Shri Lalit Kr. Daga, Kolkata V. ACIT, Circle - 30, Kolkata, Kolkata

ITA 165/KOL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3069 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 10-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 25-01-2010
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Assessee Lawyers: A K TIBREWAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [ () . .. . . .. . , ,, , , !' #! $'# #! $'# #! $'# #! $'#, ,, , ] ]] ] [BEFORE HONBLE SRI K.K.GUPTA, AM & HONBLE SRI MAHAVIR SINGH, JM] '& '& '& '& /ITA NO.165/KOL/2010 $'( !)*/ ASSESSMENT YEAR : 2005-06 (,- / APPELLANT ) - !' - ( /0,- /RESPONDENT) SRI LALIT KR.DAGA . A.C.I.T., CIRCLE-30, KOLKATA -VERSUS- KOLKATA (PAN:ADTPD 1808 K) ,- 1 2 / FOR THE APPELLANT: SHRI A.K.TIBREWAL, FCA /0,- 1 2 / FOR THE RESPONDENT: SHRI K.N.JANA, SR.DR '!3 1 4 /DATE OF HEARING : 16.04.2013 5) 1 4 /DATE OF PRONOUNCEMENT : 19.04.2013. 6 / ORDER PER SHRI K.K.GUPTA, AM THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING THE FOLLOWING GROUNDS :- 1. THAT THE IMPUGNED ASSESSMENT ORDER SERVED ON TH E ASSESSEE ON 22 ND JANUARY 2008 COULD NOT HAVE BEEN MADE ON 26 TH DECEMBER, 2007 OR ON ANY DATE WITHIN 31 ST DECEMBER, 2007 AS SHOWN ON THE PREFACE OF THE IMPUGNED ASSESS MENT ORDER AND THEREFORE THE SAID WAS IN TIME BARRED AS PRESCRIBED UNDER SECTION 153 OF THE INCOME TAX ACT, 1961. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL) ERRED IN CONFIRMING THE ADDITION OF RS.3,19,265/- IN THE TOTAL INCOME OF TH E APPELLANT ON THE ALLEGED GROUND THAT THE APPELLANT COULD NOT PROPERLY EXPLAIN THE RECONC ILIATION OF INCOME APPEARING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT WITH THAT WITH T HE AMOUNT SHOWN IN THE CERTIFICATE OF TAX DEDUCTED AT SOURCE. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO CALCULATE THE DISALLOWANCE OF EXPENSES U/S 14A OF THE INCOME TAX ACT, 1961 IN ACCORDANCE WITH RULE 8D OF THE INCOME TAX RULES, 1962 WHEN THE APPELLANT DID NOT INCUR ANY EXPENSES IN RELATION TO EARNING EXEMPT INCOME. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE APPELLANT DID NOT WISH TO PRESS GROUND NO.1 WHICH IS DISMISSED AS NOT PRESSED. ITA NO. 165/KOL/2010 2 3. THE BRIEF FACTS ON THE ISSUES RAISED IN THIS APP EAL ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR D ECLARING TOTAL INCOME OF RS.20,57,779/-. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) THE AO COMPUTED THE INCOME WHICH WAS DECLARED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES WHEN THE ASSESSEE WAS TO RECONCILE THE INCOME RENDERED TO TA X, THE TAX DEDUCTED AT SOURCE. HE MADE AN ADDITION OF RS.3,19,265/- REMAINING UNRECON CILED WHICH AMOUNT WAS AS PER TDS CERTIFICATES. HE BROUGHT THE SAME TO TAX WHEN F URTHER ON THE EXEMPTED INCOME HE ARBITRARILY DISALLOWED AS A SUM OF RS.1,51,307/- HO LDING THAT THE ASSESSEE COULD NOT CLAIM ANY EXPENDITURE RELATING TO EXEMPTED INCOME. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHO CONSIDERED THAT THE ASSESSEE HAD RECEIVED CONTRACT RECEIPT OF RS.70,68,472/- WHEREI N THE PROFIT AND LOSS ACCOUNT HAD DECLARED THE SAME AT RS..67,49,207/-. THE DIFFERENC E OF RS.3,19,265/- WAS RECONCILED BY THE ASSESSEE APPELLANT BEFORE HIM WHEN HE TRIED TO BIFURCATE THE GROSS RECEIPT IN THE PROFIT AND LOSS ACCOUNT WHEN HE OBSERVED THAT THE R ECONCILIATION WAS NOT PROPER AND CONFIRMED THE ADDITION OF RS.3,19,265/-. FURTHER MO RE HE CONSIDERED THE DISALLOWANCE MADE U/S 14A OF THE ACT BY THE AO WHEN IT WAS SUBMI TTED THAT THE PURPORTED DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT WAS ARBITRARY, IN SO FAR AS, THE AO HAS DISALLOWED A SUM OF RS.1,51,307/-ON ACCOUNT OF INTE REST PAID OF RS.1,58,307/- WHICH WAS NOT IN ACCORDANCE WITH THE PROVISION OF SECTION 14A R.W. RULE 8D. HOWEVER, DIRECTED THE AO TO RECALCULATE THE DISALLOWANCE U/S 14A AS PER THE METHOD PROVIDED UNDER RULE 8D OF THE IT RULES. 