M/s B.R. Associates Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 2434/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2000 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Earning of tax free income; Rule 8D; Set aside; Capital Gains
• Section: 271(1)(c); 153A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 2434/DEL/2017 : ASSTT. YEAR : 2010-11 ITA NO. 2435/DEL/2017 : ASSTT. YEAR : 20 11-12 M/S B. R. ASSOCIATES PVT. LTD., RAJIV SAXENA & CO. (ADVOCATES & SOLICITORS), 318, POCKET-D, MAYUR VIHAR-II, DELHI-110091 VS ACIT, CENTRAL CIRCLE-16, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACB1067H ASSESSEE BY : MS. SUMANGLA SAXENA, ADV. REVENUE BY : SH. RAJESH KUMAR, SR. DR DATE OF HEARING: 17.02.2020 DATE OF PRONOUNCEMENT: 05.05.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDERS OF THE LD. CIT(A)-27, NEW DELHI DATED 27.02.2017. ITA NO. 2434/DEL/2017 : ASSTT. YEAR : 2010-11 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY U/S 271(1)(C) OF THE IT ACT ON ACCOUNT OF CONCEALED INCOME OF RS.5,18,590/-. (A) SHE HAS FAILED TO APPRECIATE THAT ASSESSING OFF ICER HAS LEVIED THE PENALTY MERE ON THE GROUND OF FILING ITA NOS. 2434 & 2435/DEL/2017 B.R. ASSOCIATES PVT. LTD. 2 INACCURATE PARTICULARS, WHILE NO PARTICULARS WERE FOUND BY HIM WHICH WERE FILED INACCURATE. (B) SHE HAS NOT GONE INTO THE MERITS OF THE CASE AN D MERELY REFERRED TO THE APPLICATIONS OF THE APPELLAN T FOR KEEPING THE PENALTY PROCEEDINGS IN ABEYANCE. (C) SHE HAS FAILED TO UNDERSTAND THAT THE ASSESSING OFFICER HAS LEVIED THE PENALTY ON THE BASIS OF ADDITIONS MADE DURING ASSESSMENT WITHOUT APPRECIATING THAT THE ADDITIONS MADE U/S 153A WERE ITSELF BAD IN LAW AS THE SAME WERE MADE WITHOUT REFERRING TO ANY INCRIMINATING MATERIAL. (D) SHE HAS FAILED TO UNDERSTAND THAT MERELY BECAUS E AO DID NOT ACCEPT EXEMPTED INCOME WITHOUT REFERRING TO ANY MATERIAL BROUGHT ON RECORD, PENALTY CANNOT B E LEVIED ON THE BASIS OF DISALLOWANCE U/S 10(38) OF T HE ACT. 2. THAT THE PENALTY ORDER MADE U/S 271(1)(C) AS WEL L AS THE ORDER OF THE CIT(A) IS REQUIRED TO BE QUASHE D AS THEY WERE MADE WITHOUT PROVIDING PROPER, REASONABLE AND SUFFICIENT OPPORTUNITY TO THE ASSESS EE, THUS DEFYING PRINCIPLES OF NATURAL JUSTICE. 3. THE MOOT ISSUE TO BE ADJUDICATED IS WHETHER PENA LTY LEVIED BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS LEGAL LY TENABLE WHEN THE ADDITION BASED ON WHICH THE PENALTY LEVIED STANDS DELETED BY THE ITAT IN THE FURTHER APPEAL. 4. THE AO MADE ADDITION OF RS.16,78,276/- ON ACCOUN T OF SHORT TERM CAPITAL GAINS AGAINST THE AMOUNT DECLA RED UNDER THE HEAD LONG TERM CAPITAL GAINS. THE CO-ORDINATE BENCH OF ITAT VIDE ORDER DATED 30.06.2014 (ITA NO. 2003/DEL/ 2013) IN THE CASE OF THE ASSESSEE HAS DELETED THE ADDITION M ADE ON ACCOUNT OF SHORT TERM CAPITAL GAINS. THE MATTER WAS FURTHER REMANDED BACK TO THE AO FOR EXAMINATION OF RE-INVES TMENT OF ITA NOS. 2434 & 2435/DEL/2017 B.R. ASSOCIATES PVT. LTD. 3 LTCG IN THE NEW ASSET. SINCE AS ON DATE, THE QUANTU M ADDITION STANDS DELETED BY THE TRIBUNAL, THE PENALTY LEVIED ON SUCH INCOME IS HEREBY SET ASIDE WITH LIBERTY TO REVIVE T HE PROCEEDINGS BASED ON THE OUTCOME OF THE RE-INVESTME NT OF THE LONG TERM CAPITAL GAINS. ITA NO. 2435/DEL/2017 : ASSTT. YEAR : 2011-12 5. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.1,64,000/- MADE BY TH E AO WHILE COMPUTING SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE BECAUSE: (A) SHE HAS NOT MADE ANY EFFORT TO UNDERSTAND THAT PROPERTY SOLD WAS OLD PROPERTY AT KAROL BAGH, DARIW ALAN, SIDHIPURA, NEW DELHI AN ITS REPAIR WAS ESSENTIAL FO R SELLING THE PROPERTY. (B) SHE HAS FURTHER FAILED TO APPRECIATE DETAILS OF ACCOUNT PAYEE CHEQUES PAID TO VARIOUS PERSONS FOR REPAIRING THE BUILDING WHICH WAS CLAIMED AGAINST SHORT TERM CAPIT AL GAIN. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.55,115/- MADE BY THE AO U/S 14A OF T HE IT ACT BY APPLYING RULE 8D OF THE IT RULES BECAUSE: (A) SHE HAS FAILED TO APPRECIATE THAT DISALLOWANCE U/S 14A CANNOT EXCEED THE EXEMPTED INCOME. (B) THE ASSESSEE ITSELF HAS MADE THE DISALLOWANCE O F RS.9,054/- WHICH WAS ACTUALLY INCURRED TO EARN THE INCOME. 6. THE SHORT ISSUE OF THE APPEAL IS THAT THE ASSESS EE HAS DECLARED SHORT TERM CAPITAL GAIN OF RS.4,89,099/- O N HOUSE PROPERTY AFTER CLAIMING REPAIR EXPENSES OF RS.1,64, 000/-. DURING THE ASSESSMENT PROCEEDINGS, THE REPAIR EXPEN SES HAS ITA NOS. 2434 & 2435/DEL/2017 B.R. ASSOCIATES PVT. LTD. 4 BEEN DISALLOWED OWING TO NON-FURNISHING OF THE DETA ILS OF SUCH EXPENSES. THE LD. CIT (A) CONFIRMED THE DISALLOWANC E MADE BY THE AO ON THE GROUNDS THAT EVEN DURING THE APPELLAT E PROCEEDING, THE ASSESSEE WAS UNABLE TO JUSTIFY THE CLAIM BY PRODUCING RELEVANT DOCUMENTARY EVIDENCE IN SUPPORT OF REPAIR EXPENSES. BEFORE US DURING THE ARGUMENTS, IT WAS AR GUED THAT THE LD. CIT (A) FAILED TO APPRECIATE THE DETAILS OF ACCOUNT PAYEE CHEQUES PAID ON ACCOUNT OF REPAIRS TO VARIOUS PERSO NS. IT WAS ARGUED THAT THE PROPERTY SOLD WAS OLD PROPERTY AND THE REPAIRS WERE ESSENTIAL FOR SELLING SUCH PROPERTY. THE LD. D R SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. FROM THE SUBMISSIONS, WE FIND THAT THE ASSESSEE HAS MADE PAYMENT TO FOUR PARTIES ON AC COUNT OF THE REPAIRS UNDERTAKEN IN THE PROPERTY WHICH HAS BE EN SOLD FOR WHICH THE SHORT TERM CAPITAL GAINS HAVE BEEN OFFERE D TO TAX. THE DETAILS ARE AS UNDER: S. NO. DATE OF PAYMENT CHEQUE NO. PARTY NAME AMOUNT 1. 05.07.2010 119091 MR. MOHAN SHARMA 42,000/- 2. 05.07.2010 119092 MR. ANIL KUMAR 40,000/- 3. 05.07.2010 119093 MR. NEETA SHARMA 40,000/- 4. 05.07.2010 209899 MR. YOGESH KUMAR 42,000/- TOTAL 1,64,000/- 8. THE LD. CIT (A) WOULD HAVE BEEN INADVERTENTLY IG NORED THE PAYMENTS MADE WHILE CONFIRMING THE DISALLOWANCE IN ABSENCE OF ANYTHING CONTRA BROUGHT BY THE REVENUE ABOUT THE PA YMENT OF THE REPAIR CHARGES TO THE FOUR PERSONS MENTIONED AB OVE. HENCE, ITA NOS. 2434 & 2435/DEL/2017 B.R. ASSOCIATES PVT. LTD. 5 WE HEREBY DIRECT THE DISALLOWANCE MADE BY THE REVEN UE IS LIABLE TO BE DELETED. ADDITION U/S 14A: 9. STRAIGHT FACTS OF THE CASE ARE THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.29,357/- OUT OF THE INVESTMEN TS MADE OF RS.1.34 CRORES. THE AO DISALLOWED TOTAL AMOUNT OF R S.64,169/- UNDER RULE 8D OF THE INCOME TAX RULES, 1962 AGAINST THE DISALLOWANCE MADE BY THE ASSESSEE OF RS.9,054/-. KE EPING IN VIEW, THE ESTABLISHED JUDICIAL PRONOUNCEMENTS ON TH E ISSUE OF DISALLOWANCE U/S 14A AND KEEPING IN VIEW THE FACT T HAT THE PROVISIONS OF SECTION 14A(2) HAVE NOT BEEN ADHERED TO BY THE REVENUE AND KEEPING IN VIEW THE FACT THAT THE ASSE SSEE SUO MOTO HAS DISALLOWED NEARLY 30% OF THE EXEMPT INCOME RECE IVED, WE FIND THAT THE INVOCATION OF RULE 8D IN THIS CASE IS LEGALLY NOT TENABLE. THE DISALLOWANCE MADE IS DIRECTED TO BE DE LETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL IN ITA NO. 2434/DEL/2 017 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AND THE APPEAL IN ITA NO. 2435/DEL/2017 OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2020. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 05/05/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR