M/s Neutral Publishing House Ltd., Kolkata V. DCIT-Circle-7, Kolkata, Kolkata

ITA 2511/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4767 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH J
• Assessee Lawyers: S M SURANA
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 2511 / KOL / 2013 ASSESSMENT YEAR :2009-10 M/S NCUTRAL PUBLISHING HOUSE LTD. 3, DECRES LANE, 1 ST FLOOR, KOLKATA-700069 [ PAN NO.AABCN 0482 B ] V/S . DCIT, CIRCLE-7, P-7, CHOWRNGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.M.SURANA, ADVOCATE /BY RESPONDENT SHRI KALYAN NATH, JCIT-DR /DATE OF HEARING 25-05-2016 /DATE OF PRONOUNCEMENT 03-06-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA DATED 04.10.2013 . ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-7, KOLKATA U/S 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 22.1 2.2011 FOR ASSESSMENT YEAR 2009-10. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. FOR THAT THE ORDER OF THE LD. CIT(A) IS ARBITRA RY AND BAD IN LAW. 2. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.62,491/- WHICH WAS DISALLOWED BY THE AO MECHANICALLY WITHOUT RECORDING ANY SATISFACTION THAT THE PROVISIONS OF RULE 8D(2)(III) WERE APPLICABLE. 3. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAVING FOUND THAT THERE ARE ONLY 7 ENTRIES FOR MUTU AL FUND INVESTMENTS AND ONLY 5 ENTRIES FOR DIVIDEND COLLECTION WHICH TOO TH ROUGH E BANKING THERE ITA NO.2511/KOL/2013 A.Y.2009-10 M/S NEUTRAL PUBLISHING HOUSE LTD. V. DCIT, CIR-7, KOL. PA GE 2 WAS NO QUESTION OF ANY EXPENSES FOR EARNING THE DIV IDEND INCOME AND AS SUCH THE LD. CIT(A) SHOULD HAVE DELETED THE ENTIRE ADDITION OF RS.62,491/-. 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. 3. THE GROUND NO.2 AND 3 ARE INTER-CONNECTED, HENCE , WE PASS A CONSOLIDATE ORDER FOR THE SAKE OF CONVENIENCE. THE COMMON ISSUE RAISED IN ITS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESS ING OFFICER BY SUSTAINING THE DISALLOWANCE AS PER RULE 8D(2)(III) OF THE IT RULES , 1962 WITHOUT RECORDING ANY SATISFACTION. 3.1 THE FACTS OF THE CASE ARE THAT ASSESSEE IS A LI MITED COMPANY ENGAGED IN BUSINESS OF PRINTING AND CIRCULAR OF NEWS PAPER AND PERIODICAL AND ALSO RUNS F.M. RADIO CHANNEL. DURING THE YEAR, ASSESSEE HAS EARNED DIVIDEND INCOME OF 7,03,309/- BUT ASSESSEE HAS NOT MADE ANY DISALLOWAN CE AS PER THE PROVISION OF SEC.14A OF THE ACT. ACCORDINGLY, AO HAS APPLIED THE PROVISION OF SEC. 14A OF THE ACT R.W.S 8D OF IT RULES AND WORKED OUT THE DISALLO WANCE AT 62,491/- IN TERMS OF RULE 8D(2)(III) AND ADDED IT TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A), BEFORE LD. CIT(A) ASSESSEE SUBMITTED THAT THERE WERE A FEW ENT RIES IN RESPECT OF INVESTMENT IN MUTUAL FUND AND EARNING OF DIVIDEND INCOME, THER EFORE AS SUCH NO EXPENDITURE WAS INCURRED BY ASSESSEE. HOWEVER, LD. CIT(A) REJEC TED THE PLEA OF ASSESSEE BY CONSIDERING THAT SOME EXPENSES ARE COMPULSORY AND R EQUIRED TO BE INCURRED TOWARDS THE INVESTMENT AND ADMINISTRATIVE ACTIVITY. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. ITA NO.2511/KOL/2013 A.Y.2009-10 M/S NEUTRAL PUBLISHING HOUSE LTD. V. DCIT, CIR-7, KOL. PA GE 3 SHRI S.M.SURANA, LD. AUTHORIZED REPRESENTATIVE APPE ARED ON BEHALF OF ASSESSEE AND SHRI KALYAN NATH, LD. DEPARTMENTAL REPRESENTATI VE APPEARED ON BEHALF OF REVENUE. 5. BEFORE US LD. AR SUBMITTED THAT AUTHORITIES BELO W HAVE MADE THE DISALLOWANCE WITHOUT RECORDING ANY SATISFACTION IN TERMS OF PROVISION OF SEC. 14A OF THE ACT. HE FURTHER SUBMITTED THAT ASSESSEE HAS NOT INCURRED ANY EXPENSE IN RELATION TO DIVIDEND INCOME AS THERE WERE ONLY SEVE N ENTRIES FOR INVESTMENT AND FIVE ENTRIES FOR DIVIDEND INCOME WHICH WAS THROUGH E-BANKING CHANNEL. HE ALSO SUBMITTED SEVERAL CASE LAWS FOR CONSIDERATION WHERE THE DISALLOWANCE MADE BY LOWER AUTHORITIES WAS DELETED. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF A UTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF EXPENSES BY APPLYING THE PROVISION OF RULE 8D OF THE IT RULE AN D SUBSEQUENTLY CONFIRMED THE SAME BY LD. CIT(A). IN OUR CONSIDERED VIEW, AO BEFO RE RESORTING TO THE PROVISION OF SEC. 14A OF THE ACT WAS REQUIRED TO RECORD THE S ATISFACTION FOR THE DISALLOWANCE AS PER RULE 8D OF THE IT RULES IN TERMS OF THE PROV ISION OF SEC. 14A OF THE ACT. BUT IN THE INSTANT CASE THE AO FAILED TO DO SO. IN THIS CONNECTION, WE ARE PUTTING OUR RELIANCE IN THE CASE OF ITO V. M/S RAJMA PROJECTS PVT. LTD. IN ITA NO.318/KOL/2013 DATED 04-03-2016 OF THIS TRIBUNAL, WHEREIN THE TRI BUNAL HAS HELD AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT I N THE COMPUTATION OF TOTAL INCOME, DISALLOWANCE OF RS.5.76 LAKHS WAS OFFERED BY THE AS SESSEE UNDER SECTION 14A OF THE ACT ON ACCOUNT OF EXPENDITURE INCURRED IN RELAT ION TO THE EARNING OF EXEMPT DIVIDEND INCOME AND THERE WAS NO REASON GIVEN BY TH E ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, TO SHOW HIS DISSATISFACTION WITH THE CORRECTNESS OF QUANTUM OF EXPENDITURE DISALLOWED BY THE ASSESSEE UNDER SECTION 14A. IN THE CASE OF REI AGRO LIMITED (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASSESSEE, IT WAS HELD BY THE COORDINATE BENCH OF TH IS TRIBUNAL THAT WHERE THE ASSESSEE MAKES A CLAIM THAT ONLY A PARTICULAR AMOUN T IS TO BE DISALLOWED UNDER SECTION 14A AND IF THE ASSESSING OFFICER PROPOSES T O INVOKE SECTION 14A, HE HAS TO ITA NO.2511/KOL/2013 A.Y.2009-10 M/S NEUTRAL PUBLISHING HOUSE LTD. V. DCIT, CIR-7, KOL. PA GE 4 RECORD THE SATISFACTION AS TO HOW THE CLAIM OF THE ASSESSEE IS NOT CORRECT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. IT WAS ALSO HELD THAT IF THERE IS NO SATISFACTION RECORDED BY THE ASSESSING OFFICER, NO DISALLOWANCE COULD BE MADE BY HIM BY INVOKING THE PROVISIONS OF SECTION 14A. KEEP ING IN VIEW THIS DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LIMITED (SUPRA), WHICH HAS BEEN AFFIRMED BY THE HON'BLE CALCUTTA HIGH COUR T, WE HOLD THAT IN THE ABSENCE OF REQUISITE SATISFACTION RECORDED BY THE ASSESSING OFFICER SHOWING HOW THE DISALLOWANCE OFFERED BY THE ASSESSEE UNDER SECTION 14A WAS NOT CORRECT HAVING REGARD TO ITS BOOKS OF ACCOUNT, IT WAS NOT PERMISSI BLE TO THE ASSESSING OFFICER IN LAW TO INVOKE SECTION 14A AND MAKE A FURTHER DISALL OWANCE. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING SUCH DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A ALTHOUGH ON DIFFERENT GROUNDS AND DISMISS THIS APPEAL OF THE REVENUE. KEEPING IN VIEW OF THIS DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S RAJMA PROJECTS PVT. LTD. (SUPRA), WE HOLD THAT AO IS NOT ENTITLED TO MECHANICALLY APPLY RULE 8D OF THE RULES WITHOUT REC ORDING SATISFACTION. ACCORDINGLY WE REVERSE THE ORDERS OF AUTHORITIES BELOW AND DELE TE THE ADDITION MADE BY THE AO. HENCE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 03 /06/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 03 / 06 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S NCUTRL PUBLISHING HOUSE LTD., 3, DEC RES LANE, 1 ST FL, KOL-69 2. /RESPONDENT-DCIT, CIRCLE-7, P-7, CHOWRINGHEE SQUARE , KOLKATA-700 069 3. ) *+ - / CONCERNED CIT KOLKATA 4. -- / CIT (A) KOLKATA 5. 012 33*+, *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , /TRUE COPY/ / *+ ,