M/s. Paramount Products Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 188/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8690 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 11-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SARAS KUMAR
• Keywords: Rule 8D
• Section: 143(3); 14A; 113; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER & SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO.-187/DEL/2017, A.Y. 2012-13 ITA NO.-188/DEL/2017, A.Y. 2013-14 M/S. PARAMOUNT PRODUCTS (P) LTD., A-55, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI-110020 PAN : AAACP1213B VS . DCIT CIRCLE-19(2) NEW DELHI APPELLANT RESPONDENT ASSESSEE BY : SH RAJESH MALHOTRA, C A REVENUE BY : SH. SARAS KUMAR, SR. D R ORDER PER ANADEE NATH MISSHRA, A.M.: (A) FOR THE SAKE OF CONVENIENCE THESE TWO APPEALS ARE DISPOSED OF THROUGH THIS CONSOLIDATED ORDER AS COMM ON ISSUE IS INVOLVED. GROUNDS OF APPEAL ARE AS UNDER : - ITA NO.-187/DEL/2017, A.Y. 2012-13 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE AUTHORITIES BELOW HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF EXPENSE OF RS. 35,46,812/- U/S 14A OF THE ACT. THE ACTION OF AUTHORITIES BELOW IS WRONG, 2 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) ILLEGAL, MISCONCEIVED, UNJUSTIFIED AND BAD AT LAW THEREFORE IT SHOULD BE QUASHED. 2. THE APPELLANT CRAVES THE RIGHT TO ADD/ALTER/AMEND/DELETE ALL OR ANY OF THE GROUND OF APPEAL AT THE TIME OF HEARING. ITA NO.-188/DEL/2017, A.Y. 2013-14 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE AUTHORITIES BELOW HAS ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSE OF RS. 40,69,447/- U/S 14A OF THE ACT. THE ACTION OF AUTHO RITIES BELOW IS WRONG, ILLEGAL, MISCONCEIVED, UNJUSTIFIED AND BAD AT LAW THEREFORE IT SHOULD BE QUASHED. 2. THE APPELLANT CRAVES THE RIGHT TO ADD/ALTER/AMEND/DELETE ALL OR ANY OF THE GROUND OF APPEAL AT THE TIME OF HEARING. ( B) FOR ASSESSMENT YEAR 2012-13, ASSESSMENT ORDER U/S 143(3) DATED 10.03.2015 WAS PASSED DETERMINING TOT AL INCOME OF THE ASSESSEE AT RS. 18,16,18,664/- AS AGA INST RETURNED INCOME OF RS. 17,79,04,610/-. IN THIS ASSE SSMENT ORDER, THE TOTAL DISALLOWANCE COMPUTED BY THE ASSES SING OFFICER U/S 14A OF INCOME TAX ACT READ WITH RULE 8D OF INCOME TAX RULES WAS RS. 37,14,054/-, WHICH WAS IN ADDITION TO AN AMOUNT OF RS.88,240/- SUO MOTO DISAL LOWED BY THE ASSESSEE. RELEVANT PORTION OF THE ASSESSMENT ORDER IS REPRODUCED AS UNDER :- 3 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 4 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 5 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 6 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) (B.1) THE ASSESSEE FILED APPEAL AGAINST THE AFO RESAID ASSESSMENT ORDER DATED 10.03.2015 FOR A.Y. 2012-13, BEFORE THE LD. CIT(A). VIDE IMPUGNED APPELLATE ORDER DATED 18.11.2016 THE LD. CIT(A) UPHELD THE DISALLOWANCE U /S 14A READ WITH RULE 8D, TO THE EXTENT OF RS. 35,46,812/- AS AGAINST AFORESAID RS. 37,14,054/- COMPUTED BY THE ASSESSING OFFICER; AND DELETED THE REMAINING DISALL OWANCE AMOUNTING TO RS. 1,67,242/-. THE RELEVANT PORTION O F THE ORDER OF THE LD. CIT(A) IS REPRODUCED AS UNDER :- 7 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 8 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) (C) IN ASSESSMENT YEAR 2013-14, ASSESSMENT O RDER U/S 143(3) OF INCOME TAX ACT WAS PASSED BY THE ASSE SSING OFFICER ON 27.01.2016 WHEREIN TOTAL INCOME WAS DETE RMINED AT RS. 16,26,41,018/- AS AGAINST RETURNED INCOME OF RS. 15,85,47,480/-. IN THIS ASSESSMENT ORDER, THE DISAL LOWANCE U/S 14A READ WITH RULE 8D OF INCOME TAX ACT WAS COM PUTED AT RS. 40,93,538/- WHICH WAS IN ADDITION TO RS. 89 ,888/- SUO MOTO DISALLOWED BY THE ASSESSEE. THE RELEVANT P ORTION OF THE ASSESSMENT ORDER IS REPRODUCED AS UNDER :- 9 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 10 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 11 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) (C.1) THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT( A) AGAINST THE AFORESAID ASSESSMENT ORDER DATED 27.01.2016 FOR A.Y.2013-14. VIDE IMPUGNED SEPARATE APPELLATE ORDER , ALSO DATED 18.11.2016, THE LD. CIT(A) RESTRICTED THE DIS ALLOWANCE TO RS. 40,69,447/- AS AGAINST AFORESAID RS. 40,93,5 38/- COMPUTED BY THE ASSESSING OFFICER AND DELETED THE REMAINING DISALLOWANCE OF RS. 24,091/-.THE RELEVANT PORTION OF THE ORDER OF THE LD.CIT(A) IS REPRODUCED ASUNDER :- 12 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 13 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) (D) THE PRESENT APPEALS BEFORE US HAVE BEEN FILED BY THE ASSESSEE AGAINST THE AFORESAID TWO SEPARATE IMP UGNED APPELLATE ORDERS, EACH DATED 18.11.2016, FOR ASSESS MENT YEARS 2012-13 AND 2013-14. IN THE COURSE OF APPELLA TE PROCEEDINGS IN ITAT, A CONSOLIDATED PAPER BOOK CON TAINING THE FOLLOWING PARTICULARS WAS FILED FROM THE ASSESS EE SIDE: S.NO. PARTICULARS (A) ASSESSMENT YEAR 2013-14 1. COPY OF ACKNOWLEDGMENT OF ITR (ITR-V) AND COMPUTATION OF TOTAL INCOME ALONG WITH BALANCE SHEET WITH ITS ANNEXURES, PROFIT & LOSS ACCOUNT AND TAX AUDIT REPORT (FORM 3CA/3CD) FOR THE YEAR ENDED 31.03.2013. 2. COPY OF REPLY SUBMITTED BEFORE LD. CIT(A) DATED 20.10.2016. 3. COPY OF REPLY SUBMITTED BEFORE LD. AO DATED 23.11.2015 (B) ASSESSMENT YEAR 2012-13 4. COPY OF ACKNOWLEDGMENT OF ITR (ITR-V) AND COMPUTATION OF TOTAL INCOME ALONG WITH BALANCE SHEET WITH ITS ANNEXURES, PROFIT & LOSS ACCOUNT AND TAX AUDIT REPORT (FORM 3CA/3CD) FOR THE YEAR ENDED 31.03.2012. 5. COPY OF REPLY SUBMITTED BEFORE LD. CIT(A) DATED 19.08.2016. 6. COPY OF REPLY SUBMITTED BEFORE LD. AO DATED 10.03.2015 7. COPY OF REPLY SUBMITTED BEFORE LD. AO DATED 09.02.2015. 14 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) (D.1) MOREOVER, TWO SEPARATE COMPENDIA OF JUDGMENTS WAS ALSO FILED FROM THE ASSESSEE SIDE CONTAINING COPIES OF DECISIONS IN THE FOLLOWING CAS ES :- S. NO. PARTICULARS 1. PRINCIPAL COMMISSIONER OF INCOME-TAX, CENTRAL- 1 VS. MOONSTAR SECURITIES TRADING AND FINANCE CO. (P.) LTD. REPORTED AT 105 TAXMANN.COM 275 (HON'BLE SC). 2. PRINCIPAL COMMISSIONER OFLNCOME TAX VS HERO CORPORATE SERVICES LTD. REPORTED AT 103 TAXMANN.COM 200 (HON'BLE SC) 3. H.T MEDIA LTD. VS PRINCIPAL COMMISSIONER OF INCOME TAX-IV, NEW DELHI REPORTED AT 85 TAXMANN.COM 113 (HONBLE HIGH COURT OF DELHI) 4. ASSOCIATED LAW ADVISERS VS INCOME-TAX OFFICER, WARD 37(3), NEW DELHI REPORTED AT 87 TAXMANN.COM 148 (HONBLE DELHI- TRIBUNAL) 5. COMMISSIONER OF INCOME-TAX, LUDIANA VS. METALMAN AUTO (P.) LTD. REPORTED AT 1 LTAXMANN.COM 51 (HONBLE HIGH COURT OF PUNJAB & HARYANA) 6. AC1T 11(2) VS IQBAL M CHAGALA. PALLONI MANSION REPORTED AT ITA NO. 877/MUM/2013 (HONBLE MUMBAI - TRIBUNAL) 7. PRINCIPAL COMMISSIONER OF INCOME-TAX, CENTRAL- 1 VS. MOONSTAR SECURITIES TRADING AND FINANCE CO. (P.) LTD. REPORTED AT 105 TAXMANN.COM 275 (HONBLE SUPREME COURT OF INDIA) 8. PRINCIPAL COMMISSIONER OF INCOME-TAX VS. HERO CORPORATE SERVICE LTD. REPORTED AT 103 TAXMANN.COM 200 (HONBLE SUPREME COURT OF INDIA) 9. H.T MEDIA LTD. VS PRINCIPAL COMMISSIONER OF INCOME TAX-IV, NEW DELHI REPORTED AT 85 TAXMANN.COM 113 (HONBLE HIGH COURT OF DELHI) 10. PRINCIPAL C OMMISSIONER OF INCOME - TAX - IV, AHMEDABAD VS. SINTEX INDUSTRIES LTD. REPORTED AT 93 TAXMANN.COM 24 (HONBLE 15 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) SUPREME COURT OF INDIA) 11. MAXLOOP INVESTMENT LTD. VS. COMMISSIONER OF INCOME TAX, NEW DELHI REPORTED AT 91 TAXMANN.COM 154 (HONBLE SUPREME COURT OF INDIA) (E) AT THE TIME OF HEARING BEFORE US, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT U/S 14A(2) OF INCOME TAX ACT READ WITH RULE 8D(1) OF INCOME TAX RULES THE ASSESSING OFFICER IS REQUIRED TO RECORD SATISFA CTION FOR INVOKING RULE 8D OF INCOME TAX RULES FOR THE PURPOS E OF COMPUTATION OF DISALLOWANCE U/S 14A OF IT ACT. HE CONTENDED THAT ALTHOUGH THE ASSESSING OFFICER HAS R ECORDED SATISFACTION IN THE ASSESSMENT ORDER FOR BOTH THE Y EARS, THE SATISFACTION RECORDED BY THE ASSESSING OFFICER WAS IN GENERAL TERMS AND DOES NOT MEET THE REQUIREMENTS OF SECTION 14A(2) OF INCOME TAX ACT READ WITH RULE 8D(1) OF INCOME TA X RULES. HE PLACED STRONG RELIANCE ON H.T. MEDIA LTD. VS. PR . CIT (SUPRA) FOR HIS CONTENTION. THE LD. AUTHORISED REPRESENTATIVE, RELYING ON ARNAV GRUH LTD. VS. DCIT , CENTRAL CIRCLE-36 [2018] 89 TAXMANN.COM 189 (MUMBAI - TRIB.] FURTHER SUBMITTED THAT THE SATISFACTION REC ORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER CANNO T BE IMPROVED UPON BY THE LD. CIT(A) IN APPELLATE PROCEE DINGS BEFORE THE LD. CIT(A). THE LD. DEPARTMENTAL REPRESE NTATIVE, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE ASSE SSING OFFICER AND THE LD. CIT(A). (F) WE HAVE HEARD BOTH SIDES. WE HAVE PERUSED THE MATERIALS ON RECORD. WE HAVE ALSO CONSIDERED THE JU DICIAL 16 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) PRECEDENTS BROUGHT TO OUR ATTENTION OR REFERRED TO IN THE RECORDS. ON PERUSAL OF THE ASSESSMENT ORDERS FOR BO TH THE YEARS, RELEVANT PORTION OF WHICH HAVE ALREADY BEEN REPRODUCED IN FOREGOING PARAGRAPHS (B) AND (C) OF T HIS ORDER; WE FIND THAT THE ASSESSING OFFICER HAS RECORDED DET AILED SATISFACTION, IN ASSESSMENT ORDERS FOR BOTH THE ASS ESSMENT YEAR 2012-13 AND 2013-14, FOR INVOKING RULE 8D OF I NCOME TAX RULES FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S 14A OF INCOME TAX ACT. IN VIEW OF DETAILED SATISFAC TION RECORDED BY THE ASSESSING OFFICER IN ASSESSMENT ORD ERS FOR BOTH ASSESSMENT YEARS 2012-13 AND 2013-14; WE REJEC T THE CONTENTION MADE BY THE LD. AR THAT THE SATISFACTION RECORDED BY THE ASSESSING OFFICER DOES NOT MEET THE REQUIREMENTS OF SECTION 14A(2) OF INCOME TAX ACT RE AD WITH RULE 8D(1) OF INCOME TAX RULES. WE ARE OF THE VIEW THAT THE SATISFACTION RECORDED BY THE ASSESSING OFFICER IN B OTH THE ASSESSMENT YEARS 2012-13 AND 2013-14 IS SUFFICIENT COMPLIANCE OF SECTION 14A(2) OF IT ACT READ WITH RU LE 8D(1) OF IT RULES. THE RELIANCE PLACED BY THE LD. AR ON A RNAV GRUH LTD. VS. DCIT (SUPRA) IS OF NO HELP TO THE ASS ESSEE IN VIEW CLEARLY DISTINGUISHABLE FACTS. IN ARNAV GRUH L TD. VS. DCIT (SUPRA) THE ASSESSING OFFICER HAD NOT RECORDED ANY SATISFACTION; WHEREAS IN THE PRESENT APPEALS BEFORE US THE ASSESSING OFFICER HAS RECORDED DETAILED SATISFACTIO N FOR INVOKING RULE 8D FOR THE PURPOSE OF COMPUTING DISAL LOWANCE U/S 14A OF INCOME TAX ACT. SIMILARLY THE RELIANCE P LACED BY THE LD. AR ON ASSOCIATED LAW ADVISERS VS. ITO (SUPR A) ALSO DOES NOT ADVANCE THE CASE OF THE ASSESSEE, BECAUSE OF 17 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) CLEARLY DISTINGUISHABLE FACTS. IN ASSOCIATED LAW AD VISERS VS. ITO (SUPRA), THE ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND THE ASSESSING OFFICER HAD FAILED TO SATISFY HIMSELF ABOUT CORRECTNESS OF ASSESSEES CLAIM. HOW EVER, IN THE PRESENT APPEALS BEFORE US, THE ASSESSEE IS FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING AND THE ASSESSING O FFICER HAS RECORDED DETAILED SATISFACTION FOR COMPUTING DISALLOWANCE U/S 14A OF INCOME TAX ACT, IN ACCORDAN CE WITH RULE 8D OF INCOME TAX RULES. THOUGH THE LD. AR PLAC ED HEAVY RELIANCE ON H.T.MEDIA LTD. VS. PR. CIT (SUPRA ) FOR THE CONTENTION THAT THE SATISFACTION RECORDED IN THE AS SESSMENT ORDERS WAS OF BROAD AND GENERAL NATURE AND DID NOT MEET THE REQUIREMENT OF SECTION 14A(2) OF INCOME TAX ACT READ WITH RULE 8D OF INCOME TAX RULES; HOWEVER, IN THE F ACTS BEFORE US, IT IS OUR CATEGORICAL FINDING OF FACT, T HAT THE SATISFACTION RECORDED BY THE ASSESSING OFFICER IS N OT OF BROAD AND GENERAL NATURE; BUT IS DETAILED SATISFACTION TA KING INTO ACCOUNT THE SPECIFIC FACTS AND CIRCUMSTANCES OF THE CASE; AND MEETS THE REQUIREMENTS OF SECTION 14A(2) OF I.T .ACT READ WITH RULE 8D(1) OF IT RULES, FOR BOTH THE ASSESSMEN T YEARS, A.Y. 2012-13 AS WELL AS AY 2013-14. THEREFORE THE ORDER IN THE CASE OF H T MEDIA LTD. VS. PR. CIT (SUPRA) FAIL S TO ADVANCE ASSESSEES CASE. (F.1) WE HAVE FURTHER NOTICED THAT THE LD. CIT(A) , IN THE AFORESAID IMPUGNED APPELLATE ORDERS EACH DATED 18.11.2016 HAS ALREADY GRANTED PARTIAL RELIEF AND H AS DELETED DISALLOWANCES AMOUNTING TO RS. 1,67,242/- I N ASSESSMENT YEAR 2012-13 AND RS. 24,091/- IN ASSESSM ENT 18 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) YEAR 2013-14 RESPECTIVELY. THE LD. CIT(A) HAS PASSE D DETAILED SPEAKING ORDER FOR PARTLY UPHOLDING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER AND PAR TLY DELETING THE REMAINING PORTION OF THE DISALLOWANCES . (F.2) IN VIEW OF THE FOREGOING, WE ARE OF VIEW TH AT THE IMPUGNED APPELLATE ORDERS, EACH DATED 18.11.2016, O F THE LD. CIT(A) FOR ASSESSMENT YEARS 2012-13 AND 2013-14 , ARE JUST, PROPER AND IN ACCORDANCE WITH LAW HAVING REGA RD TO SPECIFIC FACTS AND CIRCUMSTANCES OF THE CASE. WE AR E ALSO OF THE VIEW THAT THE SATISFACTION RECORDED BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDERS FOR ASSESSMENT YEA R 2012- 13 AND 2013-14 ARE SUFFICIENT COMPLIANCE OF REQUIRE MENTS OF SECTION 14A OF I.T. ACT, READ WITH RULE 8D OF IT RU LES. THEREFORE, WE DECLINE TO INTERFERE WITH THE IMPUGNE D APPELLATE ORDERS OF THE LD. CIT(A) AND DISMISS THE ASSESSEES APPEALS FOR ASSESSMENT YEAR 2012-13 AND 2013-14, BO TH. (F.2) IN THE RESULT, BOTH THE APPEALS ARE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16.01.2020. SD/- SD/- (H.S.SIDHU) (ANADEE NA TH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16.01.2020 *BR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 19 ITA NO. 187,188/DEL/2017 (PARAMOUNT PRODUCT P. LTD.) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 14.01.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER