VS. M/S. NUPOOR CAPITALS PVT. LTD. STANDARD HOUSE, 83, M.K. ROAD, MARINE LINES, MUMBAI-400 020. ./ ./PAN/GIR NO. AABCM 1114B ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI AKHILENDRA PRATAP YADAV / RESPONDENT BY : SHRI RAM KUMAR PUGALIYA / DATE OF HEARING : 21/06/2016 !'# / DATE OF PRONOUNCEMENT : 21/06/2016 $% / O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 04-10-2013 PASSED BY LD CIT(A)-8, MUMBAI AND I T RELATES TO THE ASSESSMENT YEAR 2010-11. THE REVENUE IS AGGRIEVED B Y THE DECISION OF LD CIT(A) IN DELETING THE DISALLOWANCE MADE U/S 14A OF T HE ACT BY HOLDING THAT THE ASSESSING OFFICER DID NOT RECORD IS DISSATISFACTION . 2 ITA NO. 16/MUM/14(A.Y. 2010-11) ACIT VS. M/S. NUPOOR CAPITALS PVT. LTD. 2. THE LD D.R SUBMITTED THAT THE ASSESSEE HAD EA RNED TAX FREE INCOME OF RS.24.03 LAKHS DURING THE YEAR UNDER CONSIDERATION. THOUGH THE ASSESSEE HAD DISALLOWED A SUM OF RS.4,80,660/- U/S 14A OF THE ACT , YET THE ASSESSEE DID NOT FURNISH ANY BASIS FOR WORKING OUT THE DISALLOWANCE. HENCE THE AO HELD THAT THE SUO-MOTU DISALLOWANCE MADE BY THE ASSESSEE IS WITHOUT ANY BASIS AND ACCORDINGLY PROCEEDED TO COMPUTE THE DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX RULES. THE LD D.R SUBMITTED THAT THE AS SESSING OFFICER HAS OBSERVED IN PARAGRAPH 4.1 OF THE ORDER THAT THE DISALLOWANCE MADE BY THE ASSESSEE U/S 14A OF THE ACT IS WITHOUT ANY BASIS AND THE SAME CON STITUTES DISSATISFACTION RECORDED BY THE AO IN TERMS OF SEC. 14A OF THE ACT. HE SUBMITTED THAT THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF MAK D ATA P LTD (358 ITR 593) THAT THE SATISFACTION REQUIRED U/S 271(1)(C) NEED NOT BE RECORDED IN A PARTICULAR MANNER. HE SUBMITTED THAT THE RATIO OF THE SAID DE CISION WOULD EQUALLY APPLY TO SEC. 14A OF THE ACT. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE U/S 14A OF THE ACT BY HOLDING THAT THE ASSESSING OFFICER HAS NOT RECORDED DISSATISFACTION. 3. THE LD A.R, ON THE CONTRARY, SUBMITTED THAT T HE ASSESSEE HAS DISALLOWED A SUM OF RS.1,16,69,746/- OUT OF INTEREST EXPENDITURE AND SUM OF RS.4,80,660/- COMPUTED AT 20% OF TAX FREE INCOME TOWARDS GENERAL E XPENSES. HE SUBMITTED THAT THIS FACT WAS GIVEN TO THE AO IN POINT NO.6 OF THE LETTER DATED NIL FILED WITH THE AO. HE SUBMITTED THAT THE ASSESSEE HAD PURCHAS ED SHARES OF BAJAJ HINDUSTAN LIMITED BY UTILISING THE BORROWED FUNDS AN D IT HAD ALSO GIVEN THE DETAILS OF WORKINGS OF INTEREST DISALLOWANCE ALSO TO THE AO. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER WAS NOT RIGHT I N OBSERVING THAT THERE IS NO BASIS FOR THE DISALLOWANCE COMPUTED BY THE ASSESSEE. HE SUBMITTED THAT THE AO DID NOT DISCUSS ANYTHING ABOUT THE DISALLOWANCE MADE OUT OF INTEREST EXPENDITURE 3 ITA NO. 16/MUM/14(A.Y. 2010-11) ACIT VS. M/S. NUPOOR CAPITALS PVT. LTD. IN PARAGRAPH 4.1 OF THE ASSESSMENT ORDER. ACCORDIN GLY HE FURTHER SUBMITTED THAT THE OBSERVATIONS MADE BY THE AO IN PARAGRAPH 4.1 OF THE ASSESSMENT ORDER CANNOT BE CONSTRUED AS DISSATISFACTION CONTEMPLATED U/S 14A OF THE ACT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. WE NOTICE THAT THE ASSESSEE HIMSELF HAS MADE DISALLOWANCE U/S 14A OF THE ACT FROM OUT OF INTEREST EXPENDITURE TO THE TUNE OF RS.1,16,69,746/ - AND FURTHER DISALLOWED 20% OF THE DIVIDEND INCOME APPARENTLY TOWARDS EXPENDITU RE. A PERUSAL OF THE ORDER PASSED BY LD CIT(A) SHOWS THAT THE ASSESSEE APPEARS T O HAVE BORROWED FUNDS FOR MAKING INVESTMENT IN SHARES OF BAJAJ HINDUSTAN LIMITED. ACCORDINGLY IT HAS WORKED OUT THE DISALLOWANCE OF INTEREST EXPENDITURE, WHICH SHALL CONSTITUTE DIRECT EXPENDITURE. HOWEVER, ON A PERUSAL OF THE WORKINGS F URNISHED BY THE AO, WE NOTICE THAT THE ASSESSEE HAS NOT GIVEN DETAILS OF B ORROWINGS, THE INTEREST PAID THEREON. THERE SHOULD NOT BE ANY DOUBT THAT THE DI SALLOWANCE WORKED OUT BY THE ASSESSEE CAN BE APPRECIATED ONLY IF THOSE DETAI LS ARE GIVEN. FURTHER THE ASSESSEE HAS DISALLOWED 20% OF DIVIDEND INCOME TOWARD S EXPENSES. AS HELD BY THE AO, THE BASIS FOR WORKING OUT THE DISALLOWANCE AT 20% OF DIVIDEND INCOME WAS NOT FURNISHED BY THE ASSESSEE. WE NOTICE THAT T HE ASSESSEE HAS MADE ADHOC DISALLOWANCE OF 20% OF DIVIDEND INCOME WITHOUT MAKING ANY REFERENCE TO THE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT . 5. IN VIEW OF THE ABOVE SAID FACTS, WE AGREE WITH THE OBSERVATION OF THE AO THAT THE ASSESSEE HAS NOT GIVEN THE BASIS FOR WORKIN G OUT DISALLOWANCE. THE LD D.R, BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF MAK DATA P LTD (SUPRA) HAS CONTENDED TH AT THERE IS NO REQUIREMENT TO RECORD DISSATISFACTION IN A PARTICULAR MANNER. WE AGREE WITH THE SAID CONTENTIONS OF THE ASSESSEE. THE OBSERVATIONS MADE BY THE AO THAT THE 4 ITA NO. 16/MUM/14(A.Y. 2010-11) ACIT VS. M/S. NUPOOR CAPITALS PVT. LTD. DISALLOWANCE MADE BY THE ASSESSEE WITHOUT ANY BASIS, IN OUR VIEW, BRINGS OUT THE DISSATISFACTION OF THE AO WITH REGARD TO THE DISALLO WANCE COMPUTED BY THE ASSESSEE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE L D CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 14A OF THE ACT BY HOLDING THAT THE AO HAS NOT RECORDED HIS DISSATISFACTION. 6. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HE MATTER REQUIRES FRESH EXAMINATION AT THE END OF THE LD CIT(A) ON MERITS OF DISALLOWANCE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS I SSUE AND RESTORE THE SAME TO HIS FILE FOR ADJUDICATING THE SAME AFRESH. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2016 SD/- SD/- (RAM LAL NEGI ) (B.R. BASKARAN) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED : 21.06.2016 PS. ASHWINI 5 ITA NO. 16/MUM/14(A.Y. 2010-11) ACIT VS. M/S. NUPOOR CAPITALS PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI