M/s. RPA Promoter & Builders (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 1956/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3587 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 11-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS PRATIMA KAUSHIK
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A. NO.1955/D/2010 ASSESSMENT YEAR: 2007-08 M/S RTCL LTD., VS. ASSTT. C.I.T., 6926, JAIPURIA MILLS CLOCK TOWER, CIRCLE 15(1), SABZI MANDI, NEW DELHI NEW DELHI PAN/GIR NO.AAACR 4304 H; I.T.A. NO.1956/D/2010 ASSESSMENT YEAR: 2007-08 M/S RPA PROMOTERS & BUILDERS (P) LTD. VS. DY. C.I.T., 6926, JAIPURIA MILLS CLOCK TOWER, CIRCLE 15(1), SABZI MANDI, NEW DELHI NEW DELHI PAN/GIR NO.AADCR 2824 F AND I.T.A. NO.3281/D/2010 ASSESSMENT YEAR: 2007-08 M/S RAGHUNATH INTERNATIONAL LTD. VS. ASSTT. C.I.T., 6926, JAIPURIA MILLS, CLOCK TOWER, CIRCLE 15(1), SABZI MANDI, NEW DELHI NEW DELHI PAN/GIR NO.AAACR 4305 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA, FCA RESPONDENT BY : MRS. PRATIMA KAUSHIK, SR. DR ORDER PER RAJPAL YADAV: JM: THE PRESENT THREE APPEALS ARE DIRECTED AT /THE INSTANC E OF ASSESSES AGAINST THE SEPARATE ORDERS OF EVEN DATE I.E., 2 ND MARCH, 2010 PASSED BY LEARNED CIT(A) ON THE RESPECTIVE APPEAL OF T HE ASSESSES IN ASSESSMENT YEAR 2007-08. ONLY ONE ISSUE IS INVOLVED WHICH IS COMMON IN ALL THE APPEALS, THEREFORE, WE HEARD THEM TOGETHE R AND DEEM IT 1955-1956-3281-2010 2 APPROPRIATE TO DISPOSE OF THESE APPEALS BY A COMMON ORD ER. THE SOLITARY GRIEVANCE OF THE ASSESSES IS THAT LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF `1,07,188/-; `62,500/ - AND `51,442/- U/S 14A READ WITH RULE 8D IN THE CASE OF M/S RTCL LTD., R PA PROMOTER AND BUILDERS (P) LTD. AND M/S RAGHUNATH INTERNATIONAL LTD ., RESPECTIVELY. 2. THE BRIEF FACTS IN THE CASE OF M/S RTCL LTD. ARE TH AT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 22.10.2007 DECLARING A N INCOME OF `85,17,725/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SC RUTINY ASSESSMENT AND A NOTICE U/S 143(2) WAS SENT TO THE ASSESSEE ON 17 TH SEPTEMBER, 2008. SHRI VIRENDRA KUMAR GOEL, CA DULY AUTHORIZED BY THE ASSESSEE HAD APPEARED BEFORE THE ASSESSING OFFICER AND SUBMITTED THE REQUISITE DETAIL. DURING THE COURSE OF ASSESSMENT PR OCEEDING, IT CAME TO THE NOTICE OF THE ASSESSING OFFICER THAT ASSESSEE H AD MADE INVESTMENT IN SHARES AND MUTUAL FUNDS. HE DIRECTED THE ASSESSEE TO EXPLAIN THE EXPENSES COMPUTED BY IT WHICH ARE ATTRIBU TABLE TO EARNING OF TAX FREE INCOME AND WHICH ARE TO BE DISALLOWED U/ S 14A READ WITH RULE 8D OF THE I.T. RULES. THE ASSESSEE HAS SUBMITTED THA T IT HAD EARNED EXEMPT INCOME WITHOUT INCURRING ANY DIRECT E XPENSES, HENCE, NO DISALLOWANCE BE MADE U/S 14A OF THE ACT. THE LEAR NED ASSESSING OFFICER FOUND IN THE BALANCE SHEET OPENING BALANCE O F INVESTMENT AT `1,71,69,883/-. THE CLOSING BALANCE OF INVESTMENT HA S BEEN SHOWN AT `2,57,05,508/-. THE ASSESSING OFFICER HAS WORKED OUT TH E AVERAGE VALUE OF INVESTMENT AND THEN DISALLOWED U/S 8D @0.5%. IN THIS WAY, THE DISALLOWANCE HAS BEEN WORKED OUT AT `1,07,188/-. APPEAL TO THE CIT(A) DID NOT BRING RELIEF TO THE ASSESSEE. 3. IN THE CASE OF RPA PROMOTER & BUILDERS, THE FACTS A RE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31 ST OCTOBER, 2007 DECLARING THE TOTAL INCOME OF `84,84,980/-. A NOTICE U/S 143( 2) WAS SENT TO ASSESSEE ON 16 TH SEPTEMBER, 2008. SHRI V.K. GOEL, CA DULY AUTHORIZ ED 1955-1956-3281-2010 3 BY THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND SU BMITTED THE REQUISITE DETAIL. IN THIS CASE ALSO ASSESSING OFFICER HAS NOTICED INVESTMENT IN THE MUTUAL FUND AND SHARES. HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY EXPENSES RELATABLE TO EARNING FROM T HESE INVESTMENTS BE NOT DISALLOWED U/S 14A OF THE ACT. ON T HE PRINCIPLE OF DISALLOWANCE MADE IN THE CASE OF RTCL LTD., HE MADE A DISALLOWANCE OF `62,500/- IN THIS CASE. THE APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. IN THE CASE OF RAGHUNATH INTERNATIONAL LIMITED, T HE FACTS ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 05.10.200 7 DECLARING AN INCOME OF `1,13,99,580/-. A NOTICE U/S 143(2) WAS SEN T TO THE ASSESSEE ON 17 TH SEPTEMBER, 2008. SHRI V.K. GOEL, CA APPEARED FOR THE ASSESSEE AND SUBMITTED THE REQUISITE DETAIL. THE FACTS ARE IDE NTICAL IN THIS CASE ALSO. ALL THE THREE COMPANIES HAVE GIVEN THEIR ADDRE SS AT 6929, JAIPURIA MILLS, CLOCK TOWER, SABZI MANDI, DELHI. TH E ASSESSING OFFICER HAS APPLIED THE SAME YARDSTICKS AND WORKED OUT THE DISAL LOWANCE AT `51,442/-. APPEAL TO THE CIT(A), DID NOT BRING REL IEF TO THE ASSESSEE. 5. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THOUGH RULE 8D IS NOT APPLICABLE FOR COMPUTING THE DISALLOWANCE REQU IRED TO BE MADE U/S 14A IN THIS ASSESSMENT YEAR, AS PER THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING COMPANY REPORTED IN 328 ITR 81, BUT THE ASSESSES HAVE ALREADY GO NE THOUGH A SUBSTANTIAL SCRUTINY AND THE AMOUNTS INVOLVED ARE VERY NOMINAL IN COMPARISON TO THE INCOME DECLARED BY THEM, HENCE, ISSU E MAY NOT BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR REINVE STIGATION BECAUSE IT WILL UNNECESSARILY ENHANCE THE LITIGATION COST TO T HE ASSESSES. HE PRAYED THAT THE ADDITIONS MAY PLEASE BE REDUCED ON AN ESTIMATE BASIS. 1955-1956-3281-2010 4 6. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDE RS OF LEARNED REVENUES AUTHORITIES BELOW. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT ASSESSES ARE NOT INTERESTED IN GOING BACK TO THE ASSE SSING OFFICER FOR REINVESTIGATION AND RE-ADJUDICATION. THE HONBL E BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING COMP ANY (SUPRA) HAS HELD THAT RULE 8/D HAS BEEN BROUGHT ON THE STATUTE B OOK ON 24 TH MARCH 2008. IT IS APPLICABLE PROSPECTIVELY, HENCE, IT IS NO T APPLICABLE IN THE PRESENT ASSESSMENT YEAR. THE LEARNED ASSESSING OFFICER HAS M ADE A DISALLOWANCE ON THE BASIS OF THIS RULE. IN THE ABSENCE OF THIS RULE, THE ADDITION HAS TO BE WORKED OUT BY KEEPING IN VIEW THE SURROUNDING CIRCUMSTANCES I.E. WHETHER INTEREST BEARING FUNDS HAVE BEEN USED BY THE ASSESSEE OR NOT? THE OTHER EXPENSES DIRECTLY RELATAB LE FOR MANAGING THE INVESTMENT PORTFOLIO ETC. ALL THESE FAC TS HAVE NOT BEEN DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDERS. I N SUCH CIRCUMSTANCES, IT IS QUITE DIFFICULT FOR US TO WORK OUT REASONABLE EXPENSES, WHICH DESERVES TO BE DISALLOWED. 8. WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND FIND T HAT IN THE CASE OF RTCL LTD. FRESH INVESTMENT IS MORE THAN `80 LAC S. SIMILARLY, IN THE CASE OF RPA PROMOTERS, THE OPENING INVESTMENT IS NI L WHEREAS FRESH INVESTMENT IS MORE THAN `2.5 CRORES. SIMILARLY IS THE FACT IN THE CASE OF M/S RAGHUNATH INTERNATIONAL. THE ASSESSEE HAD MADE FRESH INVESTMENT. IT IS NOT ASCERTAINABLE WHETHER THIS INVEST MENT HAS BEEN MADE OUT OF THEIR OWN FUNDS OR FROM BORROWED FUNDS. THEREFORE, THERE CANNOT BE ANY REDUCTION IN THE DISALLOWANCE WORKED O UT BY THE ASSESSING OFFICER. THE CONTENTION OF ASSESSEE THAT THEY AR E NOT INTERESTED IN GOING BACK TO THE ASSESSEE IN A WAY GIVES A N IMPRESSION THAT THEIR APPEAL BE DISMISSED IF THE AMOUNTS ARE NOT P OSSIBLE TO BE 1955-1956-3281-2010 5 REDUCED. CONSIDERING ALL THESE FACTORS AND THE STAND O F THE ASSESSEE, WE DO NOT FIND ANY MERITS IN THESE APPEALS AND THEY AR E DISMISSED. 9. IN RESULT, ALL THE THREE APPEALS ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 15.07.2011 . SD/- SD/- ( K.D. RANJAN ) ( RAJPAL YADA V ) ACCOUNTANT MEMBER JUDICIA L MEMBER DT. 15.07.2011. NS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).