Kishan Gopal Mohta, Kolkata V. ACIT, Circle-35, Kolkata, Kolkata

ITA 182/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6455 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G HANGSHING
• Assessee Lawyers: P J BHIDE
• Keywords: Rectification of order; Earning of tax free income
• Section: 143(3); 142(1); 234B; 14A; 263; 154

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 182 / KOL / 20 17 ASSESSMENT YEAR :2010-11 KISHAN GOPAL MOHTA 7, LYONS RANGE, 2 ND FLOOR, ROOM NO. 2A, KOLKATA-001 [ PAN NO.ADQPM 0469 E ] V/S . ACIT, CIRCLE-35, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI P.J. BHIDE, FCA /BY RESPONDENT SHRI G. HANGSHING, CIT-DR /DATE OF HEARING 01-03-2018 /DATE OF PRONOUNCEMENT 27-04-2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA DA TED 04.04.2016. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-35, KOLKATA U /S 263/154/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 26.02.2016 FOR ASSESSMENT YEAR 2010-11 AND ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ERRED IN HOLDING THAT THE ASSESSING OFFICER WAS JUSTIFIED IN INVOKING THE PRO VISION OF SECTION 14A OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), KOLKATA ERRED IN CONFIRMING THE DISALLOWANCE OF RS.94,89,504/- MADE BY THE ASSESSIN G OFFICER U/S. 14A OF THE ACT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), KOLKATA, ERRE D IN HOLDING THAT ITA NO.182/KOL/2017 A.Y. 2010-11 KISHAN GOPAL MOHTA VS. ACIT, CIR-35 , KOL. PAGE 2 THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING INTE REST UNDER SECTIONS 234A, 234B AND 234C OF THE ACT. 4. THAT THE ORDER PASSED BY THE AUTHORITIES BELOW I S BAD IN LAW. 5. THAT THE APPELLANT CRAVES LEAVE TO URGE FURTHER GROUNDS OF APPEAL T THE TIME OF HEARING. SHRI P.J BHIDE, LD. AUTHORIZED REPRESENTATIVE APPEA RED ON BEHALF OF ASSESSEE AND SHRI G. HANGSHNG, LD. DEPARTMENTAL REP RESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. BEFORE COMING TO THE SPECIFIC ISSUE OF THE CASE IN HAND, IT IS BETTER TO UNDERSTAND THE HISTORY OF THE FACTS OF THE CASE IN BRIEF. 3. THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT ON 22.03.2013 AT A TOTAL INCOME OF 2,82,39,620/- ONLY AFTER MAKING CERTAIN ADDITIONS/ DISALLOWANCES TO THE TOTAL INCOME OF ASSESSEE. SUBS EQUENTLY A RECTIFICATION ORDER U/S 154 OF THE ACT WAS PASSED ON 26.04.2013 D ETERMINING THE TOTAL INCOME AT 2,81,38,450/- ONLY. 4. AGAIN, THE TOTAL INCOME OF ASSESSEE WAS REVISED TO 2,82,39,620/- BY RECTIFYING THE ORDER U/S 154 OF THE ACT VIDE DATED 26.02.2016. IN THE MEANTIME, LD. CIT U/S 263 OF THE ACT OBSERVING AN ERROR IN TH E IMPUGNED ORDER PASSED U/S 143(3) VIDE DATED 22.03.2013 CAUSING PREJUDICE TO THE INTEREST OF REVENUE. ACCORDINGLY, NOTICE WAS ISSUED UPON ASSESS EE U/S 263 OF THE ACT FOR REVISING THE ASSESSMENT ORDER ON ACCOUNT OF NON-DED UCTION OF EXPENSES U/S 14A OF THE ACT. FINALLY, ORDER WAS REVISED BY LD. C IT U/S. 263 OF THE ACT VIDE ORDER DATED 27.01.2015 BY HOLDING THAT THE ORDER OF ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, AO WAS DIRECTED TO PASS THE ORDER AFRESH AFTER CARRYIN G OUT THE NECESSARY INVESTIGATION WITH REGARD TO DISALLOWANCE OF THE EX PENSE IN RELATION TO EXEMPT INCOME. THE AO IN CONSEQUENCE TO THE DIRECTION ISSU ED BY LD. CIT(A) U/S. 263 OF THE ACT MODIFIED THE ASSESSMENT ORDER BY ADDING A SUM OF 94,89,504/- U/S. 14A OF THE ACT. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ORDER OF AO VIDE ORDER DATED 28.11.20 16. THE ASSESSEE AGAINST THE REVISION ORDER PASSED U/S. 263 OF THE ACT PREFE RRED AN APPEAL BEFORE ITA NO.182/KOL/2017 A.Y. 2010-11 KISHAN GOPAL MOHTA VS. ACIT, CIR-35 , KOL. PAGE 3 HON'BLE TRIBUNAL IN ITA NO.310/KOL/2015 WHEREIN IT WAS HELD THAT THERE WAS NO ERROR IN THE ORDER PASSED BY AO. ACCORDINGLY, IMPUG NED ORDER PASSED BY LD. CIT U/S 263 OF THE ACT WAS HELD UNSUSTAINABLE BY TH E TRIBUNAL VIDE ORDER DATED 03.01.2018. IN THIS REGARD, LD. AR BEFORE US SUBMITTED THAT THE IMPUGNED ORDER PASSED IN CONSEQUENCE TO THE DIRECTI ON ISSUED U/S 263 OF THE ACT BY THE AO HAS NO LEG TO STAND. THEREFORE, SUCH IMPUGNED ORDER BECOME INFRUCTUOUS / NON EST IN THE EYES OF LAW. THUS, IT WAS PLEADED BY LD. AR THAT THE APPEAL FILED AGAINST THE ORDER OF LD. CIT-A BEC OMES INFRUCTUOUS. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER O F AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THERE IS NO AMBIGUITY THAT THE IMPUGNED ORDER PASSED BY LD. CIT U/S. 263 OF THE AC T IN THE CASE OF ASSESSEE WAS QUASHED IN ITA NO.310/KOL/2015 PERTAINING TO AS SESSMENT YEAR 2010-11 ORDER DATED 03.01.2017. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASS ESSEE. AT THE OUTSET, WE FIND THAT THE ENTIRE EXERCISE OF THE REVISIONARY JU RISDICTION U/S 263 OF THE ACT HAD BEEN INVOKED BY THE LD. CIT ON THE ASPECT OF AR RIVING AT FIGURE OF DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE RULES . THE ASSESSEE HAD VOLUNTARILY DISALLOWED RS. 2129607/- U/S 14A READ W ITH RULE 8D(2) OF THE RULES UNDER ALL THE THREE LIMBS. THE CORE DISPUTE A RISES WITH REGARD TO ADOPTION OF FIGURE OF INTEREST TO BE CONSIDERED FOR DISALLOWANCE UNDER 2 ND LIMB OF RULE 8D(2). IN THIS REGARD, THE ASSESSEE HAD DIS ALLOWED A SUM OF RS. 327590/- BY CONSIDERING THE INTEREST PAID OF RS.550 899/-, WHEREAS THE LD. AO HAD CONSIDERED THE INTEREST PAYMENT AT RS.651821/-. THERE IS ALSO SIMILAR DIFFERENCE OF ADOPTION OF AVERAGE VALUE OF INVESTME NT AND AVERAGE VALUE OF TOTAL ASSETS IN THE SAID COMPUTATION BETWEEN THE AS SESSEE AND THE LD. AO. SINCE, THERE IS A DIFFERENCE IN ADOPTION OF AVERAGE VALUE OF INVESTMENTS FIGURE BETWEEN THE LD. AO AND THE ASSESSEE, THERE IS A CON SEQUENTIAL DIFFERENCE OF DISALLOWANCE FIGURE TO THE TUNE OF RS.29585/- UNDER THE THIRD LIMB OF 8D(2) ALSO. WE FIND THAT THE LD. AO HAD ISSUED A SPECIFI C QUESTIONNAIRE 142(1) DATED 31.01.2013 RAISING A SPECIFIC QUERY WITH REGA RD TO DISALLOWANCE U/S 14A READ WITH RULE 8D DURING THE COURSE OF ASSESSMENT P ROCEEDINGS FOR THE ASST YEAR 2010-11. THE LD. AO ON CONSIDERATION OF DETAIL ED REPLY GIVEN BY THE ASSESSEE HAD ELABORATED IN HIS ASSESSMENT ORDER AS TO THE APPLICABILITY OF THE RULE 8D OF THE RULES AND WORKINGS THEREON AND U NDER EACH LIMB OF RULE 8D(2) AND HAD COMPLETED THE ASSESSMENT ACCORDINGLY. HENCE, THIS CANNOT BE SAID AS LACK OF ENQUIRY BY THE LD. AO ON THIS ASPEC T. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD FILED THE ENTIRE DETAILS OF INTERE ST PAID BEFORE THE LD. AO VIDE REPLY TO PREVIOUS QUESTIONNAIRE ISSUED U/S 142 (1) OF THE ACT DATED ITA NO.182/KOL/2017 A.Y. 2010-11 KISHAN GOPAL MOHTA VS. ACIT, CIR-35 , KOL. PAGE 4 16.08.2012 VIDE POINT NO. 12 THEREON. WE ALSO FIND THAT THE LD. AO HAD RAISED A QUERY ON UTILIZATION OF INTEREST BEARING SECURED AND UNSECURED LOANS FOR THE PURPOSE OF BUSINESS AND OTHERS VIDE SECTION 142(1) QUESTIONNAIRE DATED 31.01.2013 IN POINT NO. 13 THEREON. THE LD. AO ON DUE SATISFACTION OF THE REPLIES GIVEN THEREON PROCEEDED NOT TO MAKE ANY DIS ALLOWANCE OF INTEREST AS DIVERTED FOR NON-BUSINESS PURPOSES U/S 36(1)(III) O F THE ACT. HENCE THIS GOES TO PROVE THAT THE ASSESSEE HAD GIVEN THE ENTIRE DET AILS OF INTEREST PAYMENT ON BORROWED FUNDS AND ITS SPECIFIC UTILIZATION THEREON BEFORE THE LD. AO ITSELF AND THE LD. AO HAD TAKEN A CONSCIOUS DECISION ON THE SA ME AND HAD NOT DISALLOWED ANY INTEREST U/S 36(1)(III) OF THE ACT. THIS GOES TO PROVE THAT THE INTEREST PAYMENTS OTHER THAN RS. 651821 HAVE BEEN U SED BY THE ASSESSEE ONLY FOR HIS BUSINESS PURPOSES AND NOT FOR ANY INVE STMENTS. WE FIND THAT EVEN THOUGH THE ASSESSEE HAD AGREED BEFORE THE LD. CIT THAT A SUM OF RS.703797/- REPRESENTS INTEREST PAYMENT BEING UTILI ZED FOR INVESTMENT IN SHARES WHICH OUGHT TO HAVE BEEN CONSIDERED FOR DISA LLOWANCE UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES, THE LD. CIT HAD NO T LOOKED INTO THE SAME AND HAD NOT EVEN WHISPERED ABOUT THE SAME IN HIS ENTIRE REVISION ORDER. APART FROM THIS, WE ALSO FIND THAT THE LD. CIT HAD MADE A MENTION THAT STOCK-IN- TRADE IS NOT INCLUDED IN CURRENT ASSETS OF THE ASSE SSEE IN HIS BALANCE SHEET WHICH IS FACTUALLY INCORRECT. WE HAVE PERUSED THE B ALANCE SHEET OF THE ASSESSEE WHICH IS ENCLOSED IN THE PAPER BOOK AND WH ICH IS FORMING PART OF THE RECORDS OF THE LOWER AUTHORITIES. FROM THE SAME , WE FIND THAT THE ASSESSEE HAS DUAL PORTFOLIO I.E. SHARES HELD AS INV ESTMENTS AS WELL AS SHARES HELD AS STOCK-IN-TRADE. IN VIEW OF THE SAME, WE HOL D THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE DISALLOWANCE U/S 14A OF T HE ACT READ WITH RULE 8D OF THE RULES NEED TO BE MADE IN THE INSTANT CASE. H ENCE, RELIANCE PLACED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT REPORTED IN 392 ITR 196 (CAL) NEED NOT BE ADJUDICATED UPON. TO THIS EXTENT, THE ARGUMENT PLACED BY THE LD. DR DESERVES TO BE APPRECIATED. FROM THE PER USAL OF THE BALANCE SHEET, WE FIND THAT THE ASSESSEE HAS SUFFICIENT OWN FUNDS TO MAKE THE INVESTMENTS AND HENCE THE RELIANCE PLACED BY THE LD . AR ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RE LIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340 (BOM) IS CORRECT . HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAD VOLUNTARILY DISALLOWED RS.21 ,29,607 BY APPLYING ALL THE THREE LIMBS OF RULE 8D. HENCE WE ARE NOT INCLIN ED TO GET INTO THE AVAILABILITY OF OWN FUNDS AS FAR AS APPLICABILITY O F RULE 8D(2)(II) IN THE INSTANT CASE. 9.1. NOW, WE ARE LEFT ONLY WITH THE LEGAL GROUND WH EREIN WHETHER THE REVISION JURISDICTION COULD AT ALL BE EXERCISED BY THE LD. C IT IN THE INSTANT CASE. WE FIND THAT THE LD. AO HAD MADE ELABORATE ENQUIRY ABO UT THE ASPECT OF 14A AND HAD TAKEN A POSSIBLE VIEW ON THE SAME WHILE DISCUSS ING IT ELABORATELY IN HIS ASSESSMENT ORDER. AT THE COST OF REPETITION, WE WOU LD LIKE TO MENTION THAT THE LD. AO HAD NOT MADE ANY DISALLOWANCE OF INTEREST U/ S 36(1)(III) OF THE ACT WHICH GOES TO PROVE THAT THE INTEREST PAID OTHER TH AN RS. 651821/- HAVE BEEN USED ONLY FOR THE PURPOSE OF BUSINESS OF THE ASSESS EE AND NOT FOR THE PURPOSE OF MAKING INVESTMENTS IN SHARES. WHEN THE P OSSIBLE VIEW HAS BEEN TAKEN BY THE LD. AO AFTER TAKING INTO CONSIDERATION FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER RAISING A SPECIFIC QUERY WITH RE GARD TO COMPLETE DETAILS OF INTEREST PAYMENTS VIS--VIS ITS UTILIZATION, AND AF TER RAISING A SPECIFIC QUERY WITH REGARD TO DISALLOWANCE UNDER RULE 8D OF THE RU LES, IT CANNOT BE SAID THAT ITA NO.182/KOL/2017 A.Y. 2010-11 KISHAN GOPAL MOHTA VS. ACIT, CIR-35 , KOL. PAGE 5 THE LD. AO HAD NOT APPLIED HIS MIND OR HAD PROCEEDE D ON INCORRECT ASSUMPTION OF FACTS AS ALLEGED BY THE LD. CIT IN HI S REVISION ORDER. 9.2. IN VIEW OF THE AFORESAID FACTS AND FINDINGS WE HELD THAT THE ENTIRE REVISIONARY JURISDICTION EXERCISED BY THE LD. CIT U /S 263 OF THE ACT IS NOT SUSTAINABLE IN LAW IN VIEW OF THE RATIO LAID DOWN B Y THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MAX. INDIA PVT. LTD. REPORTED IN 295 ITR 282 (SC). ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESS EE FOR THE ASSESSMENT YEAR 2010-11 ARE ALLOWED. FROM THE ABOVE PROPOSITION THERE REMAINS NO DOUBT T HAT THE IMPUGNED ORDER PASSED BY LD. CIT U/S. 263 OF THE ACT IS NOT SUSTAI NABLE. THEREFORE, THE ORDER PASSED IN CONSEQUENT TO DIRECTION ISSUED U/S. 263 O F THE ACT BECOMES INFRUCTUOUS. HENCE, WE REVERSE THE ORDER OF AUTHORI TIES BELOW ON THE GROUND THAT THE CONSEQUENTIAL ORDER PASSED U/S 263/154/154 /143(3) OF THE ACT IS NOT MAINTAINABLE AND BECOME INFRUCTUOUS. THUS THE ADDI TION MADE BY THE AO AND SUSTAINED BY THE LD. CIT-A ARE NOT SUSTAINABLE. THU S WE DECIDE THE ISSUE IN FAVOUR OF ASSESSEE. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 27/ 04/2018 SD/- SD/- ($ &) ( &) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S (- 27 / 04 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-KISHAN GOPAL MOHTA, 7 LYONS RANGE, 2 ND FL, ROOM NO.2A,KOLKATA-001 2. /RESPONDENT-ACIT, CIRCLE-35, AAYAKAR BHAWAN, P-7 CH OWRINGHEE SQ. KOLKATA-69 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 $$3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,