Exim Dcrips Dealers Pvt. Ltd., Kolkata V. I.T.O., Ward-5(2), Kolkata, Kolkata

ITA 1959/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9235 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 06-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H R SINGH
• Assessee Lawyers: GIRISH SHARMA
• Section: 14A

Judgement Text

ITA NO.1959/KOL/2016-EXIM SCRIPS DEALERS PVT.LTD. A.Y .2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE HONBLE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA. NO. 1959/KOL/2016 ASSESSMENT YEAR : 2012-13 EXIM SCRPS DEALER PVT. LTD., 412, MUKTI CHAMBERS, 4, CLIVE ROW, KOLKATA-700001. PAN : AAACE 6906 E V/S . I.T.O.WARD-5(2), P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-700069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI GIRISH SHARMA, FCA /BY RESPONDENT SHRI H.R.SINGH, ADDL.CIT /DATE OF HEARING 19.01.2017 /DATE OF PRONOUNCEMENT 10.03.2017 / O R D E R PER WASEEM AHMED, AM THIS APPEAL BY THE ASSESSEE IS AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA DATED 25.07.2016. A SSESSMENT WAS FRAMED BY I.T.O., WARD-5(2), KOLKATA U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 18. 09.2014 FOR ASSESSMENT YEAR 2012-13. SHRI GIRISH SHARMA, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND SHRI H.R. SINGH, LD. DEPARTMENTAL REPR ESENTATIVE REPRESENTED ON BEHALF OF REVENUE. ITA NO.1959/KOL/2016-EXIM SCRIPS DEALERS PVT.LTD. A.Y .2012-13 2 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING D ISALLOWANCE OF RS.5,95,004/- UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ALSO REGISTERED AS NON-BANKING FINANCIAL CORPORATION WIT H RESERVE BANK OF INDIA. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DERIVATI VES, SHARE TRADING, JUTE, LAND, INVESTMENTS IN MUTUAL FUNDS AND GRANTING OF LOANS A ND ADVANCES. THE ASSESSEE, IN THE YEAR UNDER CONSIDERATION, HAS EARNED DIVIDEN D INCOME OF RS.39,54,175/- WHICH WAS CLAIMED AS EXEMPTED FROM TAX U/S 10(34) O F THE ACT. IN CONNECTION WITH THE DIVIDEND INCOME THE ASSESSEE AT ITS OWN HA S OFFERED AN EXPENSE OF RS.33,830.00 U/S 14A OF THE ACT. THE ASSESSEE ALSO SUBMITTED THAT THE DISALLOWANCE OFFERED U/S 14A OF THE ACT IS ALMOST 5 .38% OF THE TOTAL EXPENDITURE. THE ASSESSEE IN SUPPORT OF ITS CLAIM HAS ALSO FILED THE DETAILS OF EXPENSES WHICH ARE AVAILABLE AT PAGE 2 OF THE ASSESSMENT ORDER. HO WEVER, THE AO EXPRESSED HIS DISSATISFACTION ABOUT THE AMOUNT OFFERED BY THE ASS ESSEE AND INVOKED THE PROVISION OF RULE 8D R.W.S. 14A OF THE ACT AND MADE THE DISALLOWANCE AS UNDER:- A) DIRECT EXPENSES : RS.22,646.00 B) INTEREST EXPENSES : RS. NIL C) ADMINISTRATIVE EXPENSES : RS.6,10,603.00* * ADMINISTRATIVE EXPENSES WERE WORKED OUT AT RS.10,69 ,405.00 BUT IT WAS LIMITED TO THE ACTUAL EXPENDITURE CLAIMED BY THE AS SESSEE. THE ACTUAL EXPENSES CLAIMED BY THE ASSESSEE INCLUDING DIRECT EXPENSES O F 22,646.00 IS RS. 6,28,834.00 ONLY ACCORDINGLY, THE AO DISALLOWED THE EXPENSES OF RS.5 95004.00 (628834 33830) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL T O THE LD. CIT(A). THE ASSESSEE BEFORE THE LD.CIT(A) SUBMITTED THAT THE AO FAILED TO BRING ANY DEFECT IN ITA NO.1959/KOL/2016-EXIM SCRIPS DEALERS PVT.LTD. A.Y .2012-13 3 THE COMPUTATION OF DISALLOWANCE MADE BY THE ASSESSE E U/S 14A OF THE ACT BUT REJECTED THE SAME WITHOUT ADDUCING ANY VALID REASON S. THE ASSESSEE FURTHER SUBMITTED THAT THE BASIS FOR DISALLOWANCE MADE U/S 14A OF THE ACT WAS ACCEPTED BY THE INCOME TAX AUTHORITIES IN THE EARLIER YEARS. THE DETAILS OF WHICH ARE PLACED AT PAGE 4 OF THE CIT(A)S ORDER. HOWEVER THE LD. CI T(A) DISREGARDED THE CONTENTIONS OF THE ASSESSEE BY OBSERVING AS UNDER : - I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER DU RING THE ASSESSMENT PROCEEDINGS. THE AO HAS ALREADY DISCUSSED THE ISSUE IN DETAIL WHILE PASSING THE ORDER. KEEPING IN VIEW OF THE FINDING OF THE AO GIV EN IN ASSESSMENT ORDER, THE ORDER OF THE AO IS UPHELD AND THIS GROUND OF APPEAL IS DISMISSED. BEING AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL : 1.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE L D. COMMISSIONER (APPEALS) ERRED IN DISALLOWING RS 5,95,004/- AS PER RULE 8D R EAD WITH SECTION 14A OF THE INCOME TAX ACT,1961. 2.THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AM END, DELETE, SUBSTITUTE ANY OF THE GROUNDS AND / OR TAKE ADDITIONAL GROUND /S BEFORE O R AT ANY TIME OF HEARING OF THIS APPEAL. 5. THE LD. AR BEFORE US FILED A PAPER BOOK WHICH IS RUNNING FROM PAGES 1 TO 73 AND REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LD. CIT(A). ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF T HE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE BASIS AD OPTED BY THE ASSESSEE FOR MAKING THE DISALLOWANCE HAS BEEN ACCEPTED IN ASSESS EES OWN CASE IN ITA NO. 675/KOL/2016 A.Y.2011-12 ORDER DATED 04.11.2016 WHEREIN IT WAS HELD AS UNDER:- 11. IN THE PRESENT CASE IT IS NOTICED THAT THE AO COMPUTED THE DISALLOWANCE UNDER RULE 8D(III) OF THE RULES ON THE AVERAGE VALU E OF INVESTMENT OF RS.21,17,26,456/- AT % TAKING INTO CONSIDERATION THE TOTAL INVESTMENTS FROM ITA NO.1959/KOL/2016-EXIM SCRIPS DEALERS PVT.LTD. A.Y .2012-13 4 BALANCE SHEETS AS STANDING ON 31.03.2010 & 31.03.20 11 AT RS.19,30,62,446.72 AND RS.23,03,90,465.58. IT IS ALSO NOTICED FROM THE ORD ER OF AO AT PAGE NO-2, THE ASSESSEE EARNED DIVIDEND INCOME AND OFFERED DISALLO WANCE ON ITS OWN TO AN EXTENT OF RS.5,29,464/- AND THAT UNDER EXPLANATION SUBMITT ED A BREAK UP OFF THE EXPENSES INCURRED BY WAY WRITTEN SUBMISSION DT:06-05-2013. T HE AO DID NOT ACCEPT THE WORKING OF BREAK UP OF EXPENSES AND WITHOUT ASSIGNI NG ANY REASON I.E WITHOUT EXAMINING THE ACCOUNTS OF THE ASSESSEE REJECTED THE WORKING OF THE ASSESSEE AND THEREBY HE INVOKED THE RULE 8D AND COMPUTED THE EXP ENDITURE TO AN EXTENT OF RS.10,58,632/-. IN OUR VIEW, WITHOUT EXAMINING THE CORRECTNESS OF THE CLAIM OF ASSEESEE AND APPLYING RULE 8D THEREON ON MERE PRESU MPTION THAT THE COMPUTATION OF EXPENSES AS SUBMITTED BY THE ASSEESEE IS UNSATIS FACTORY TO SOME EXTENT IS NOT PERMISSIBLE UNDER LAW. IN THIS REGARD WE MAY REFER TO THE DECISION OF KOLKATA TRIBUNAL IN THE CASE OF DCIT VS. ASHISH JHUNJHUNWAL A IN ITA NO. 1809/KOL/2012 FOR THE AY 2009-10 HELD THAT THE AO HAS TO RECORD HIS S ATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AND WITHOU T THERE BEING NO SATISFACTION INVOCATION OF RULE 8D OF THE RULES IS BAD UNDER LAW . THE RELEVANT PORTION IS REPRODUCED HEREIN BELOW:- WE FIND FROM THE FACTS OF THE ABOVE CASE THAT THE AO HAS NOT EXAMINED THE ACCOUNTS OF THE ASSESSEE AND THERE IS NO SATISFACTION RECORDED BY THE AO ABOUT THE CORRECTNE SS OF THE CLAIM OF THE ASSESSEE AND WITHOUT THE SAME HE INVOKED THE RULE 8D OF THE RULES. WHILE REJECTING THE CLAIM OF THE ASSESSE E WITH REGARD TO EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY B E, IN RELATION OF EXEMPTED INCOME, THE AO HAS TO INDICATE COGENT R EASONS FOR THE SAME. FROM THE FACTS OF THE PRESENT CASE, IT I S NOTICED THAT THE AO HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AND STRAIGHT AWAY EMBARKED UPON COMPUTING THE DISALLOWANCE UNDER RULE 8D OF THE RULES ON PRESUMING THE AVERAGE VALUE OF INVE STMENT AT % OF THE TOTAL VALUE. IN VIEW OF THE ABOVE AND RESP ECTFULLY FOLLOWING THE CO-ORDINATE BENCH DECISION IN THE CASE OF J.K I NVESTORS (BOMBAY) LTD SUPRA, WE UPHOLD THE ORDER OF CIT(A). THIS APPEAL OF REVENUE IS DISMISSED. 12. IT IS ALSO BROUGHT TO OUR NOTICE THAT THE HONB LE JURISDICTIONAL HIGH COURT OF KOLKATA HAS UPHELD THE DECISION OF KOLKATA TRIBUNA L IN THE CASE OF DCIT VS. ASHISH JHUNJHUNWALA SUPRA .THE PRINCIPLE AS LAID DO WN IN THE AFOREMENTIONED CASE IS CLEARLY APPLICABLE TO THE FACTS OF THE PRES ENT CASE, IN VIEW OF THE SAME, WE HOLD THAT THE AO DID NOT VERIFY THE ACCOUNTS AND CLAIM OF THE ASSESSEE WHILE APPLYING RULE 8D OF I.T RULES IN COMPUTING EXPENDI TURE THEREON IS NOT MAINTAINABLE, AND, THEREFORE, THE ORDER OF THE CIT- A IS QUASHED IN THIS REGARD AND ADDITION MADE THEREON IS DELETED. ACCORDINGLY, THE SOLE GROUND AS RAISED BY THE ASSESSEE IS ALLOWED. ITA NO.1959/KOL/2016-EXIM SCRIPS DEALERS PVT.LTD. A.Y .2012-13 5 RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE CO-OR DINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) WHERE THE ISSUE WAS DECIDED IN ITS FAVOUR, WE ARE INCLINED TO REVERSE THE ORDER OF THE AUTHORITIE S BELOW. AO IS DIRECTED ACCORDINGLY. HENCE, THE GROUND OF ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED . ORDER PRONOUNCED IN THE OPEN COURT 10/ 03/2017 SD/- SD/- ( !') ( !') (S.S.VISWANETHRA RAVI) (WASEE M AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *RG.SR.PS/DKP* $!% &- 10/03 //201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-EXIM SCRIPS DEALERS PVT. LTD. 412, MUKTI CHAMBERS, 4, CLIVE ROW, KOLKATA-001 2. /RESPONDENT-ITO WARD-5(2), P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-69 3. %.%/0 1 1 2 / CONCERNED CIT 4. 1 1 2- / CIT (A) 5. 567 /0, 1 /0 , KOLKATA / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,