4. THE LD. COUNSEL FOR THE ASSESSEE INITIATING ARG UMENTS HAD NOT PRESSED FOR THE GROUND RELATING TO LIMITATION OF ASSESSMENT ORDER O F HAVING BEEN MADE ON 26 TH DECEMBER, 2007 WAS TIME BARRED IS DISMISSED ALREADY MENTIONED EARLIER. HOWEVER, THE LD. COUNSEL IN HIS PAPER BOOK HAD POINTED OUT THE R ECONCILIATION WHICH WAS NOT CONSIDERED BY THE LD. CIT(A)PROPER, WHEN THE GROSS RECEIPTS SHOWN BY THE ASSESSEE WERE TO BE RECONCILED WITH THE TDS CERTIFICATES WAS CLEAR AS GIVEN IN PAGES 10 TO 13 OF THE PAPER BOOK. HE POINTED OUT THAT THE RECONCILIAT ION IS SELF EXPLANATORY AND DOES NOT REQUIRE FURTHER QUERIES WHICH THE LD. CIT(A) COULD NOT IDENTIFY WHY TO CONFIRM RS.3,19,265/-. HE SUBMITTED THAT HE HAS NO OBJECTIO N IF THE MATTER IS RESTORED TO THE FILE ITA NO. 165/KOL/2010 3 OF AO WHO WOULD, WITH THE ASSISTANCE OF THE ASSESSE E APPELLANT, BE ABLE TO SPECIFY THAT THE SERVICE CHARGES AND REIMBURSEMENT OF EXPENSES R ECEIVED FROM BIRLA GREY WAS IN ACCORDANCE WITH THE PROVISION OF IT ACT RENDERING T HE INCOME ON ACCOUNT OF GROSS RECEIPTS AND NOT BECAUSE OF TDS WHICH HAD BEEN INCL UDED FOR RENDERING AS INCOME. HOWEVER, IN RESPECT OF THE SECOND ISSUE RELATING TO THE EXPENDITURE TO BE CONSIDERED FOR THE PURPOSE OF TAXATION OF EXEMPTED INCOME HE P RAYED THAT THE DISALLOWANCE @1% MAY BE MADE, IN SO FAR AS, THE EXEMPTED INCOME HAS BEEN IDENTIFIED BY THE AO AS WELL AS THE CIT(A). THE LD. CIT(A) THEREFORE HAD DI RECTED THE AO TO ALLOW BY COMPUTING THE DISALLOWANCE U/S 14A OF THE IT ACT IN ACCORDANCE WITH THE PROVISION OF INCOME TAX ACT WHICH MAY BE UPHELD. 5. THE LD. DR HAD NO OBJECTION TO THE SUBMISSIONS O F THE LD. COUNSEL ON HAVING PRAYED FOR RESTORATION OF THE ISSUE IN RESPECT OF T HE RECONCILIATION TO THE FILE OF THE AO, IN SO FAR AS, ON THE SECOND ISSUE THE LD. COUNSEL H AS SUBMITTED THE PROPOSITION THAT THE DISALLOWANCE U/S 14A OF THE ACT AS COMPUTED BY THE AO WAS TO BE IN ACCORDANCE WITH THE PROVISION OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL PERUSAL OF THE FACTS AND CIRCUMS TANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT THE RECONCILIATION AS SUBMITTED BY THE ASSESSEE APPELLANT BEFORE THE FIRST APPELLATE AUTHORITY WAS PROPER, IN SO FAR AS, THE P URPORTED DIFFERENCE IN THE SERVICE CHARGES AS PER TDS CERTIFICATE AND SERVICE CHARGES AS PER PROFIT AND LOSS ACCOUNT HAVING BEEN RENDERED TO TAX WHEN THE AO HIMSELF HAS GRANTED CREDIT FOR THE TDS, WHICH TDS HE HAS TO CONSIDER ON THE BASIS OF THE GR OSS RECEIPTS RENDERED TO TAX. THE LD. CIT(A) THEREFORE CONFIRMED THE DIFFERENCE NOT O N ACCOUNT OF ASSESSEES INABILITY TO RECONCILE THE DIFFERENCE IN SO FAR AS THE ASSESSEE HAS NOT CLAIMED TDS AS AN EXPENDITURE WAS TO BE EXPLAINED. THIS ISSUE, THEREF ORE, IS FIT FOR RESTORATION TO THE FILE OF AO FOR VERIFYING THE RECONCILIATION AS SUBMITTED BY THE ASSESSEE APPELLANT BEFORE THE CIT(A) BECAUSE THE LD. CIT(A) CONFIRMED THE TAX AS EXPENDITURE ON RECONCILIATION BY HOLDING A VIEW THAT IT WAS NOT IN ACCORDANCE WIT H THE MERCANTILE SYSTEM OF ACCOUNTING. HOWEVER, WE DIRECT THE AO TO COMPUTE TH E DISALLOWANCE U/S 14A OF THE IT ITA NO. 165/KOL/2010 4 ACT IN ACCORDANCE WITH THE PROVISION OF IT ACT ON H AVING IDENTIFIED THE EXEMPTED INCOME. THIS ISSUE IS ALSO RESTORED TO THE FILE OF THE AO TO RE-COMPUTE DISALLOWANCE OF EXPENDITURE ON EXEMPTED INCOME, IN SO FAR AS, THE L D. COUNSEL FOR THE ASSESSEE HAS PRAYED FOR DISALLOWANCE OF 1% THEREOF. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED ORDER PRONOUNCED IN THE COURT ON 19.04.2013. SD/- SD/- [ .#! $'# , ] [ .., ,, , ] [MAHAVIR SINGH ] [K.K.GUPTA] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (4 4 4 4) )) ) DATE: 19.04.2013. R.G.(.P.S.) 6 1 /$$7 87)9- COPY OF THE ORDER FORWARDED TO: 1. SRI LALIT KUMAR DAGA, 8, SOUTH END PARK, KOLKATA-70 0029. 2 A.C.I.T., CIRCLE-30, KOLKATA 3 . CIT KOLKATA 4 . CIT(A)-XIX, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 07 /$/ TRUE COPY, 6'/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES