Annuj Goel, Pune V. Deputy Commissioner of Income-tax, Circle - 7, Punes

ITA 1672/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4588 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 03-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Earning of tax free income; Rule 8D
• Section: 234B; 14A; 139(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 1672 /PUN/20 1 7 / ASSESSMENT YEAR : 20 13 - 14 MR. ANNUJ GOEL (LEGAL HEIR OF LATE UMESH GOEL) SAN MAHU COMPLEX, 5, BUND GARDEN ROAD, OPP. POONA CLUB, PUNE 411001 PAN: AAWPG2098Q ....... / APPELLANT / V/S. THE DY. COMMISSIONER OF INCOME - TAX, CIRCLE 7, PUNE / RESPONDENT A SSESSEE BY : KRISHNA GUJARATHI REVENUE BY : SHRI S.P. WALIMBE / DATE OF HEARING : 24 .0 2 .2020 / DATE OF PRONOUNCEMENT : 24 .02 .2020 / ORDER PER D. KARUNAKARA RAO , A M : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), PUNE - 5, PUNE , DATED 1 1 . 0 5 .2017 FOR THE ASSESSMENT YEAR 20 13 - 14 . 2 ITA NO. 1672 /PUN/20 1 7 A.Y. 20 13 - 14 2. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL AS WELL AS COMMERCIAL PROJECTS. THE ASSESSEE FILED THE RETURN OF INCOME ON 31.08.2014 DECLARING TOTAL INCOME OF RS. 10 , 44 , 53,300 / - . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ALSO HAD INCOME FROM HOUSE PROPERTY, INCOME FROM BUSINESS AND INCOME FROM OTHER SOURCES. THE CASE WAS S ELECTED FOR SCRUTINY. THE ASSESSING OFFICER MADE DISALLOWANCE (1) ON ACCOUNT OF APPLICATION OF SECTION 14A OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) READ WITH RULE 8D(2)(III) OF THE INCOME - TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES) AND (2) CHARG ED INTEREST U/S 234A AND 234B OF THE ACT QUA THE SELF ASSESSMENT PAYMENTS U/S 140A OF THE ACT . 3. IN THE FIRST APPELLATE PROCEEDINGS, THE LD. CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER . 4 . AGGRIEVED WITH THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, AT THE VERY OUTS ET THE LD. COUNSEL SUBMITTED THAT THERE ARE COUPLE OF ISSUES FOR ADJUDICATION AND THEY ARE (1) EXPENDITURE OF DISALLOWANCE OF TO BE MADE U/S 14A R .W.R 8D(2)(I) AND (2) CALCULATION OF LEVY OF INTEREST U/S 234A AND 234B OF THE ACT IN RESPECT OF SELF ASSESSMENT TAX PAID U/S 140A OF THE ACT. AS PER LD. COUNSEL, BOTH THESE ISSUES ARE COVERED IN FAVOUR OF ASSESSEE BY VIRTUE OF ORDER OF TRIBUNAL IN THE GROUP CASES OF ASSESSEE I.E. IN ITA NOS.710 & 711/PUN/2017, FOR A.Y. 2010 - 11 & 2013 - 14 AND IN ITA 3 ITA NO. 1672 /PUN/20 1 7 A.Y. 20 13 - 14 NO.712/PUN/2017, FOR A.Y. 2013 - 14, ORDER DATED 29.03.2019. FURTHER, LD. COUNSEL SUBM ITTED THAT HE DOES NOT WISH TO PRESS THE GROUNDS NO.1 AND 2. 6 . WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT PUNE BENCH OF TRIBUNAL DECIDED THESE TWO ISSUES IN GROUP CASES OF ASSESSEE (SUPRA) VIDE ORDER DATED 29.03.2019. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE IN PARAS 7 TO 13 AND THE SAME READ AS UNDER : 7. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST CONFIRMATION OF DISALLOWANCE U/S.14A . THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE EARNED EXEMPT INCOME BUT DID NOT OFFER ANY DISALLOWANCE U/S.14A. THE AO COMPUTED DISALLOWANCE AT RS.30,35,585/ - ONLY UNDER RULE 8D(2)(III), BEING, 0.5% OF THE AVERAGE VALUE OF INVESTMENTS. THE ASSESSEE PLEADED IN THE SAME MANNER BEFORE THE LD. CIT(A) AS WAS DONE FOR THE EARLIER YEAR THAT ONLY COMMON EXPENSES SHOULD BE CONSIDERED AND THE EXPENSES INCURRED EXCLUSIVELY IN RELATION TO TAXABLE INCOME, SHOULD BE REDUCED. THE ASSESSEE SUBMITTED SUCH CALCULATION WHICH HAS BEEN REPRODUCED AT PAGE 12 OF THE IMPUGNED ORDER, THEREBY WORKING OUT A SUM OF RS.13,297/ - AS RELATABLE TO BOTH EXEMPT AND TAXABLE STREAMS OF INCOME. SIMILAR TO HIS ACTION FOR THE PRECEDING YEAR, THE LD. CIT(A) NOT ONLY SUSTAINED THE DISALLOWANCE AS MADE BY THE AO BUT ALSO ENHANCED THE DISALLOWANCE U/S 14A BY SUCH AN A MOUNT OF RS.13,297/ - . THE ASSESSEE IS AGGRIEVED BY THE CONFIRMATION AS WELL AS ENHANCEMENT OF THE ADDITION. 8. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS SIMILAR TO THAT OF A.Y. 2010 - 11 WHICH HAS BEEN DETERMINED HEREINABOVE. IT IS OBSERVED THAT OUT OF THE EXPENSES CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE EXCLUSIVELY FOR TAXABLE INCOME, THERE IS AN ITEM OF COMMON EXPENSE, WHICH IS PROFESSIONAL FEE OF RS.58,521/ - . FOLLOWING OUR ABOVE DECISI ON FOR EARLIER YEAR, WE DIRECT TO DELETE THE ENHANCEMENT OF DISALLOWANCE MADE BY THE LD. CIT(A). AT THE SAME TIME, THE DISALLOWANCE IS RESTRICTED TO COMMON EXPENSES INCURRED BY THE ASSESSEE AT RS.71,818 (NAMELY RS.13,297 + RS.58,521). THIS ISSUE IS PARTL Y DECIDED IN FAVOUR OF THE ASSESSEE. 9. THE ONLY OTHER ISSUE WHICH SURVIVES IN THE INSTANT APPEAL IS AGAINST THE COMPUTATION OF INTEREST U/S.234A AND 234B OF THE ACT. THE FACT APROPOS THIS ISSUE ARE THAT THE ASSESSEE ADMITTEDLY FILED HIS RETURN BEYOND DUE DATE U/S. 139(1) OF THE ACT. THE AO COMPLETED THE ASSESSMENT AND DETERMINED THE AMOUNT OF INTEREST U/S.234A AT RS.25,97,300/ - . THE ASSESSEE ARGUED BEFORE THE LD. C IT(A) THAT THE AMOUNT OF SELF - ASSESSMENT TAX PAID BY HIM SHOULD HAVE BEEN PROPORTIONATELY REDUCED IN THE CALCULATION OF INTEREST U/S.234A. THE LD. CIT(A) DIRECTED THE AO TO FOLLOW CBDT CIRCULAR NO.2/2015, DATED 10 - 02 - 2015. THE ASSESSEE IS AGGRIEVED BY SU CH A DECISION OF THE LD. CIT(A) IN NOT GIVING FURTHER RELIEF IN INTEREST U/S.234A IN RESPECT OF SELF - ASSESSMENT TAX PAID AFTER THE DUE DATE U/S.139(1) BUT BEFORE THE FILING OF RETURN OF INCOME. 10. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVAN T MATERIAL ON RECORD. IT IS AN UNDISPUTED POSITION THAT THE ASSESSEE FILED RETURN BELATEDLY AND HENCE, IS LIABLE TO BE VISITED WITH INTEREST U/S.234A OF THE ACT. THE CASE OF THE ASSESSEE IS THAT THE AMOUNT OF SELF - ASSESSMENT TAX PAID BY HIM PRIOR TO THE FILING OF RETURN SHOULD BE REDUCED IN THE PROCESS OF CALCULATION OF INTEREST UNDER 4 ITA NO. 1672 /PUN/20 1 7 A.Y. 20 13 - 14 THIS SECTION. WE WANT TO CLARIFY AT THE OUTSET THAT THE DISPUTE IN THE EXTANT APPEAL IS ONLY REGARDING THE CALCULATION OF INTEREST AND NOT FOR THE DURATION FOR WHICH THE IN TEREST IS SO CHARGEABLE. SECTION 234A THOUGH PROVIDES CERTAIN AMOUNTS OF TAXES ETC. UNDER SUB - SECTION (1) TO BE REDUCED FROM THE AMOUNT OF TAX ON TOTAL INCOME DETERMINED UNDER REGULAR ASSESSMENT FOR THE PURPOSE OF CALCULATION OF INTEREST U/S 234A, BUT THE RE IS NO SPECIFIC MENTION FOR THE EXCLUSION OF THE AMOUNT OF SELF - ASSESSMENT TAX. IT IS WORTHWHILE TO MENTION THAT THE HONBLE SUPREME COURT IN CIT VS. PRANOY ROY AND ANOTHER (2009) 309 ITR 239 (SC) HAS DEALT WITH THE CHARGEABILITY OF INTEREST U/S.234A. IN THAT CASE, THE RETURN WAS DUE TO BE FILED ON 31 - 10 - 1995 BUT THE SAME WAS ACTUALLY FILED ON 29 - 09 - 1996, I.E. AFTER A DELAY OF ABOUT 11 MONTHS. THE ASSESSEE PAID SELF - ASSESSMENT TAX ON 25 - 09 - 1995, I.E. BEFORE THE DUE DATE OF FILING RETURN OF INCOME U/S.1 39(1). RELYING ON THE LANGUAGE OF THE PROVISION, THE AO DID NOT ALLOW CREDIT FOR THE PAYMENT OF SELF - ASSESSMENT TAX IN THE CALCULATION OF INTEREST U/S 234A OF THE ACT. WHEN THE MATTER FINALLY CAME UP BEFORE THE HONBLE SUPREME COURT, IT WAS HELD THAT THE AMOUNT OF SELF - ASSESSMENT TAX PAID BEFORE THE DUE DATE OF RETURN OF INCOME OUGHT TO HAVE BEEN REDUCED. PURSUANT TO THIS JUDGMENT, THE CBDT HAS COME UP WITH A CIRCULAR NO.2/2015, DATED 10 - 02 - 2015 PROVIDING THAT NO INTEREST U/S.234A OF THE ACT IS CHARGEA BLE ON THE AMOUNT OF SELF - ASSESSMENT TAX PAID BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. IT IS THIS CIRCULAR WHICH HAS BEEN FOLLOWED BY THE LD. CIT(A) IN RESTORING THE MATTER TO THE AO FOR MAKING A FRESH CALCULATION OF DISALLOWANC E OF INTEREST U/S.234A. 11. THE CASE OF THE ASSESSEE IS THAT THOUGH THE IMPUGNED ORDER PROVIDES FOR EXCLUSION OF SELF ASSESSMENT TAX PAID BEFORE THE DUE DATE OF THE RETURN OF INCOME, BUT THERE IS NO SUCH DIRECTION FOR REDUCING THE AMOUNT OF SELF - ASSES SMENT TAX PAID BY THE ASSESSEE AFTER THE DUE DATE BUT BEFORE THE ACTUAL FILING OF RETURN. IT IS THE CASE OF THE ASSESSEE THAT SIMILAR DIRECTION OUGHT TO HAVE BEEN