Transpek Industry limited, Baroda V. The DCIT, Circle-4, , Baroda

ITA 1727/AHD/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0969 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-10-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 13-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMA PRASAD
• Keywords: Question of law; Revised return; Rule 8D; Set aside
• Section: 143(3); 14A; 139(5); 201; 143(2)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO. 1727/AHD/2017 / ASSTT. YEAR: 2009 - 2010 M/S.TRANSPEK INDUSTRY LTD., 6 TH FLOOR, MARBLE ARCH , RACE COURSE CIRCLE , BARODA - 39007. PAN : AAACT8639B VS. THE D .C.I.T CIRCLE - 4, BARODA . (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI SANJAY R. SHAH , A.R REVENUE BY : SHRI UMA PRASAD SR. D.R / DATE OF HEARING : 10 / 10 / 201 9 / DATE OF PRONOUNCEMENT: 16 / 12 /201 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, VADODARA DATED 12/04/2017 ( IN SHORT LD. CIT(A) ) ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143 (3) OF THE INCOME TAX ACT, 1961 ( HERE - I N - AFTER REFERRED TO AS 'THE ACT') DT. 16 / 12/2011 RELEVANT TO THE ASSESSMENT YEAR 2009 - 20 10 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. ITA NO.1727/AHD/2017 ASSTT. YEAR 2009 - 10 2 THE APPELLANT BEING AGGRIEVED BY THE ORDER DATED 12 APRIL 2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, VADODARA ['CIT(A)'] PREFERS AN APPEAL AGAINST THE SAME ON THE FOLLOWING AMONGST OTHER GROUNDS, WHICH ARE WITHOUT PREJUDICE TO EACH OTHER. 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ASSES SING OFFICER IN DISALLOWING RS. 23,54,430/ -- U/S. 14A R.W.R. 8D OF THE ACT. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT NO DISALLOWANCE OF INTEREST U/S. 14A WAS CALLED FOR AS ALL THE INVESTMENTS WERE MADE IN EARLIER YEARS OUT OF SUFFICIENT OWNED FUNDS. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ACCEPTING THE CLAIM WITH RESPECT TO DISALLOWANCE OF INTEREST EXPENSES OF RS. 23,54,430/ - OF THE APPELLANT PUT FORWARD BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE LEARNED AO CANNOT ENTERTAIN A CLAIM OTHERWISE THAN FILING A REVISED RETURN OF INCOME. 5. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT AN APPELLANT IS ENTITLED TO R AISE BEFORE APPELLATE AUTHORITIES ADDITIONAL CLAIM WHICH WAS NOT MADE IN RETURN FILED BY IT. THE LEARNED CIT(A) HAS PLENARY POWERS AND CAN CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT. 6. THE LEARNED CIT(A) FAILED TO EXERCISE THE DISCRETION VE STED IN HIM IN ACCORDANCE WITH LAW IN NOT ACCEPTING THE ADDITIONAL CLAIM MADE BY THE APPELLANT ON MERITS. YOUR APPELLANT PRAYS FOR LEAVE TO ADD, ALTER AND / OR AMEND / WITHDRAW ANY / ALL OF THE GROUNDS OF APPEAL ADDUCED ABOVE. 2. T HE ONLY ISSUE RAISED BY THE AS SESSEE IS THAT THE LEARNED CIT(A) ER R ED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A R.W.R. 8D OF INCOME TAX RULE FOR 3 , 54 , 430 ONLY. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE BU SINESS OF MANUFACTURING AND TRADING OF CHEMICALS. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS DEC LARED DIVIDEND INCOME OF 69,21, 860 / - WHICH WAS CLAIMED AS EXEMPTED UNDER SECTION 10 ( 34 ) OF THE ACT. THE ASSESSEE AGAINST SUCH INCOME AT ITS OWN HAS MADE THE DISALLOWANCE OF 2 4 , 14 , 371 / - UNDER SECTION 14A OF THE ACT ON THE BASIS OF TAX REPORT. HOWEVER THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS CLAIMED THAT ITS OWN FUNDS EXCEEDS THE AMOUNT OF INVESTMENTS AND THEREFORE THE DISALLOWANCE WITH RESPECT TO THE ITA NO.1727/AHD/2017 ASSTT. YEAR 2009 - 10 3 EXEMPTED INCOME SHOULD BE LIMITED TO THE ADMI NISTRATIVE EXPENSES ONLY I.E. 2 , 28 , 196.00. 3.1 HOWEVER THE AO DISAGREED WITH THE CONTENTION OF THE ASSESSEE AND WORKED OUT THE AMOUNT OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULE IN THE MANNER AS DETAILED BELOW: I. DIRECT EXPENSES NIL II. INTEREST EXPENSES 23,54,430 III. ADMINISTRATIVE EXPENSES 228196.00 T OTAL 2582626.00 L ESS: AMOUNT ALREADY DISALLOWED 2414371.00 B ALANCE AMOUNT 168255.00 I N VIEW OF THE ABOV E, THE AO MADE THE DISALLOWANCE O F 1, 68 , 255 / - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO CONFIRMED THE ORDER OF THE AO BY OBSERVING AS UNDER: 4.1.1. AS REGARDS THE ADDITIONAL CLAIM OF RS.21,86,175/ - (RS.24,14,371 - RS.2,28,196) DISALLOWED BY THE APPELLANT ITSELF, THE APPELLANT FILED A REVISED WORKING BEFORE THE ASSESSING OFFICER WITHOUT FILING REVISED RETURN OF INCOME. AS PER THE EXISTING LEGAL POSITION, THE ASSESSING OFFICER CANNOT ALLOW ADDITIONAL CLAIM AND REDUCE THE INCOME BELOW RETURNED INCOME. I HAVE ALSO CONSIDERED THE CONTENTION OF LD. AUTHORIZED REPRESENTATIVE IN THIS REGARD. 4.1.2. AS PER THE LAW AND PROCEDURE OF FILING OF RETURN AND C ONSEQUENTIAL ASSESSMENT, I FIND THAT THE RETURN OF INCOME BECOMES FINAL UNLESS IT IS SCRUTINIZED BY ISSUANCE OF NOTICE U/S. 143(2) OR U/S. 147. THE CASE OF APPELLANT FALLS IN THE CATEGORY WHERE NOTICE U/S. 143(2) WAS ISSUED. AS PER THE PROVISIONS OF SECTIO N 143(2), THIS NOTICE IS ISSUED ONLY IF THE ASSESSING OFFICER CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDER STATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDER - PAID THE TAX IN ANY MANNER. THUS, IT IS CLEAR THAT ISSUANCE OF NOTICE U/S. 143(2) IS NOT FOR ALLOWING ANY DEDUCTION OR CLAIM WHICH WAS NOT MADE BY THE APPELLANT IN THE RETURN OF INCOME. THEREFORE, IN MY CONSIDERED VIEW, THE APPELLANT CANNOT CLAIM FRESH DEDUCTION WITHOUT FILING A REVISED RETURN OF INCO ME. THIS VIEW GETS SUPPORT FROM THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF INFLUENCE VS CIT (2015) 55 TAXMAN.COM (DELHI). FURTHER, THE HON'BLE ORISSA HIGH COURT IN THE CASE OF ORISSA RURAL HOUSING DEVELOPMENT CORPORATION LTD VS. ACIT (2012) 34 3 ITR 316, AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD VS.CIT 284 ITR 323, HAS HELD THAT THE LAW IS WELL SETTLED THAT WHEN THE STATUTE REQUIRES TO DO CERTAIN THING IN CERTAIN WAY, THE THING MUST BE DONE IN THAT WAY OR NOT AT ALL. OTHER ITA NO.1727/AHD/2017 ASSTT. YEAR 2009 - 10 4 MODES OR MODE OF PERFORMANCE ARE IMPLIEDLY AND NECESSARILY \ FORBIDDEN. ACCORDINGLY, IT HAS BEEN FURTHER HELD THAT IN THE ABSENCE OF \ REVISED RETURN AS CONTEMPLATED U/S 139(5) OF THE ACT, THE CIT \ (APPEALS) WAS JUSTIFIED IN CONFIRMING THE VIEW OF ASSESSING OFFICER FOR NOT CONSIDERING THE REVISED STATEMENT FILED BY THE ASSESSEE WIT HOUT \ REVISING THE RETURN OF INCOME. IT IS ALSO NOT OUT OF PLACE TO MENTION THAT WORKING OF DISALLOWANCE U/S. 14A R.W. RULE 8D IS PURELY A QUESTION OF FACT IN CONTRADISTINCTION TO A QUESTION OF LAW WHICH CAN BE RAISED AT ANY TIME. 4.1.3. IT IS ALSO WORTHWHILE TO MENTION THAT SINCE THE ASSESSING OFFICER CANNOT ALLOW ANY FRESH CLAIM DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) UNLESS A REVISED RETURN OF INCOME IS FILED WITHIN THE STIPULATED PERIOD OF TIME, IN MY CONSIDERED VIEW, THERE IS NO ERROR OR ILLEGALITY IN THE ORDER OF THE ASSESSING OFFICER WHICH CAN BE CHALLENGED IN THE APPELLATE PROCEEDINGS. THUS, I HOLD THAT THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING FRESH CLAIM IS AS PER THE LAW SINCE THE APPELLANT HAS NOT FILED REVISED RETURN OF I NCOME AND ACCORDINGLY THE APPELLANT DOES NOT DESERVE, ANY RELIEF ON THIS ACCOUNT. ACCORDINGLY, GROUND NO. 2 IS DISMISSED. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US: 5. T HE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 32 AND SUBMITTED THAT OWNED FUND OF THE ASSESSEE EXCEEDS THE AMOUNT OF INVESTMENT. THE LEARNED AR IN SUPPORT OF HIS CONTENTION DREW OUR ATTENTION ON PAGE 1 OF THE PAPER BOOK WHERE THE BALANCE SHEET OF THE ASSESSEE AS ON 31 ST MA RCH 200 9 WAS PLACED. 6. ON THE OTHER AND THE LEARNED DR SUBMITTED THAT THE FACT WHETHER THE ASSESSEE HAS ITS OWN FUND EXCEEDING THE AMOUNT OF INVESTMENT WAS NEVER EXAMINE D BY THE AO DURING THE ASSESSMENT PROCEEDINGS . T HE LEARNED DR ACCORDINGLY VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 7. ON THE CONTRARY, THE LEARNED AR IN HIS REJOINDER SUBMITTED THAT THE COPY OF THE BALANCE SHEET WAS VERY MUCH AVAILABLE BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. INDEED, ON PERUSAL OF THE BALANCE SHEET O F THE ASSESSEE AS ON 31/03/ 2009, THERE REMAINS NO DOUBT THAT T HE OWN FUND OF THE ITA NO.1727/AHD/2017 ASSTT. YEAR 2009 - 10 5 ASSESSEE EXCEEDS THE AMOUNT OF INVESTMENT. IN SUCH CIRCUMSTANCES T HERE CANNOT BE ANY DISALLOWANCE OF INTEREST EXPENSES AGAINST THE EXEMPTED INCOME. IT IS BECAUSE IT IS PRESUMED THAT THE FUND HAS BEEN INVESTED IN THE SECURITIES OUT OF THE OWN FUND OF THE ASSESSEE WHICH IS INTEREST FREE. ACCORDINGLY, THE QUESTION OF DISALL OWING THE INTEREST DOES NOT ARISE. IN THIS REGARD WE FIND SUP PORT AND GUIDANCE FROM THE JUDG MENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF PCIT VS. INDIAN GELATINE AND CHEMICALS LTD. REPORTED IN 66 TAXMANN.COM 356 WHEREIN ITS WAS HELD AS UNDER: THE A SSESSEE HAD MADE INVESTMENT IN SHARES AND MUTUAL FUNDS. IT SUO MOTU OFFERED/DISALLOWED THE AMOUNT OF RS. 2 LAKHS ON ACCOUNT OF SECTION 14A. THE ASSESSING OFFICER, HOWEVER, MADE FURTHER DISALLOWANCE UNDER SECTION 14A. THE TRIBUNAL DELETED THE ENTIRE DISALLO WANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAD SUFFICIENT INTEREST - FREE FUNDS OUT OF WHICH INVESTMENT WAS MADE. HELD THAT THERE WAS NO INFIRMITY IN THE IMPUGNED ORDER OF THE TRIBUNAL. 8.1 HOWEVER, BEFORE PARTING WE ARE CONSCIOUS TO THE FACT THAT THE ASSESSEE HAS MADE SUO M OTO DISALLOWANCE OF THE INTE REST EXPENSES UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES AMOUNT ING TO 24, 14,371/ - ONLY . IN CASE WE DIRECT THE AO TO REDUCE THE AMOUNT OF DISALLOWANCE OF THE INTEREST EXPENSES OF 2 3 , 54 , 430 / - , THEN THE INCOME DECLARED IN THE RETURN OF INCOME WILL REDUCE FURTHER BY THE AFORESAID AMOUNT. THUS THE QUESTION ARISES WHETHER THE ITAT CAN DIRECT TO REDUCE TH E INCOME DECLARED BY THE ASSESSEE IN THE INCOME TAX RETURN. IN THIS REGARD WE NOTE THAT THE REVENUE IS EXPECTED TO ALLOW ALL THE LE GAL TO CLAIM OF THE ASSESSEE WHILE DETERMINING THE TOTAL INCOME OF THE ASSESSEE IRRESPECTIVE OF THE FACT WHETHER THE CONCERNE D PERSON H AS CLAIMED THE DEDUCTION IN ITS INCOME TAX RETURN OR NOT . THUS IT IS CLEAR THAT, THE REVENUE CANNOT TAKE THE BENEFIT OF THE IGNORANCE OF THE ASSESSEE. THE INCOME TAX AUTHORITIES ARE BOUND TO ALLOW THE RELIEF AVAILABLE UNDER THE PROVISIONS OF LAW TO THE ASSESSEE DESPITE THE FACT THAT THE SAME WAS NOT CLAIMED IN THE INCOME TAX RETURN BUT IT WAS CLAIMED THROUGH SEPARATE LETTER 04/12 / 011 IN THE PRESENT FACTS AND CIRCUMSTANCES. I N VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO SUSTAIN THE ORDER OF THE LEARNED CIT (A). ITA NO.1727/AHD/2017 ASSTT. YEAR 2009 - 10 6 ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE MADE BY THE ASSESSEE OF THE INTEREST EXPENSES AMOUNTING TO 23,54,430/ - FROM THE TOTAL INCOME. HENCE THE GROUND OF APPEAL OF THE ASSES SEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE ALLOWED . O RDER PRONOUNCED IN THE COURT ON 16 /12 / 2019 AT AHMEDABAD. - SD - - SD - (MAHAVIR PRASAD ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 16 / 12 /2019 MANISH