The Dy. Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad V. Greenland Infracon P. Ltd., Ahmedabad

ITA 2040/AHD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2100 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 05-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANKIT M TALSANIA
• Keywords: Earning of tax free income; Revised return; Rule 8D
• Section: 143(3); 14A; 250

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR I.T.A. NOS. 2039 & 2040/AHD/2016 ( ASSESSMENT YEARS : 2012-13 & 2013-14) THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1), AHMEDABAD / VS. GREENLAND INFRACON P. LTD. ARDOR HOUSE, MONDEL BUSINESS PARK, THALTEJ, AHMEDABAD / / PAN/GIR NO. : AADCG5313Q ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. K. DEV, SR. D.R. / RESPONDENT BY : SHRI ANKIT M. TALSANIA, A.R. DATE OF HEARING 24/10/2018 !'# / DATE OF PRONOUNCEMENT 14 /11/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE REVENUE AGAINST RESPECTIVE ORDERS OF THE COMMISSION ER OF INCOME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT) EMAN ATION FROM ASSESSMENT ORDER UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEARS 2012-13 & 2013-14. ITA NOS.2039 & 2040/AHD/16 [DCIT VS. GREENLAND INFR ACON P. LTD.] A.YS. 2012-13 & 2013-14 - 2 - 2. WE SHALL FIRST TAKE REVENUES APPEAL IN ITA NO. 2039/AHD/2016 CONCERNING AY 2012-13. 3. THE REVENUE BY ITS GROUND OF APPEAL HAS IMPUGNED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO BY INVOKING SECTION 14A OF THE ACT. 4. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAN ED AR FOR THE ASSESSEE STRAIGHTWAY ADVERTED OUR ATTENTION TO THE UNDISPUTABLE FACT RECORDED BY THE AO IN PARA 4.1.1 OF ITS ORDER THAT THE INVESTMENTS MADE BY THE ASSESSEE COMPANY HAS NOT GIVEN RISE TO ANY EXEMPT INCOME CONCERNING THE ASSESSMENT YEAR. NOTWITHSTAND ING SUCH FACT, THE ASSESSEE VOLUNTARILY DISALLOWED RS.98.03 LAKHS AGAINST THE NON- EXISTENT TAX FREE INCOME. THE AO HOWEVER RE-WORKED THE DISALLOWANCE AT RS.1,67,32,314/- AND AFTER REDUCING THE DISALLOWANCE SUO MOTO MADE BY THE ASSESSEE AMOUNTING TO RS.98,03,322/- COMPUTED THE ADDITIONAL DISALLOWANCE UNDER S.14A OF THE ACT AT RS.69,28,992/-. THE LEARNED AR THEREAFT ER SUBMITTED THAT THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND WITHDRAWN THE SUO MOTO DISALLOWANCE OF RS.98,03,322/- BEING WRONGLY OFFER ED IN ITS RETURN OF INCOME UNDER ERRONEOUS IMPRESSION OF LAW. THE LEARNED AR SUBMITTED THAT IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS ON THE ISSUE DISCUSSED IN DETAIL BY THE CIT(A), THE CIT(A) GRANTED RELIEF TO THE ASSESSEE AND DELETED THE ENTIRE DISAL LOWANCE IN TUNE WITH THE DECISION OF THE HONBLE SUPREME COURT OF I NDIA IN CIT VS. CHETTINAD LOGISTICS (P.) LTD. (2018) 95 TAXMANN.COM 250 (SC). AND HOST OF OTHER BINDING JUDICIAL PRECEDENTS. THE LEA RNED AR ACCORDINGLY CONCLUDED THAT NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CALLED FOR IN THE CIRCUMSTANCES OF THE CA SE. ITA NOS.2039 & 2040/AHD/16 [DCIT VS. GREENLAND INFR ACON P. LTD.] A.YS. 2012-13 & 2013-14 - 3 - 5. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AO AND INTER ALIA SUBMITTED THAT WHERE THE ASSESSEE ITSELF HAS MADE A DISALLOWANCE OF RS.98,03,322/-, THERE WAS NO JUSTIFICATION FOR THE CIT(A) TO GRANT RELIEF ON THIS SCORE. THE LEARNED DR NEXT SUBMITTED THAT THE CIT(A) OUGHT TO HAVE CONFIRMED T HE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE AS WELL AS THE AD DITIONAL DISALLOWANCE OF RS.69,28,992/- AS COMPUTED BY THE A O IN TERMS OF RULE 8D OF THE INCOME TAX RULES. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE S UBSTANTIVE QUESTION ARISES IN THE REVENUES APPEAL IS TO ASCER TAIN THE CORRECTNESS OF THE ACTION OF THE CIT(A) IN REFUSING TO ENDORSE THE ACTION OF THE AO FOR RESORTING TO DISALLOWANCE UNDE R S.14A OF THE ACT. TWO BROAD ISSUES EMERGES IN THE CONTEXT OF TH E CASE; (I) WHETHER THE DISALLOWANCE UNDER S.14A IS MAINTAINABL E WHERE ADMITTEDLY NO EXEMPT INCOME I.E. DIVIDEND WAS EARNE D BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR AND (II) W HETHER THE CIT(A) WAS JUSTIFIED IN GOING BEYOND THE RETURN OF INCOME AND REMOVE THE DISALLOWANCE WHICH THE ASSESSEE ITSELF HAS MADE WHI LE FILING THE RETURN OF INCOME. IN OTHER WORDS, WHETHER THE ACTI ON OF THE CIT(A) IN BRINGING DOWN THE INCOME RETURNED BY THE ASSESSE E AND GRANTING RELIEF ON THE ISSUES NOT RAISED AT THE TIME OF FILI NG ORIGINAL RETURN OF INCOME OR BY WAY OF REVISED RETURN AT A SUBSEQUENT STAGE IS JUSTIFIED IN LAW OR NOT. 7. THE FIRST ISSUE FRAMED ABOVE APPEARS QUITE SIMPL E AS WE SEE. WHILE ADJUDICATING THE ISSUE, WE TAKE NOTE OF CBDT CIRCULAR NO. 5/2014 DATED 11/02/2014 WHICH SEEKS TO EMPHASIZE TH AT ALL EXPENSES PERTAINING TO AN EXEMPT INCOME IS REQUIRED TO BE DI SALLOWED ITA NOS.2039 & 2040/AHD/16 [DCIT VS. GREENLAND INFR ACON P. LTD.] A.YS. 2012-13 & 2013-14 - 4 - NOTWITHSTANDING THE FACT THAT NO CORRESPONDING TAX FREE INCOME HAS BEEN EARNED DURING THE FINANCIAL YEAR. NOTWITHSTAND ING THE AFORESAID CIRCULAR, VARIOUS COURTS HAVE HELD THAT SECTION 14A OF THE ACT DISALLOWANCE CANNOT BE KICKED WHEN THERE WAS NO EXE MPT INCOME EARNED BY THE ASSESSEE AS IS THE CASE IN THE PRESEN T APPEALS. HONBLE DELHI HIGH COURT IN PCIT VS IL&FS ENERGY DEVELOPMEN T COMPANY LTD. (2017) 84 TAXMAN.COM 186(DELHI) AND THE HONBL E MADRAS HIGH COURT IN CIT V. CHETTINAD LOGISTICS (P.) LIMIT ED (2017) 80 TAXMANN.COM 221(MADRAS) HAVE EXPRESSED A CLEAR DISA GREEMENT WITH CBDT CIRCULAR AND HELD THAT WHERE THERE IS NO EXEMP T INCOME IN RELEVANT YEAR THERE CANNOT BE A DISALLOWANCE OF EXP ENDITURE UNDER S.14A OF THE ACT. SIMILAR PROPOSITION HAS BEEN LAI D DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY (P.) LTD (2014) 45 TAXMANN.COM. 116 (GUJ) AND PR.CIT VS. IND IA GELATINE AND CHEMICALS LTD. (2016) 66 TAXMANN.COM 356 (GUJ). THE AFORESAID JUDICIAL FIAT WAS REITERATED BY THE HONB LE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS . CIT REPORTED IN 372 ITR 692 (DELHI) WHEREIN HONBLE DELHI HIGH COUR T HAS CATEGORICALLY RULED THAT DISALLOWANCE UNDER S.14A O F THE ACT CANNOT EXCEED THE AMOUNT OF TAX EXEMPT INCOME. NOTABLY, T HE SLP FILED AGAINST THE DECISION OF HONBLE MADRAS HIGH COURT I N CHETTINAD LOGISTICS (SUPRA) HAS BEEN DISMISSED BY HONBLE SUP REME COURT IN CIT VS. CHETTINAD LOGISTICS (P.) LTD. (2018) 95 TAX MANN.COM 250 (SC). HENCE, IN CONFORMITY WITH THE JUDICIAL PRECE DENTS, WE FIND SUBSTANTIAL MERIT IN THE CONCLUSION DRAWN BY THE CI T(A) WHICH ESSENTIALLY HOLDS THAT SECTION 14A OF THE ACT CAN B E TRIGGERED ONLY IF ASSESSEE SEEKS TO SQUARE OFF EXPENDITURE AGAINST THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT AN D SECTION 14A OF THE ACT CANNOT BE INVOKED WHERE NO EXEMPT INCOME WA S EARNED IN THE RELEVANT ASSESSMENT YEARS. IN CONSONANCE WITH THE JUDICIAL ITA NOS.2039 & 2040/AHD/16 [DCIT VS. GREENLAND INFR ACON P. LTD.] A.YS. 2012-13 & 2013-14 - 5 - PRECEDENTS, WE DO NOT SEE ANY INFIRMITY IN THE CONC LUSION DRAWN BY THE CIT(A) FOR NON-APPLICABILITY OF SECTION 14A OF THE ACT IN THE FACTS OF THE CASE. 8. WE SHALL NOW TURN TO THE SECOND ISSUE RAISED ON BEHALF OF THE REVENUE REGARDING PROPRIETY OF THE ACTION OF THE CI T(A) IN GRANTING RELIEF ON THE DISALLOWANCE ( SUO MOTO MADE BY THE ASSESSEE) BEYOND THE RETURN OF INCOME AND IN THE ABSENCE OF ANY FORM AL REVISED RETURN. THE CIT(A) HAS DISCUSSED THIS ASPECT IN VE RY GREAT DETAIL IN PARA 2.5 TO 2.28 OF ITS ORDER. WE ARE NOT INCLINED TO REITERATE THE FINDINGS OF THE CIT(A). HOWEVER, WE FULLY ENDORSE THE OBSERVATIONS OF THE CIT(A) WHICH ESSENTIALLY HOLDS THAT THE MIST AKE OR INADVERTENCE ON THE PART OF THE ASSESSEE WHEREBY AN INCOME NOT TAXABLE HAS BEEN WRONGLY OFFERED FOR TAX, WILL NOT OPERATE AS ANY KIND OF ESTOPPEL AGAINST THE ASSESSEE AND REGARDLES S OF WHETHER THE REVISED RETURN WAS FILED OR NOT. ONCE THE ASSESSEE IS IN A POSITION TO SHOW THAT IT HAS BEEN OVER ASSESSED UNDER THE PROVI SIONS OF THE ACT EVEN ON ACCOUNT OF ASSESSEES OWN MISTAKE OR OTHERW ISE, THE REVENUE IS UNDER DUTY TO ASSESS CORRECT INCOME. 9. IT IS TRITE THAT THE AUTHORITIES UNDER THE ACT A RE UNDER SACROSANCT OBLIGATION TO ACT IN ACCORDANCE WITH LAW . TAX CAN BE COLLECTED ONLY AS PROVIDED UNDER THE ACT. IF AN AS SESSEE, UNDER A MISTAKE, MIS-CONCEPTION OR NOT BEING PROPERLY INSTR UCTED, IS OVER ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRE D TO ENSURE THAT ONLY LEGITIMATE TAX DUES ARE COLLECTED. THIS IS TH E VIEW WHICH FLOWS FROM INNUMERABLE JUDGMENTS INCLUDING CIT VS. SHELLY PRODUCTS (2003) 261 ITR 367 (SC), S. R. KOSHTI VS. CIT (2005 ) 276 ITR 165 (GUJ), ESTER INDUSTRIES VS. CIT (2009) 185 TAXMAN 2 66 (DELHI) AND CIT VS. PRUTHVI BROKERS & SHAREHOLDERS (P.) LTD . [2012] 349 ITA NOS.2039 & 2040/AHD/16 [DCIT VS. GREENLAND INFR ACON P. LTD.] A.YS. 2012-13 & 2013-14 - 6 - ITR 336 (BOM). THE ESSENCE OF THESE DECISIONS ARE THAT MERE ADMISSION ON THE PART OF THE ASSESSEE WITH RESPECT TO AN ADDITION/DISALLOWANCE IN ITS ORIGINAL RETURN OR IN REVISED RETURN WOULD NOT IPSO FACTO BAR AN ASSESSEE FROM CLAIMING AN EXPENSE OR DISPUTING AN ADDITION IF IT IS OTHERWISE PERMISSIBL E UNDER LAW. IT IS THUS WELL SETTLED THAT IF A PARTICULAR INCOME IS NO T TAXABLE UNDER THE ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OR ANY OTHER EQUITABLE DOCTRINE. THE REVENUE AUTHORITIES CANNOT ENFORCE UNTENABLE ACTIONS OF THE ASSESSEE AGAINST IT WHICH LED TO DECLARATION OF INCOME OF HIGHER AMOUNT INCORRECTLY. IT IS THUS OPEN TO ASSESSEE TO SHOW THAT IT WAS OVER ASSESSED IN CORRECTLY OWIN G TO ITS OWN MISTAKE. 10. SO VIEWED, WE DO NOT SEE ANY POTENCY IN THE ARG UMENT LAID ON BEHALF OF THE REVENUE THAT THE CIT(A) ALLEGEDLY COM MITTED ERROR IN GRANTING TOTAL RELIEF IN THE MATTER OF DISALLOWANCE UNDER S.14A OF THE ACT. IN OUR CONSIDERED VIEW, THE ACTION OF THE CIT( A) IN GRANTING RELIEF UNDER S.14A OF THE ACT ON ACCOUNT SUO MOTO DISALLOWANCE BY THE ASSESSEE AND THEREBY GRANTING RELIEF HIGHER THA N CLAIMED IN THE RETURN OF INCOME CANNOT BE FAULTED IN LAW. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 12. THE REVENUE HAS ALSO RAISED GRIEVANCE TOWARDS D ISALLOWANCE UNDER S.14A OF THE ACT AMOUNTING TO RS.1,47,32,234/ - IN ITA NO.2040/AHD/2016 CONCERNING AY 2013-14 WHEREIN THE FACTS AND CIRCUMSTANCES ARE SUBSTANTIALLY SIMILAR TO THE ITA NO.2039/AHD /2016 CONCERNING AY 2012-13 DEALT WITH IN THE PRECE DING PARAGRAPHS. IN PARITY WITH THE OBSERVATIONS MADE I N THE PRECEDING PARAGRAPHS, WE DO NOT SEE ANY ERROR IN THE CONCLUSI ON DRAWN BY THE ITA NOS.2039 & 2040/AHD/16 [DCIT VS. GREENLAND INFR ACON P. LTD.] A.YS. 2012-13 & 2013-14 - 7 - CIT(A) AGAINST THE ORDER FRAMED BY THE AO. WE THUS DECLINE TO INTERFERE. 13. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 2040/AHD/2016 CONCERNING AY 2013-14 IS DISMISSED. 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 14/11/2018 S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- & / REVENUE 2 / ASSESSEE ( ) *+ , / CONCERNED CIT 4 ,- / CIT (A) / 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7 289 : / GUARD FILE. BY ORDER / 4 TRUE COPY / 5 *+#4 56) 1.DATE OF DICTATION ON 24.10.2018 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E OTHER MEMBER 25.10.2018 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER THIS ORDER PRONOUNCED IN OPEN COURT ON 14/11/2018