M/s CD Equipfinance Pvt. Ltd., Kolkata V. DCIT, CIR-7(1), KOLKATA, Kolkata

ITA 312/KOL/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3158 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Assessee Lawyers: D S DAMLE
• Keywords: Opportunity of being heard; Earning of tax free income; Assessment record
• Section: 143(3); 14A; 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.312/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. C. D. EQUIFINANCE (P) LTD. VS. DEPUTY COMMI SSIONER OF INCOME-TAX, (PAN: AACCP7333A) CIRCLE-7(1), KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 21.12.2015 DATE OF PRONOUNCEMENT: 03.02.2016 FOR THE APPELLANT: SHRI D. S. DAMLE, FCA FOR THE RESPONDENT: N O N E ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT-3, KOLKATA VIDE M.NO. CIT-3/KOL/263/2014-15/6033-35 DATED 18/19.03.2015. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-7, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2010-11 VIDE HIS ORDER DA TED 26.10.2012. 2. WE HAVE HEARD THIS MATTER EX PARTE. NONE IS PR ESENT FOR AND ON BEHALF OF THE REVENUE AND NO ADJOURNMENT PETITION FILED. WE FIND THAT THE REVENUE IS NOT SERIOUS IN APPEARING BEFORE TRIBUNAL AND FOR THAT PURPOSE NONE IS PRESEN T ON BEHALF OF REVENUE WHILE HEARING IS FIXED FOR THIS APPEAL. THIS IS AN APPEAL AGAINST R EVISION ORDER PASSED BY CIT U/S. 263 OF THE ACT AND THIS BEING A PRIORITY APPEAL, IT SHOULD BE DISPOSED OF AT THE EARLIEST TO AVOID MULTIPLICITY OF PROCEEDINGS. ACCORDINGLY, WE PROCE EDED TO DECIDE IT EX PARTE QUA REVENUE. 3. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE REVISION ORDER PASSED BY CIT U/S. 263 OF THE ACT HOLDING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE REASON THAT THE AO FAILED TO DET ERMINE BOOK PROFIT U/S. 115JB OF THE ACT IN RESPECT TO DISALLOWANCE U/S. 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES). 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS E NGAGED IN TRADING AND INVESTMENT IN SHARES AND SECURITIES AND PRECIOUS STONES AND ALSO RUNNING FINANCIAL CONSULTANCY SERVICES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE REL EVANT AY 2010-11 ON 14.10.2010 AND ASSESSMENT WAS ORIGINALLY FRAMED U/S. 143(3) OF THE ACT BY DCIT VIDE HIS ORDER DATED 26.10.2012. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS FRAMED AT A TOTAL INCOME OF 2 ITA NO.312/KOL/2015 M/S. C.D EQUIFINANCE (P) LTD., AY 2010-11 2 RS.9,51,64,413/-. SUBSEQUENTLY, CIT-3, KOLKATA ISS UED SHOW CAUSE NOTICE VIDE NO. DCIT/HQRS-3/U/S.263/2014-15/3734 DATED 05.01.2015 W HEREIN HE WAS OF THE OPINION THAT THE DISALLOWANCE OF AN AMOUNT OF RS.37,67,250/- U/S . 14A OF THE ACT READ WITH RULE 8D OF THE RULES HAS TO BE MADE WHILE COMPUTING INCOME U/S . 115JB OF THE ACT. THE RELEVANT PARA OF THE SHOW CAUSE NOTICE READS AS UNDER: THE ASSESSMENT IN THE CASE WAS COMPLETED U/S. 143 (3) BY DCIT, CIRCLE-7, KOLKATA ON 26.10.2012 DETERMINING TOTAL INCOME OF RS.9,51,64,4 13/-. ON PERUSAL OF THE ASSESSMENT RECORDS VIS--VIS THE RETURN AND OTHER DOCUMENT SUBMITTED IT IS SEEN THAT AN AMOUNT OF RS.37,67,250/- WAS DISALLOWE D U/S. 14A WHILE COMPUTING TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT WHEREAS, AS THE ASSESSEE HAS PAID TAX U/S. 115JB, SUCH DISALLOWANCE WAS NOT ADDED BACK IN THE COMPUTATION OF BOOK PROFIT. THE WRONGFUL ACT ON THE PART OF THE AO ON THE POINT DISCUSSED ABOVE HAS MAD E THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. SECTION 263 ENVISAGES THE COMMISSIONER MAY CALL F OR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD A ND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE ASSESSMENT ORDER PASSED U/S. 143(3) DATED 26.1 0.2012 APPEARS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THIS POIN T FOR THE REASONS DISCUSSED ABOVE. THE ASSESSEE BEFORE CIT REPLIED THAT THE DISALLOWAN CE MADE BY AO U/S. 14A OF THE ACT READ WITH RULE 8D OF THE RULES CANNOT BE THE SUBJECT MAT TER OF DISALLOWANCE WHILE MAKING ADJUSTMENT IN THE BOOK PROFIT U/S. 115JB OF THE ACT . BUT THE CIT FINALLY DIRECTED VIDE PARA 6 AS UNDER: THE FACTS REMAINS THAT THE ASSESSEE ITSELF HAS DI SALLOWED THE EXPENDITURE U/S. 14A IN COMPUTING THE INCOME UNDER THE NORMAL PROVISIONS. MOREOVER, THE LAW ON THIS ISSUE IS DEBATABLE AND HAS NOT REACHED FINALITY. CONSIDERIN G THE ABOVE FACTS AND LAW, THE ASSESSMENT ORDER PASSED U/S. 143(3) DATED 26.10.2012 IS SET AS IDE FOR FRESH APPLICATION OF MIND FOR THE ASSESSING OFFICER AND FRESH ASSESSMENT. ACCORDINGLY, THE CIT HELD THAT THE ORDER PASSED BY THE AO IS WITHOUT APPLICATION OF MIND AND ORDER SHOWS APPARENT ERROR OF REASONING OR THE ORDERS WHERE THE AO SIMPLY ACCEPTED THE CONTENTION OF THE ASSESSEE AND HENCE, IT REQUIRES A CTION U/S. 263 OF THE ACT. 5. WE FIND FROM THE ABOVE FACTS AND CIRCUMSTANCES T HAT THE CIT HIMSELF ADMITTED THAT THE DISALLOWANCE OF EXPENDITURE U/S. 14A OF THE ACT READ WITH RULE 8D OF THE RULES WHETHER TO BE ADJUSTED IN THE BOOK PROFIT WHILE COMPUTING I NCOME U/S. 115JB OF THE ACT IS A HIGHLY DEBATABLE ISSUE. THIS FINDING IS EVIDENT FROM THE ABOVE REPRODUCED PARA OF CITS ORDER. AND IT IS ALSO A FACT THAT ALL THE DETAILS WERE AVA ILABLE BEFORE THE AO DURING THE COURSE OF 3 ITA NO.312/KOL/2015 M/S. C.D EQUIFINANCE (P) LTD., AY 2010-11 3 ASSESSMENT PROCEEDINGS, WHICH IS SUBJECT MATTER OF REVISION, AND THE AO HAS EXAMINED THE AUDITED ACCOUNTS OF THE ASSESSEE AND ALSO BOOK PROF IT DECLARED BY THE ASSESSEE. WE AGREE WITH THE OBSERVATIONS OF THE CIT THAT DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME TO BE ASSESSED U/S. 115JB OF THE ACT OR NOT IS A HIGHLY DEBATABLE ISSUE AND AO HAS TAKEN A VIEW ON THIS PARTICULAR POINT AND WH ICH IS A POSSIBLE VIEW. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE THAT THE DISALLOWANCE U/S. 14A READ WITH RU LE 8D OF THE RULES CANNOT BE THE SUBJECT MATTER FOR MAKING ADJUSTMENT IN THE BOOK PROFIT U/S . 115JB OF THE ACT BY VARIOUS JUDICIAL PRECEDENTS OF THIS TRIBUNAL. THE ORDER OF CIT IS, THEREFORE, QUASHED AND THE APPEAL OF ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.02.2016 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 RD FEBRUARY, 2016 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. C. D. EQUIFINANCE (P) LTD., 37, SH AKESPEARE SARANI, KOLKATA- 700017. 2. RESPONDENT DCIT, CIRCLE-7(1), KOLKATA. 3. CIT(A) , KOLKATA 4. CIT , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .