MOOSAJEE JEEVAJEE & CO., MUMBAI V. DCIT 13(3), MUMBAI

ITA 1723/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55007 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: CHETAN A KARIA
• Keywords: Earning of tax free income
• Section: 263; 2; 143(3); 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.1723/MUM/2010 (ASSESSMENT YEAR:2006-07) MOOSAJEE JEEVAJEE & CO., 449, KATHA BAZAR, MUMBAI-400009 PAN:AAAFM6255D DY. COMMISSIONER OF INCOME TAX, CIRCLE 13(3), MUMBAI APPELLANT V/S RESPONDENT DATE OF HEARING : 9.8.2011 DATE OF PRONOUNCEMENT : 24.8.2011 APPELLANT BY : SHRI CHETAN A K ARIA RESPONDENT BY : SHRI P.C.MAURYA O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.12.2009 PASSED BY THE L EARNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2006-07. . 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF SHIP CHANDLERS , FILED RETURN DECLARING TOTAL INCOME AT RS.34,39,860/-. T HE AO AFTER PROCESSING OF THE RETURN UNDER SECTION 143(1) OF TH E INCOME TAX ACT, 1961 (IN SHORT THE ACT) SELECTED THE CASE FOR SCRUTINY AND ACCORDINGLY ISSUED NOTICE UNDER SECTI ON 143(2) OF THE ACT. SUBSEQUENTLY, THE AO ALSO ISSUED NOTI CE UNDER ITA NO.1723/MUM/2010 (ASSESSMENT YEAR:2006-07) 2 SECTION 142(1) OF THE ACT ALONG WITH THE QUESTIONNA IRE. IN RESPONSE, THE ASSESSEE FILED REQUIRED DETAILS. THE AO AFTER VERIFICATION OF THE DETAILS MADE TWO DISALLOWANCES I.E. DISALLOWANCE UNDER SECTION 40(A)(IA) OF RS.3,36,55 9/- AND DISALLOWANCE OF RS.2,43,942/- OUT OF HEL MAJOORI EXPENSES OF RS.12,19,709/- AND THEREBY COMPLETED THE ASSES SMENT AT AN INCOME OF RS.40,20,361/- VIDE ORDER DATED 26.1 2.2008 PASSED UNDER SECTION 143(3) OF THE ACT. 3. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (A) WHILE DELETING BOTH THE DISALLOWANCES OBSERVED THAT THE APPELLANT HAS EXEMPT DIVIDEND INCOME OF RS.22,60,9 02/-. THE LEARNED COMMISSIONER OF INCOME TAX (A) FOLLOWI NG THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT.LTD., 312 ITR 1 (AT) ( SB) (MUM.) ISSUED NOTICE UNDER SECTION 251(1)(A) R.W.S. 251(2) OF THE ACT TO THE ASSESSEE TO SHOW CAUSE AS TO WHY TH E DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 SHOULD NOT BE MADE. IN RES PONSE, IT WAS INTERALIA STATED BY THE ASSESSEE THAT NO EXPEND ITURE HAVE BEEN INCURRED FOR EARNING THE EXEMPT INCOME, T HEREFORE, NO SUCH DISALLOWANCE IS CALLED FOR. THE RELIANCE WAS ALSO PLACED ON THE DECISIONS OF HONBLE PUNJAB AND HARYA NA HIGH COURT IN THE CASE OF HERO CYCLES LTD. ORDER DATED 4 .11.2009 AND THE DECISION IN WINSOME TEXTILE INDUSTRIES. HOWEVER, ITA NO.1723/MUM/2010 (ASSESSMENT YEAR:2006-07) 3 THE LEARNED COMMISSIONER OF INCOME TAX (A), FOLLOW ING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL (SUPR A) DIRECTED THE AO TO WORK OUT THE DISALLOWANCE UNDER SECTION 1 4A READ WITH RULE 8D AS PER THE DECISION OF THE SPECIAL BE NCH OF THE TRIBUNAL (SUPRA). 4. BEING AGGRIEVED OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) IN DIRECTING HE AO TO MAKE DISALLOWANCE UNDER SECTION 14A OF THE ACT. 5. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THIS CASE THE AO HAS NOT M ADE ANY SUCH DISALLOWANCE UNDER SECTION 14A OF THE ACT. HO WEVER, THE LEARNED COMMISSIONER OF INCOME TAX (A), HAS RA ISED A NEW ISSUE WHICH WAS NOT THERE IN THE ASSESSMENT ORD ER, THEREFORE, THE LEANED COMMISSIONER OF INCOME TAX (A) IS NOT JUSTIFIED IN DIRECTING THE AO TO WORK OUT THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D, IN VIEW OF THE DECI SION OF THE SPECIAL BENCH OF THE TRIBUNAL(SUPRA). THE RELIANC E WAS ALSO PLACED ON THE DECISION OF THE FULL BENCH OF THE H ONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S SARDARI LA L AND CO. (2001) 251 ITR 864 (FB) DELHI). HE, THEREFORE, SUBM ITS THAT THE DIRECTION GIVEN BY THE LEARNED COMMISSIONER OF INCOME ITA NO.1723/MUM/2010 (ASSESSMENT YEAR:2006-07) 4 TAX (A) TO WORKOUT THE DISALLOWANCE UNDER SECTION 14A BE DELETED. 6. ON THE OTHER HAND, THE LEARNED D.R. WHILE RELYI NG ON THE ORDER OF THE AO AND THE LEARNED COMMISSIONER OF INCOME TAX (A) SUBMITS THAT THE LEANED COMMISSIONER OF IN COME TAX (A), IN VIEW OF THE PROVISIONS OF SECTIONS 251( 1)(A) R.W.S.251(2) OF THE ACT HAS POWERS TO ISSUE SUCH NO TICE FOR THE ENHANCEMENT OF INCOME, THEREFORE, THE ORDER PA SSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) IN DIRE CTING THE AO TO WORK OUT THE DISALLOWANCE UNDER SECTION 14A R .W. RULE 8D BE UPHELD. 7. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THERE IS NO DISPUTE THAT UNDER THE SCRUTINY AS SESSMENT MADE UNDER SECTION 143(3), THE AO AFTER CALLING FO R CERTAIN DETAILS HAD MADE ONLY TWO DISALLOWANCES I.E. THE DISALLOWANCE UNDER SECTION 40A(IA) OF RS.3,36,559/ - AND OUT OF HEL MAJOORI EXPENSES RS.2,43,942/- AGGREGATING T O RS.5,80,501/-. THERE IS NO MATERIAL ON RECORD TO SH OW THAT THE AO HAD MADE ANY DISCUSSION WITH REGARD TO THE APPLICATION OR NON APPLICATION OF THE PROVISIONS OF SECTION 14A OF THE ACT. THE DIRECTION OF THE LEARNED COMM ISSIONER OF INCOME TAX (A) TO WORKOUT THE DISALLOWANCE UNDER SECTION ITA NO.1723/MUM/2010 (ASSESSMENT YEAR:2006-07) 5 14A READ WITH RULE 8D AS PER THE DIRECTION OF THE SPECIAL BENCH OF THE TRIBUNAL (SUPRA) WHICH HAS BEEN IMPL IEDLY DISAPPROVED ON THE APPLICATION OF RULE 8D WHICH W OULD APPLY W.E.F. ASSESSMENT YEAR 2008-09 VIDE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF G ODREJ AND BOYCE MFG. CO. LTD. V/S DEPUTY COMMISSIONER OF INCO ME-TAX (2010) 328 ITR 81 (BOM.), WE ARE OF THE VIEW THAT T HE LEARNED COMMISSIONER OF INCOME TAX (A) HAS TAKEN IN TO ACCOUNT THE NEW SOURCE OF INCOME UNDER A DIFFERENT PROVISION OF LAW WHICH WAS NOT AT ALL ADJUDICATED B Y THE AO IN THE ASSESSMENT ORDER. 8. IN SARDARI LAL AND CO. (SUPRA), IN THE LAST PARA GRAPH IT HAS BEEN HELD AS UNDER : LOOKING FROM THE AFORESAID ANGLES, THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABI LITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SECTION 147/148 OF THE ACT AND SECTION 263 OF THE ACT, IF REQUISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIV ABLE THAT IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS, A SIM ILAR POWER IS AVAILABLE TO THE FIRST APPELLATE AUTHORIT Y. THAT BEING THE POSITION, THE DECISION IN UNION TYRES CA SE [1999] 240 ITR 556 OF THIS COURT EXPRESSES THE COR RECT VIEW AND DOES NOT NEED RECONSIDERATION. THIS REFER ENCE IS ACCORDINGLY DISPOSED OF. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE TO SHOW THAT THE DISALLOWANCE UNDER SEC TION 14A IS NOT A NEW SOURCE OF INCOME OR THE SAME IS BORNE OUT FROM ITA NO.1723/MUM/2010 (ASSESSMENT YEAR:2006-07) 6 THE ASSESSMENT ORDER, WE RESPECTFULLY FOLLOWING THE DECISION OF THE FULL BENCH OF THE HONBLE DELHI HIGH COURT (SUPRA) HOLD THAT THE LEARNED COMMISSIONER OF INCOME TAX (A ) WAS NOT JUSTIFIED IN DIRECTING THE AO TO WORK OUT THE D ISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 AND ACCORDINGLY, THE GROUNDS TAKEN BY T HE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE ASSESSEES APPEAL STANDS ALLO WED.. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2011. SD SD (RAJENDRA SINGH) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 24TH AUGUST, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI