BIO MED PVT. LTD., GHAZIABAD V. ADDL. CIT, RANGE- 2, GHAZIABAD

ITA 2770/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9613 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 20-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH DAHIA
• Keywords: Rule of consistency; Earning of tax free income; Period of limitation; Condonation of delay; Rule 8D
• Section: 14A; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BEN CH, NEW DELHI [THROUGH VIDEO CONFERENCE] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI K.N. CHARY, JUDICIAL MEMBE R ITA NO. 2770/DEL/2018 [A.Y 2011-12] & ITA NO. 2771/DEL/2018 [A.Y 2012-13] BIO MED PVT LTD VS. THE ADDL. C.I.T C 96, SITE 1, B.S. ROAD RANGE - 2 INDUSTRIAL AREA, GHAZIABAD GHAZIABAD PAN: AABCB 3477 C [APPELLANT] [RESPONDENT] ASSESSEE BY : SHRI AKHILESH KUMAR , ADV REVENUE BY : SHRI JAGDISH SINGH DAHIA, SR. DR DATE OF HEARING : 26.07.2021 DATE OF PRONOUNCEMENT : 26.07.2021 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, BOTH THE ABOVE CAPTIONED APPEALS BY THE ASSESSEE AR E PREFERRED AGAINST THE ORDER OF THE CIT(A) - ALIGARH, DATED 13 .01.2016 PERTAINING TO A.YS 2011-12 AND 2012-13 . 2 2. SINCE COMMON GRIEVANCE IS INVOLVED IN BOTH THE A PPEALS, THEY WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. BOTH THE APPEALS HAVE BEEN FILED AFTER THE PERIO D OF LIMITATION AND, ACCORDINGLY, BARRED BY LIMITATION. 4. THE LD. COUNSEL FOR THE ASSESSEE FILED AN APPLIC ATION FOR CONDONATION OF DELAY IN FILING THE APPEALS. THE LD . COUNSEL FOR THE ASSESSEE STATED THAT SHRI S.P. GARG, MANAGING DIREC TOR OF THE ASSESSEE COMPANY HANDED OVER THE APPEAL PAPERS TO ONE SHRI P USHKAR PANDEY WHO WORKS IN THE OFFICE OF THE LD. COUNSEL FOR THE ASSESSEE. BOTH SHRI S.P. GARG AND SHRI PUSHKAR HAVE FILED AFFIDAVITS TO SHOW THAT THE APPEAL PAPERS WERE MISPLACED DUE TO OFFICE RENOVATION WORK AND COULD ONLY BE DISCOVERED AFTER SUBSTANTIAL LAPSE OF TIME AND IMME DIATELY THEREAFTER, APPEALS WERE FILED. 5. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CONTEN DED THAT THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESS EE TO CIRCUMVENT DUE PROCESS OF LAW AND, THEREFORE, THE DELAY SHOULD BE CONDONED. 3 6. PER CONTRA, THE LD. DR STRONGLY OPPOSED THE COND ONATION OF DELAY AND VEHEMENTLY STATED THAT THE ASSESSEE HAS INTENTI ONALLY FILED THE APPEALS BEYOND THE PERIOD OF LIMITATION AND HAS NO JUSTIFIABLE CAUSE FOR DELAY. 7. WE HAVE CAREFULLY CONSIDERED THE CONDONATION LET TER SUPPORTED BY AFFIDAVITS OF SHRI S.P. GARG AND SHRI PUSHKAR PA NDEY. MATERIAL AVAILABLE ON RECORD REVEALS THAT THE IMPUGNED APPEA LS ARE COVERED BY EARLIER ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CA SE AND HENCE, IN OUR CONSIDERED OPINION, THERE COULD NOT BE ANY MALAFIDE INTENTION ON THE PART OF THE ASSESSEE IN FILING THE APPEALS WHICH AR E, IN FACT, COVERED BY EARLIER ORDER OF THIS TRIBUNAL. 8. WE ARE OF THE CONSIDERED VIEW THAT TECHNICALITIE S SHOULD NOT COME IN THE WAY OF IMPARTING JUSTICE. DELAY IS, AC CORDINGLY, CONDONED. 9. THE COMMON GRIEVANCE IN BOTH THESE APPEALS RELAT ES TO THE DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT, 19 61 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] R.W.R 8D OF THE INCOME TAX RULES, 1962. 4 10. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS REC EIVED DIVIDEND FROM UTI LIQUID PLUS FUND AND DIVIDEND FROM SHARES OF OT HER COMPANIES. THE ASSESSING OFFICER WAS OF THE OPINION THAT TO EA RN EXEMPT INCOME, THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE AN D ACCORDINGLY, COMPUTED THE DISALLOWANCE U/S 14A OF THE ACT R.W.R 8D AMOUNTING TO RS. 12,24,394/- IN A.Y 2011-12 AND RS. 10,01, 542/- IN A.Y 2012-13. 11. THE ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CAS E IN ITA NO. 6827/DEL/2014 FOR A.Y 2009-10. IT IS THE SAY OF TH E LD. COUNSEL FOR THE ASSESSEE THAT WHILE MAKING DISALLOWANCE, THE ASSESS ING OFFICER HAS HIMSELF MENTIONED THAT THERE IS NO EXPENDITURE WHIC H IS DIRECTLY ATTRIBUTABLE TO THE EXEMPT INCOME AND DISALLOWANCES HAVE BEEN MADE ONLY CONSIDERING THE PAST HISTORY OF THE ASSESSEE. 5 13. WITH THIS IN MIND, THE PAST HISTORY, I.E, A.Y 2 009-10 SHOWS THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE AND AGAINST THE REVENUE. RELEVANT FINDINGS OF THE CO-ORDINATE BENC H READ AS UNDER: 9. AFTER HEARING BOTH THE PARTIES, WE FIND THAT NO NE OF THE AUTHORITIES BELOW HAS CONTROVERTED THE FACTS PUT FO RWARD BY ASSESSEE. OBVIOUSLY WHEN DIVIDEND IS DIRECTLY CREDI TED TO FUND BY WAY OF CREDIT ENTRIES AND THEN SUCH CREDIT BY FUND DOES NOT REQUIRE ANY EFFORT BY ASSESSEE WHICH IS THE MAJOR PORTION O F DIVIDEND. OTHER AMOUNT IS DIRECTLY COLLECTED BY BANK THROUGH E-TRANSFER EXAMPLE OF WHICH IS PLACED ON RECORD AT PAGES 3-4. BESIDES, THE AUTHORITIES BELOW HAVE NOT INDICATED ANY SPECIFIC A MOUNT/ITEM WHICH IS CONSIDERED AS RELATED TO ABOVE INCOME. LD. CIT(A) MISDIRECTED HIMSELF IN STATING ABOUT THE DECISIONS FOR INVESTMENT THAT TOO ON A PROBABILISTIC VIEW BUT NOT FOR EXEMPT INCOME MORE SO WHEN FUNDS ETC. ITSELF PROVIDED SUFFICIENT SERVICES AS EXPLAINED BY ASSESSEE BEFORE AO. INVESTMENTS ARE ADMITTEDLY OUT OF OWN FUNDS FOR WHICH NO ADDITION IS MADE. LD. AR ALSO TOOK US TO THE ORDER FOR AY 2011-12 OF ASSESSEE WITH IDENTICAL FACTS ON THE ISSUE WHICH IS ON PAGES 15 TO 19 OF PAPER BOOK WHERE LD. AO HAS RECOR DED IN PARA 4 THAT, '.... IT IS EVIDENT THAT THERE IS NO EXPENDIT URE WHICH IS DIRECTLY ATTRIBUTABLE TO EXEMPT INCOME (DIVIDEND). HOWEVER , IT CANNOT BE RULED OUT THAT CERTAIN ELEMENT OF INDIREC T EXPENSES CANNOT BE REMOTELY ATTRIBUTABLE TO THE EXEMPT INCOM E.....'. IT IS ALSO STATED THAT DISALLOWANCE IS MADE TO MAINTAIN C ONSISTENCY AND KEEP ISSUE ALIVE. SUCH SPECIFIC FINDINGS PROVES THA T FACTUALLY NO 6 INCURRENCE OF EXPENDITURE IS FOUND EVEN IN A SUBSEQ UENT YEAR THOUGH REVENUE IS MAKING ADDITION MERELY TO KEEP IS SUE ALIVE. HENCE WE DO FIND FORCE IN THE CLAIM OF ASSESSEE ABOUT NON -INCURRENCE OF EXPENDITURE AND UPHELD SAME. 10. BESIDE ABOVE, BASIS OF INVOKING S. 14A AS IS STATED ABOVE IS NOT IN TERMS OF SAID PROVISION READ WITH RULE 8 D. THER E IS ABSOLUTELY NO SATISFACTION EXCEPT REJECTION OF EXPLANATION OF ASS ESSEE. THERE IS NO REFERENCE TO ANY ITEM OF EXPENSES FOUND RELATED TO EXEMPT INCOME. THERE IS NO REFERENCE TO ACCOUNTS IN RELATI ON TO THIS ISSUE EITHER OR EVEN ANY MATERIAL/BASIS IN AO ORDER. WITH THE DEVELOPMENT OF LAW, NOW WE HAVE SERIES OF DECISIONS ON THIS ISSUE. THE LD. AR CITED FOLLOWING CASES ON THE ISSUE: A) H.T.MEDIA LIMITED V PCIT -ITA NO 548/2015--ORDE R DT. 23.08.2017 (DELHI) B) CIT V TAIKISHA ENGINEERING INDIA LTD. [2015] 54 TAXMANN.COM 109 (DELHI) C) PRIYA EXHIBITORS (P.) LTD. V. [2012] 27 TAXMANN .COM 88 (DELHI) D) EICHER MOTORS LTD. V CIT (2017) 86 TAXMANN.COM 49(DEL) 11. IN THE CASE OF HT MEDIA, AO HAD INVOKED 14A ALM OST ON THE SAME BASIS I.E. AFTER STATING THAT EXPLANATION ON N O EXPENDITURE IS NO ACCEPTABLE AND THAT MAKING, CONTINUING, EXITING FROM INVESTMENT ETC. ARE COORDINATED MANAGEMENT DECISION AND SO EXP ENDITURE IS EMBEDDED IN INDIRECT EXPENSES( FROM PARA 36) AND SO S.14A INVOKED. HON'BLE COURT AFTER RELYING ON GODREJ & BO YCE MFG. CO. LTD. 394 ITR 449(SC) HELD THAT AO FAILED TO RECORD PROPER 7 SATISFACTION. IN THE CASE OF TAIKISHA ENGINEERING, HON'BLE COURT HAS RELIED ON HON'BLE BOMBAY HC DECISION IN ABOVE CASE OF GODREJ REPORTED IN 328 ITR 81 FOR THE PROPOSITION THAT THA T SATISFACTION HAS TO BE RECORDED WITH RESPECT TO ACCOUNTS IN TERM S OF SS. (2)/(3) OF S. 14A AND THE PROVISIONS DOES NOT IPSO FACTO ENABLE AO T O APPLY METHOD PRESCRIBED IN RULES. THIS SATISFACTION MUST BE ON AN OBJECTIVE BASIS HAVING REGARD TO CLAIM OF ASSESSEE. RULE 8 D(1) ITSELF START WITH THE WORDS, 'WHERE THE ASSESSING O FFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE.......' IN T HE ABSENCE OF PROPER SATISFACTION. 12. IN THE MOST RECENT CASE OF EICHER [SUPRA] IT IS HELD IN PARA 13 THAT AO MERELY CONJECTURED THAT, 'THERE IS INBUILT COST EVEN IN PASSIVE INVESTMENT AS ALSO INCIDENTAL EXPENDITURE L IKE COLLECTION, TELEPHONE, FOLLOW UP ETC, THUS CONCLUDING THAT EXPE NSES ARE EMBEDDED IN AS INDIRECT EXPENSES. THIS IS NOT AS PE R REQUIREMENT OF RULE 8D. THERE IS NO SATISFACTION RECORDED BASED ON THE ACCOUNTS OF ASSESSEE. THE AO SIMPLY PRESUMES THAT S INCE EXEMPT INCOME EXISTS ....................' 13. IN THE PRESENT CASE AO HAS NOT EVEN IDENTIFIED ANY SPECIFIC ITEM OF EXPENSE HE MERELY SAYS THAT EXPLANATION OF ASSESSEE IS NOT CORRECT AS HUGE INVESTMENT IS MADE. AS PER ABOVE DI SCUSSION RESPECTFULLY FOLLOWING ABOVE AUTHORITIES WHICH ARE BINDING ON US IT IS HELD THAT THERE IS NO SATISFACTION OF TERMS OF S. 14A READ WITH RULE 8 D. COPY OF ORDER FOR AY 08-09 IS ALSO PLACED ON PAGES20-21 OF PAPER BOOK AS PER WHICH NO DISALLOWANCE U/S 14A WAS MADE, HENCE ASSESSEE IS RIGHT IN SUBMITTING THAT DISALLOW ANCE IS ALSO AGAINST THE PRINCIPLE OF CONSISTENCY IN THE ABSENCE OF ANY FACTS. 8 14. GROUNDS 2 AND 3 ARE ALLOWED AND ADDITION OF RS. 8,88,490/- IS HEREBY DELETED. 14. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH [SUPRA] WE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 15. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS. 2770 & 2771/DEL/2018 ARE ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT IN THE PR ESENCE OF BOTH THE RIVAL REPRESENTATIVE ON 26.07.2021. SD/- SD/- [ K.N. CHARY ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 TH JULY, 2021 VL/ 9 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION ATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER