ACIT CIR 6(1), MUMBAI V. BALKRISHNA INDUSTRIES LTD, MUMBAI

ITA 1809/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100669 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 03-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Keywords: Additional evidence; Tax effect
• Section: 43B; 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KAR UNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 1809/M/2011 (AY:2007 - 2008 ) I.T.A. NO. 18 11/M/2011 (AY:2006 - 2007 ) ACIT, CIR. 6(1), R.NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. / VS. M/S. BALKRISHNA INDUSTRIES LIMITED, 418, CREATIVE INDUSTRIAL ESTATE, SITARAM MILL COMPOUND, 72, N.M. JOSHI MARG, MUMBAI 400011. ./ PAN : AAACB3333J ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI A.K. KARDAM, DR / RESPONDENT BY : SHRI RAJESH P. SHAH, AR / DATE OF HEARING : 29 .07.2015 / DATE OF PRONOUNCEMENT : 05 .08 .2015 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THESE APPEALS ARE FILED BY THE REVENUE ON 4.3.2011 AGAINST THE DIFFERENT ORDERS OF THE CIT (A) - 14, MUMBAI. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE CONNECTED, THEREFORE, BOTH THESE APPEALS ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. I.T.A. NO. 1809/M/2011 (AY: 2007 - 2008) 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS. 9,46,031/ - U/S 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TDS ON FOREIGN REMITTANCE, RELYING ON THE ORDER OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. SAMSUNG LTD, IGNORING THE AMENDMENT IN THE EXPLANATION TO THE SECTION 9(2) OF THE ACT VIDE FINANCE ACT, 2010 W.E.F 1.6.1976. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DIRECTING THE AO TO RE - COMPUTE THE DISALLOWANCE U/S 14A ON A REASONABLE BASIS RELYING ON THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. LTD WITHOUT APPRECIATING THE FACT THAT THE JUDG MENT OF BOMBAY HIGH COURT HAS OT BEEN ACCEPTED BY THE REVENUE AND SLP HAS BEEN PROPOSED. 2 3 . IN THIS APPEAL, THE REVENUE CHALLENGED THE CIT (A)S DECISION IN DELETING THE ADDITION OF RS. 9,46,031/ - U/S 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TDS ON FORE IGN REMITTANCE AND A DISALLOWANCE OF RS.1,82,489/ - U/S 14A OF THE ACT . THE TAX EFFECT FOR THE PRESENT APPEAL IS RS.3,38,556/ - WHICH IS LESS THAN RS. 4 LAKHS AND ACCORDING TO INSTRUCTION NO.5/2008, DATED 15.5.2008 OF THE CBDT, NO APPEAL SHOULD BE FILED BY THE DEPARTMENT BEFORE THE TRIBUNAL IF THE TAX EFFECT IS LESS THAN RS. 4 LAKHS. IT IS ALSO HELD BY THE HONBLE BOMBAY HIGH COURT IN THE FOLLOWING CASES THAT THE INSTRUCTIONS OF THE CBDT DESCRIBING THE LIMIT TO THE TAX EFFECT WOULD BE APPLICABLE TO THE PEN DING APPEALS ALSO. (I) CIT VS. SMT. VIJAYA KAVEKAR [(2013) 30 TAXMANN.COM 412], BOMBAY HIGH COURT (II) CIT VS. MADHUKAR INAMDAR [(2009) 185 TAXMAN 101], BOMBAY HIGH COURT 4 . LD DR DID NOT CONTROVERT TO THE FACT THAT THE TAX EFFECT IN THE PRESENT APPEAL IS LESS THAN RS. 4 LAKHS. 5 . IN THIS VIEW OF THE SITUATION, APPEAL FILED BY THE REVENUE IS DISMISSED ON ACCOUNT OF LOW TAX EFFECT. I.T.A. NO. 1811/M/2011 (AY:2006 - 2007) 6. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF THE CIT (A) - 14, MUMBAI DATED 22.12.2010 FOR THE ASSESSMENT YEAR 2006 - 07. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RE - COMPUTE THE DISALLO WANCE U/S 14A ON A REASONABLE BASIS RELYING ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. LTD WITHOUT APPRECIATING THE FACT THAT THE JUDGMENT OF BOMBAY HIGH COURT HAS NOT BEEN ACCEPTED BY THE REVENUE AND SLP HAS BEEN PROPOSED. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS. 47,00,723/ - OUT OF TOTAL ADDITION OF RS. 49,6 6 ,880/ - HOLDING THE SAME IS EXEMPT U/S 10(35) AND DIRECTING THE AO TO TAX BALANCE AMOUNT OF RS . 2,66,157/ - @ 10% U/S 111 OF THE ACT WITHOUT APPRECIATING THE FACTS THAT NO EXPLANATION WAS OFFERED BY THE ASSESSEE FOR NOT OFFERING THESE AMOUNTS FOR TAX DURING THE COURSE OF SCRUTINY PROCEEDINGS AND ADMITTING THE FRESH EVIDENCE FILED BEFORE HIM WITHOUT GIVING OPPORTUNITY TO THE AO TO EXAMINE THE SAME WHICH IS IN VIOLATION OF RULE 46A. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN SETTING ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER, TO VERIFY AND DELETE THE ADDITION OF INTEREST INCOME OF RS. 1,05,47,053/ - , WHEN THE LD CIT (A) HAD NO POWER TO SET ASIDE. 3 7. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TYRES AND SYNTHETICS. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 88,05,85,796/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 9,03,455,520/ - . IN THE ASSESSMENT, AO MADE CERTAIN ADDITIONS / DISALLOWANCES NAMELY; (I) DISAL LOWANCE OF RS. 10,37,975/ - U/S 14A OF THE ACT; (II) ADDITION OF RS. 46,22,119/ - ON ACCOUNT OF ADJUSTMENT IN THE VALUE OF CLOSING STOCK U/S 145A OF THE ACT; (III) RS. 13,50,227/ - ON ACCOUNT OF EXCISE DUTY WRITTEN OFF; (IV) ADDITION OF RS. 3,28,209/ - ON ACCO UNT OF DELAYED PAYMENT OF PF ETC U/S 43B OF THE ACT AND (V) ADDITION OF RS. 1,55,13,933/ - ON ACCOUNT OF INTEREST AND OTHER INCOME NOT OFFERED TO TAX. AGGRIEVED WITH THE ABOVE DECISION OF THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY. 8. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE , CIT (A) GRANTED RELIEF ON CERTAIN ADDITIONS AND PARTLY ALLOWED THE APPEAL. AGGRIEVED WITH THE CIT (A) S DECISION IN RESPECT OF ADDITION OF RS. 49.69 LAKHS AS WELL AS THE ADDITION OF RS. 1 05.47 LAKHS, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 9. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE HEAVILY REL IED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 10. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORIT IES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. 12. GROUND NO.1 RELATES TO THE DISALLOWANCE U/S 14A OF THE ACT. IN THIS REGARD, LD COUNSEL SUBMITTED THAT IN THE AY 2005 - 06, A DISALLOWANCE OF RS. 50,000/ - WAS MADE ON REASONABLE BASIS AND THE SAM E WAS ACCEPTED BY THE ASSESSEE. AS SUCH, THE AY UNDER CONSIDERATION BEING 2006 - 07, RULE 8D CANNOT BE APPLIED RETROSPECTIVELY, WHICH IS APPLICABLE FROM AY 2008 - 2009 ONWARDS . FURTHER, LD COUNSEL FOR THE ASSESSEE 4 SUBMITTED THAT THE ABOVE FACTS WERE NARRATED TO THE FIRST APPELLATE AUTHORITY AND AFTER CONSIDERING THE SAME, CIT (A) DIRECTED THE AO TO DETERMINE THE REASONABLE AMOUNT OF DISALLOWANCE U/S 14 AND THE SAME ISSUE IS PENDING BEFORE THE AO. 13. AFTER HEARING THE LD COUNSEL FOR THE ASSESSEE AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES IN GENERAL AND PARA 6 OF THE CIT (A)S ORDER IN PARTICULAR, WE FIND MERIT IN THE ARGUMENTS OF THE LD COUNSEL AND THE DECISION TAKEN BY THE CIT (A) ON THIS ISSUE TO DETERMINE A REASONABLE AMOUNT OF DISALLOWANCE IS FAIR AND REASONABLE AND THE SAID DIRECTION OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 14. GROUND NO.2 RELATES TO THE ADMITTIN G OF ADDITIONAL EVIDENCE IN VIOLATION OF PROVISIONS OF RULE 46A OF IT RULES, 1962. DURING THE FIRST APPELLATE PROCEEDINGS, T HIS ISSUE WAS EXAMINED BY THE CIT (A). AO ALSO EXAMINED THE ISSUE WHILE PASSING THE ORDER GIVING EFFECT TO THE CIT (A)S ORDER DAT ED 29.6.2010 AND THUS, THE ASSESSEE HAD THE BENEFIT OF PERUSING ALL THE DETAILS / CHARTS. THE SAME IS EVIDENT FROM PAGE 1 OF THE PAPER BOOK PLACED BEFORE US . CONSIDERING THE SAME, WE ARE OF THE OPINI ON THAT THERE IS NO VIOLATION TO THE PRINCIPLE S OF NATU RAL JUSTICE. FURTHER, O N PERUSAL OF ORDER OF THE CIT (A) IN GENERAL, AND PARAS 15 AND 16 IN PARTICULAR, WE FIND THE SAME ARE RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID PARAS AND FOR THE SAKE OF COMPLETENESS OF THIS ORDER, PARA 16 OF T HE CIT (A)S ORDER IS EXTRACTED AS FOLLOWS: 16. I HAVE GONE THROUGH THE ABOVE SUBMISSION AND PERUSED THE ORDER OF THE ASSESSING OFFICER . I FIND THAT OUT OF RS. 49.69 LAKHS, A SUM OF RS. 47,00,723/ - IS DIVIDEND RECEIVED FROM MUTUAL FUNDS, WHICH IS EXEMPT U/S 10(35) OF THE IT ACT. THE BALANCE OF RS. 2,66,157/ - IS PROFIT ON SALE OF UNITS WHICH NEEDS TO BE TAXED @ 10% U/S 111A INSTEAD OF 30% AS CALCULATED BY THE AO. I FIND CONSIDERABLE MERIT IN THE ABOVE SUBMISSION AND IN VIEW OF THE FACTS, THE ADDITION MAD E BY THE AO IS NOT SUSTAINABLE. HENCE, THE SAME IS DELETED. 15 . FROM THE ABOVE, WE FIND THE CIT(A) HAS RIGHTLY ADJUDICATED THE ISSUE AND DELETED THE ADDITION. IN OUR OPINION, THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 16 . GROUND NO.3, RELATES TO DIRECTION OF THE CIT (A) TO THE AO TO VERIFY THE POSITION AND DELETE THE ADDITION. THIS GROUND WAS TREATED AS ALLOWED BY THE CIT 5 (A) AND PARA 14 OF THE CIT (A)S ORDER RELEVANT IN THIS REGARD. RELEVANT LINES FROM THE SAID PARA 14 READ AS UNDER: 14..........THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE POSITION AND DELETE THE ADDITION. FOR STATISTICAL PURPOSES, THE GROUND OF APPEAL IS TREATED A ALLOWED. 1 7 . FROM THE ABOVE, IT IS EVIDENT THAT THE DIRECTION GIVEN BY THE CIT (A) TO THE AO IS ONLY TO CONDUCT VERIFICATION, HE HAS NOT SET ASIDE THE ISSUE TO THE FILE OF THE AO IN LEGAL SENSE. THEREFORE, CONSIDERING THE ABOVE WE ARE OF THE OPI NION THAT THE GROUND RAISED BY THE REVENUE IS MISPLACED. ACCORDINGLY, GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 18 . IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH AUGUST, 2015. SD/ - SD/ - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 5 .8. 2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI