DCIT, New Delhi V. M/s. Morgan Securities & Credits Pvt. Ltd., New Delhi

ITA 3073/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5784 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Tax effect
• Section: 14A

Judgement Text

- INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO.:-3073/DEL/2015 ASSESSMENT YEAR: 2008-09 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(APPEALS)-6, DELHI IN RELATION TO THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE ASSESSMENT YEAR 20 08-09. THE REVENUE IS AGGRIEVED BY LEVY OF PENALTY OF RS. 18,5 4,000/- ON ACCOUNT OF DISALLOWANCE MADE U/S 14A READ WITH RULE 8D. THE DCIT, CIRCLE-17 (1), NEW DELHI. VS. M/S. MORGAN SECURITIES & CREDITS PVT. LTD., 53, NEW FRIENDS COLONY, NEW DELHI 110 065. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI S.R. SENAPATI, SR. DR ASSESSEE BY : SHRI SATYAJEET GOEL, CA DATE OF HEARING 27/06/2018 DATE OF PRONOUNCEMENT 27/06/2018 2 2. ON PERUSAL OF THE ASSESSMENT ORDER IT IS SEEN THAT THE EXEMPT INCOME EARNED BY THE ASSESSEE BY THE WAY OF DIVIDEND WAS ONLY RS. 1,40,576/-, HOWEVER THE AO AFTER APPLYING RULE 8D HA S MADE HUGE DISALLOWANCE OF RS.54,56,177/-. THE ASSESSEE DID NO T CONTEST THIS DISALLOWANCE OWING TO HEAVY LOSS AND NIL TAX EFFECT IN THIS YEAR. NOW ON SUCH DISALLOWANCE, AO HAS LEVIED PENALTY OF RS. 18, 54,555/-. 3. LD. CIT(A) HAS DELETED THE PENALTY ON THE GROU ND THAT AO HAS MECHANICALLY APPLIED RULE 8D WITHOUT GIVING ANY SPEC IFIC FINDING ABOUT THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME A ND NO SATISFACTION HAS BEEN RECORDED IN TERMS OF PROVISION OF SECTION 14A (2) & (3). FURTHER THERE IS NOTHING TO SUGGEST THAT ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS OF INCOME OR ENTIRE EXPENDI TURE DEBITED HAS NOT BEEN TRULY DISCLOSED. AFTER RELYING UPON VARIOUS J UDGMENTS HE HAS DELETED THE PENALTY. 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE IMPUGNED ORDERS, WE FIND THAT WHEN THE EXEMPT INCOME ITSELF IS RS . 1,40,576/-, THEN HOW SUCH A HUGE DISALLOWANCE FOR SUM OF RS. 54, 56,177/- HAS BEEN MADE UNDER RULE 8D. THIS OSTENSIBLY SHOWS THAT D ISALLOWANCE HAS NOT ONLY BEEN MADE IN A MECHANICAL MANNER BUT AL SO WITHOUT FOLLOWING THE MANDATORY REQUIREMENT OF SECTION 14A (2) AND RULE 8D (1), THAT IS, AO HAS TO FIRST RECORD HIS SATISFACTION HAVING REGARD TO THE ACCOUNTS MAINTAINED BY THE ASSESSEE AS WELL AS EXAMINI NG THE NATURE 3 OF EXPENDITURE DEBITED WHICH CAN BE SAID TO BE ATTRIBUTAB LE FOR THE EARNING OF SUCH EXEMPT INCOME. APART FROM THAT, IT HAS ALSO BEEN POINTED OUT THAT BY THE LD. COUNSEL THAT ON SIMILAR DISALL OWANCE PENALTY WAS LEVIED IN ASSESSMENT YEAR 2007-08, WHERE IN THE TRIBUNAL HAS DELETED THE SAID PENALTY IN ITA NO. 6158/DEL/201 5, VIDE ORDER DATED 16.11.2017. THUS, UNDER THE FACTS AND CIRCUMSTANC ES OF THE CASE, THE DELETION OF THE PENALTY BY THE LD. CIT (A) I S UPHELD AND GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2018. SD/- SD/- (L.P. SAHU) (AMI T SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 /06 /2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI