Sukhmani Technologies Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 260/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3956 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: R S AHUJA
• Keywords: Rule 8D; Set aside
• Section: 153A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.260/DEL./2016 (ASSESSMENT YEAR : 2010-11) M/S. SUKHMANI TECHNOLOGIES PVT. LTD., VS. ACIT, C 160, OKHLA INDUSTRIAL AREA, PHASE-I, CENTRAL CIRCLE 11, NEW DELHI 110 020. (PAN : AAGCS7513M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. AHUJA, ADVOCATE REVENUE BY : SHRI S.S. RANA, CIT DR DATE OF HEARING : 27.11.2019 DATE OF ORDER : 28.11.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. SUKHMANI TECHNOLOGIES PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 19.11.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XXXI, NEW DELHI QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUND S INTER ALIA THAT:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LEARNED ITO AND THE CIT(A) ERRED IN : ITA NO.260/DEL./2016 2 1. UPHOLDING THE ASSESSMENT & ADDITION OF RS. 2,10,060/- U/S 14AINSPITE OF THE FACT THAT THE ASSE SSMENT FOR THE YEAR HAD ABATED IN TERMS OF SECTION 153A & NO INCRIMINATING MATERIAL WAS UNEARTHED IN THE COURSE OF SEARCH & SEIZURE OPERATIONS. 2. DISALLOWING RS.2,10,060/- U/S 14A OF THE ACT. 3. DISALLOWING THE EXPENDITURE U/S 14A WITHOUT THE ASSESSING OFFICER GIVING ANY FINDING IN THE ASSESSM ENT ORDER REGARDING THE AMOUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TO EARN TAX-FREE INCOME. 4. NOT FOLLOWING THE ORDERS OF THE JURISDICTIONAL HIGH COURT IN THIS MATTER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ASSESSING OFFICER (AO) NOTICED DURING THE SCRUTINY PROCEEDINGS THAT ASSESSEE COMPANY HAS RECE IVED DIVIDEND INCOME OF RS.70,98,442/- AND CLAIMED THE SAME AS EX EMPT FROM TAX. AO BY INVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (FOR SHORT THE RULES) MADE DISALLOWANCE OF RS.2,10,060/-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITION BY DISMI SSING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.260/DEL./2016 3 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1, 2, 3 & 4 5. LD. AR FOR THE ASSESSEE CONTENDED THAT THE DISAL LOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS NOT SUSTAINABLE AS NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT BECAUSE NO INTERES T BEARING FUNDS HAVE BEEN INVESTED DURING THE YEAR UNDER ASSESSMENT AND THAT THE ENTIRE INVESTMENT ON WHICH DIVIDEND INCOME HAS BEEN EARNED, IS OF LAST YEARS. 6. LD. DR FOR THE REVENUE, ON THE OTHER HAND, RELIE D UPON THE ORDERS OF THE LOWER REVENUE AUTHORITIES. 7. UNDISPUTEDLY, ASSESSEE HAS EARNED DIVIDEND INCOM E OF RS.70,98,442/-. WHEN THE ASSESSEE HAS COME UP WITH SPECIFIC PLEADING THAT NO EXPENDITURE HAS BEEN INCURRED DURI NG THE YEAR UNDER ASSESSMENT QUA THE INVESTMENT ON WHICH DIVIDE ND INCOME HAS BEEN EARNED, THE AO WAS REQUIRED TO RECORD DISS ATISFACTION THAT WORKING GIVEN BY THE ASSESSEE IS NOT CORRECT AND ON LY THEN HE CAN PROCEED TO INVOKE THE PROVISIONS CONTAINED UNDER RU LE 8D OF THE ITA NO.260/DEL./2016 4 RULES. BUT, IN THIS CASE, AO HAS NOT RECORDED ANY SATISFACTION RATHER MECHANICALLY INVOKED THE PROVISIONS OF RULE 8D. 8. HONBLE APEX COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT 394 ITR 449 (SC) THRASHED THE ISSUE IN CONTROVERSY AS TO INVOKING OF THE PROVISIONS CONTAI NED UNDER RULE 8D OF THE RULES BY OBSERVING AS UNDER :- 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESS MENT YEAR 2002-2003. SUB-SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MERELY PRESCRIBE A F ORMULA FOR DETERMINATION OF EXPENDITURE INCURRED IN RELATION T O INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISF IED WITH THE CLAIM OF THE ASSESSEE. WHETHER SUCH DETERMINATION I S TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LA W POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS P LACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE S ATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSES SEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AN D (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATI ON, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. SO, WHEN THE AO HAS FAILED TO RECORD HIS DISSATISFA CTION AS TO THE CLAIM OF THE ASSESSEE THAT THE ENTIRE INVESTMENT O N WHICH DIVIDEND INCOME HAS BEEN EARNED IS OF PRECEDING YEARS AND NO EXPENDITURE HAS BEEN INCURRED, HE WAS NOT EMPOWERED TO RESORT T O THE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D OF T HE RULES. 9. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FOL LOWING THE DECISION RENDERED BY HONBLE APEX COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT (SUPRA), WE ARE OF THE ITA NO.260/DEL./2016 5 CONSIDERED VIEW THAT WHEN ASSESSEE HAS PROVED TO HA VE EARNED THE DIVIDEND INCOME ON THE INVESTMENT OF THE PREVIOUS Y EARS FOR WHICH NO INTEREST BEARING FUNDS HAVE BEEN UTILIZED AND TH E AO HAS NOT RECORDED HIS DISSATISFACTION RATHER INVOKED THE PRO VISIONS CONTAINED UNDER RULE 8D MECHANICALLY, ADDITION MADE ON ACCOUN T OF ADMINISTRATIVE CHARGES @ 0.05% UNDER RULE 8D CANNOT BE MADE AND AS SUCH, IS NOT SUSTAINABLE, HENCE ORDERED TO B E DELETED. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 28 TH DAY OF NOVEMBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 28 TH DAY OF NOVEMBER , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.