GIVEN FOR SUCH LATER INTEREST PAYMENT AS WELL. WE FIND FORCE IN THE ARGUMENT OF THE LD. AR. IT IS A SETTLED LEGAL POSITION THAT PAYMENT OF INTEREST U/S.234A IS A COMPENSATION TO THE REVENUE FOR DEPRIVATION OF THE AMOUNT OF TAX DUE, FOR THE PERIOD IT IS NOT PAID. THE HONBLE SUPREME COURT IN PRANOY ROY (SUPRA) DEALT WITH A SITUATION IN WHICH THE AMOUNT OF SELF - ASSESSMENT TAX WAS PAID BEFORE THE DUE DATE U/S. 139(1). THERE WAS NO AMOUNT OF SELF ASSESSMENT TAX PAID AFTER THE DUE DATE. THE HONBLE COURT, THEREFORE, DIRECTED TO REDUCE SUCH AN AMOUNT OF SELF ASSESSMENT TAX IN THE CALCULATION OF INTE REST U/S 234A. IT WAS SO DECIDED ON THE GROUND THAT ONCE THE AMOUNT OF SELF ASSESSMENT TAX WAS PAID, THE REVENUE COULD NOT BE CONSIDERED AS DEPRIVED OF THE AMOUNT OF TAX DUE TO IT. AS INTEREST U/S 234A IS COMPENSATORY, FOLLOWING THE RATIONALE, WE HOLD THAT THE CONSEQUENCE WILL BE NO DIFFERENT IF THE AMOUNT OF SELF - ASSESSMENT TAX IS ALSO PAID AFTER THE DUE DATE BUT BEFORE THE FILING OF RETURN OF INCOME. IN SUCH A SCENARIO, THE REVENUE WILL STAND COMPENSATED TO THE EXTENT OF PAYMENT OF SELF - ASSESSMENT TAX MA DE AFTER THE DUE DATE AND ACCORDINGLY THE AMOUNT OF INTEREST U/S 234A FOR THE PERIOD DURING WHICH SUCH AN AMOUNT STOOD PAID, NEEDS TO BE COMPUTED ON THE PROPORTIONATELY REDUCED AMOUNT OF TAX ACCORDINGLY. UNDER THESE CIRCUMSTANCES, WE SET - ASIDE THE IMPUGN ED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO FOR CALCULATING THE AMOUNT OF INTEREST U/S.234A AFRESH AFTER CONSIDERING DATE - WISE PAYMENTS OF SELF - ASSESSMENT TAX MADE BY THE ASSESSEE, BOTH BEFORE AND AFTER THE DUE DATE U/S 139(1) (UNDERLINE PROVIDED BY US FOR EMPHASIS) 7 . THE FACTS AND ISSUES RAISED IN THE PRESENT APPEAL ARE BROADLY SIMILAR TO THE FACTS AND ISSUES IN GROUP CASES OF ASSESSEE (SUPRA) . THEREFORE , WE DIRECT 5 ITA NO. 1672 /PUN/20 1 7 A.Y. 20 13 - 14 THE ASSESSING OFFICER TO COMPLY WITH THE DIRECTIONS OF TRIBUNAL IN GROU P CASES OF ASSESSEE (SUPRA) AND DECIDE THE SAME. THE ASSESSING OFFICER SHALL GIVE REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE WHILE DECIDING THE ISSUES. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED AS ABOVE . 8 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED AS ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBR UARY, 2020. SD/ - SD/ - PARTHA SARATHI CHAUDHURY D. KARUNAKARA RAO JUDICIAL MEMBER ACCOUNTANT MEMBER / PUNE; / DATED : 24 TH FEBRUARY , 2020. GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT 3. THE CIT (APPEALS), PUNE - 5, PUNE. 4. THE PR. CIT, PUNE - 4, PUNE. 5. , , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // // TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE