K.V. Thiruppathaiah, CHENNAI V. DCIT, CHENNAI

ITA 2059/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4606 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 06-07-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Earning of tax free income
• Section: 143(3); 234B; 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , ' # BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2059/MDS/2016 / ASSESSMENT YEAR : 2012-13 K.V. THIRUPPATHAIAH, NO. 125, NEW NO. 26, A1 BLOCK, I FLOOR, 8 TH MAIN ROAD, SHANTHI COLONY, ANNA NAGAR, CHENNAI 600 040. [PAN: ACZPT 1228L] VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -4(2), CHENNAI 600 034. ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI B. RAMAKRISHNAN, FCA )*% & / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT & /DATE OF HEARING : 22.03.2017 & /DATE OF PRONOUNCEMENT : 04.05.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS) -8, CHENNAI IN ITA NO. 71/2015 -16 DATED 17.06.2016 PASSED U/S. 143(3) OF THE ACT. :-2-: I.T.A. NO. 2059/MDS/2016 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN UPHOLDING THE ASSESSING OFFICERS ACTION OF DISA LLOWING RS. 9,08,468/- U/S. 14A R.W.R. 8D OF THE INCOME TAX ACT , 1961, DESPITE HAVING EARNED NO EXEMPT INCOME. 3. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S. 234B & 234C OF THE ACT ON THE ABOVE ADDITIONS MADE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 01.10.2012 WITH TOTAL INCOME OF RS. 5,46,44,040/- AND THE RETU RN OF INCOME WAS PROCESSED U/S. 14391) OF THE ACT. SUBSEQUENTLY, TH E CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S. 143(2) AND 142( 1) OF THE ACT WAS ISSUED. IN COMPLIANCE TO NOTICE, LD. AR OF THE ASSESSEE APP EARED AND FILED THE DETAILS FROM TIME TO TIME AND PRODUCED THE DOCUMENTS AND VO UCHERS IN SUPPORT OF THE RETURN OF INCOME. THE ASSESSING OFFICER ALSO V ERIFIED THE BOOKS OF ACCOUNTS AND FINANCIAL STATEMENTS AND FOUND THAT TH E ASSESSEE HAS INVESTED IN SHARES AND HAS DIVIDEND INCOME BEING EXEMPTED FROM TAX. FURTHER, THE ASSESSEE HAS NOT DEBITED ANY EXPENSES IN THE PROFIT & LOSS ACCOUNT ON MANAGING THE INVESTMENTS, THE ASSESSING OFFICER APP LIED THE PROVISIONS OF SECTION 14A R.W.R. 8D OF THE IT RULES AND CALCULATE D DISALLOWANCE U/S. 14A R.W.R. 8D(II) & (III) OF THE IT RULES RS. 9,08,468/ - AND ASSESSED THE TOTAL :-3-: I.T.A. NO. 2059/MDS/2016 INCOME OF RS. 5,57,72,508/- AND PASSED ORDER U/S. 1 43(3) OF THE ACT DATED 31.03.2015. 4. AGGRIEVED BY THE ORDER, ASSESSEE HAS FILED AN AP PEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR A RGUED THE GROUNDS AND REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER. THE LD. CIT(A) CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AN D ALSO THE GROUNDS AND SUBMISSIONS MADE BY THE ASSESSEE REFERRED AT PARA 4 .1 OF THE ORDER. THE LD. CIT(A) ON PERUSAL OF THE FINDINGS OF THE ASSESSING OFFICER AND THE STATEMENTS AND JUDICIAL DECISIONS RELIED BY THE ASSESSEE OBSER VED THAT THE CBDT CIRCULAR HAS BEEN ISSUED ON THE PROVISIONS OF SECTION 14A R. W.R. 8D OF THE IT RULES WHERE EVEN IF THERE IS EXEMPTED INCOME IS EARNED DI SALLOWANCE HAS TO BE CARRIED OUT U/S. 14A R.W.R. 8D OF THE IT RULES. FU RTHER, THE LD. CIT(A) RELIED ON HONBLE HIGH COURT OF DELHI DECISION OF CHEMINVE ST LTD VS CIT, ITA NO. 749 OF 2014 AND CONCURRED WITH THE FINDINGS OF THE ASSE SSING OFFICER AND UPHELD THE ADDITION. 5. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE HAS FILE AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD. AR ARGUED THAT TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION U/S. 14A R.W.R. 8D OF THE I T RULES RS. 9,08,468/- IN RESPECT OF EXEMPTED INCOME AND SUPPORTED HIS ARGUME NTS WITH JUDICIAL DECISIONS AND PAPER BOOK WITH FINANCIAL STATEMENT F OR THE ASSESSMENT YEAR :-4-: I.T.A. NO. 2059/MDS/2016 2012-13, WHERE THE ASSESSEE HAS INVESTED IN THE SHA RES OF THE COMPANIES AND SUPPORTED WITH JUDICIAL DECISIONS AND PRAYED FOR SE T ASIDE OF THE ORDER OF THE CIT(A). CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE DISPUTED ISSUE OF THE CASE THAT THE LD. AR ARGUED BEFORE US WITH RESPECT TO DISALLOWANCE U/S. 14A R.W .R. 8D(II) OF THE IT RULES IRRESPECTIVE OF THE FACT THAT NO INCOME HAS BEEN EA RNED BY THE ASSESSEE. THE LD CIT(A) HAS DEALT ON THE PROVISIONS AND THE FINDI NGS OF THE ASSESSING OFFICER WITHOUT GOING INTO FACTS THAT THE ASSESSEE HAS MADE INVESTMENTS IN THE GROUP COMPANIES. WE FOUND THE ASSESSEE HAS MADE INVESTME NT IN HIS GROUP COMPANIES, AGGREGATES TO RS. 12,74,91,000/-. THE C ONTENTION OF THE LD. AR THE NO INCOME HAS BEEN RECEIVED FROM THIS INVESTMEN T AND NO EXPENDITURE WAS INCURRED. THEREFORE, DISALLOWANCE CANNOT BE EA RNED. PRIMA FACIE, THE ASSESSEE HAS MADE SUBSTANTIVE INVESTMENT AND IN GRO UP CONCERNS AND MUST HAVE INCURRED MANAGEMENT AND ADMINISTRATION EXPENDI TURE. IN THE PRESENT CASE, THE ASSESSEE HAS MADE INVESTMENT IN THE GROUP CONCERNS AND ALSO INDIRECT EXPENDITURE HAS BEEN INCURRED AS CONSIDERE D BY ASSESSING OFFICER. SO, WE ARE OF THE OPINION THAT THE ASSESSING OFFICE R HAS TO RE-CALCULATE THE DISALLOWANCE U/S. 14A R.W.R. 8D(2)(III) OF THE IT R ULES WHICH IS APPLICABLE AND IN RESPECT OF DISALLOWANCE U/S. 8D(2)(II) & (III) A ND THE ASSESSEE HAS TO SUBSTANTIATE THAT IT WAS NOT INCURRED INDIRECT EXPE NDITURE ON THE INVESTMENTS. :-5-: I.T.A. NO. 2059/MDS/2016 ACCORDINGLY, WE REMIT THE DISPUTED ISSUE FOR LIMITE D PURPOSE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY AND EXAMINE THE GENUINE NESS OF CLAIM AND THE LD. AO SHALL PROVIDE ADEQUATE OPPORTUNITY OF HEARING TO ASSESSEE BEFORE PASSING THE ORDER ON MERITS. IN THE RESULT, THE ASSESSEE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 4 TH DAY OF MAY, 2017 AT CHENNAI. SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) $ /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 4 TH MAY, 2017. JPV & )'23 43 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 )'' /DR 6. 9 /GF