ADITYA BIRLA RETAIL LTD, MUMBAI V. PR CIT 9, MUMBAI

ITA 3214/MUM/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9098 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Assessee Lawyers: MANISH SHAH AR S; YOGESH THARMS NIYANTA MEHTA
• Keywords: Business income; Principle of natural justice; Earning of tax free income; Proportionate interest; Rule 8D
• Section: 143(3); 14A; 143(2); 263

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 3214/MUM/2015 (ASSESSMENT YEAR 2010-11 ) ADITYA BIRLA RETAIL LTD., 86/92 SKYLINE ICON, 5 TH & 6 TH FLOOR, NEAR MITTAL INDUSTRIAL ESTATE, ANDHERI (EAST), MUMBAI 400 059 PAN AAACP2678Q VS. PRINCIPLE CIT-9 ROOM NO. 214, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 APPELLANT RESPONDE NT APPELLANT BY : SHRI YOGESH THAR/MS. NIYANTA MEHTA AND MANISH SHAH (AR S) RESPONDENT BY : SHRI R.P. MEENA (CIT-DR) DATE OF HEARING : 05.09.2019 DATE OF PRONOUNCEMEN T : 18.09.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THE APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDE R OF LD. PRINCIPLE COMMISSIONER OF INCOME TAX-9 [LD. PCIT), MUMBAI DAT ED 27.03.2015 PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT (THE ACT) FOR ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: GROUND I 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX- 9 ('THE CIT') ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT 1961 ('THE ACT ') AND REVISING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX RAN GE -8(1) (NOW DEPUTY COMMISSIONER OF INCOME TAX RANGE - 9(1)(1)), MUMBAI, ('THE AO') ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 2 U/S 143 (3) ON THE ALLEGED GROUND THAT THE ORDER WA S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT: (A) BOTH THE PRE-REQUISITES I.E. ASSESSMENT ORDER B EING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE NECE SSARY TO INVOKE THE PROVISIONS OF SECTION 263. IF ANY ONE CONDITION IS NOT SATISFIED, SECTION 263 CANNOT BE INVOKED. (B) THE APPELLANT HAD FURNISHED THE REQUISITE INFOR MATION AND THE AO HAS COMPLETED THE ASSESSMENT AFTER CONSIDERING ALL THE FACTS AND THEREFORE THE ASSESSMENT ORDER IS NOT ERRONEOUS. 3. THE APPELLANT PRAYS THAT IT BE HELD THAT THE ASS ESSMENT ORDER PASSED BY THE AO IS NOT ERRONEOUS AND ACCORDINGLY THE ACTION OF T HE PR. CIT IN INVOKING PROVISIONS OF SECTION 263 AND REVISING ASSESSMENT O RDER BE HELD AB-INITIO AND / OR OTHERWISE VOID AND BAD-IN-LAW. WITHOUT PREJUDICE TO GROUND I GROUND II 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE PR. CIT ERRED IN DIRECTING THE AO TO MODIFY THE ASSESSMENT ORDER PAS SED U/S. 143(3) OF THE ACT DATED 08 MARCH 2013, AFTER CONSIDERING THE INVESTME NTS WORTH RS. 560.85 CRORES WHICH WERE DIRECTLY OUT OF BORROWED FUNDS FO R COMPUTING THE AVERAGE INVESTMENTS UNDER RULE 8D(2)(II) OF THE INCOME TAX RULES, 1962, ('THE RULES'). 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT: (A) OUT OF THE TOTAL INVESTMENT OF ABOUT RS. 644.85 CRORES, INVESTMENTS WORTH RS. 560.85 CRORES WERE DIRECTLY OUT OF BORROW ED FUNDS FOR WHICH THE APPELLANT HAD MADE DISALLOWANCE OF DIRECT INTEREST EXPENDITURE UNDER RULE 8D(2)(I), SUO MOTTO. (B) CONSIDERING THE INVESTMENT WORTH RS. 560.85 CRO RES FOR COMPUTING THE AVERAGE INVESTMENTS UNDER RULE 8D(2)(II) OF THE RUL ES WOULD AMOUNT TO THE DOUBLE DISALLOWANCE OF THE PROPORTIONATE INTEREST A TTRIBUTABLE TO THE SAID INVESTMENTS I.E. RS 560.85 CRORES. 3. THE APPELLANT THEREFORE PRAYS THAT THE DIRECTION OF THE PR. CIT IN THIS REGARDS SHOULD BE QUASHED. GROUND III ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 3 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE PR. CIT ERRED IN DIRECTING THE AO TO MODIFY THE ASSESSMENT ORDER PAS SED U/S. 143(3) OF THE ACT DATED 08 MARCH 2013, TO MAKE PROPORTIONATE DISALLOW ANCE ON ACCOUNT INTEREST EXPENDITURE ON THE BORROWED FUNDS UTILISED FOR MAKI NG INVESTMENTS IN THE MUTUAL FUNDS, WHICH ULTIMATELY RESULTED IN THE CAPI TAL GAIN. 2. HE FAILED TO APPRECIATE THAT APPELLANT HAD MADE INVESTMENTS IN THE MUTUAL FUNDS FROM THE FUNDS FROM THE DAY TO DAY OPERATION AND NOT FROM THE BORROWED FUNDS. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY E NGAGED IN THE BUSINESS OF RUNNING DEPARTMENTAL STORES AND RETAILING HOUSEH OLD ARTICLES, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 27. 09.2009 DECLARING LOSS OF RS. 480 CRORE (APPROX.). THE CASE WAS SELEC TED FOR SCRUTINY AND AFTER SERVICE OF STATUTORY NOTICE UNDER SECTION 142 (1) AND 143(2) COMPLETED THE ASSESSMENT UNDER SECTION 143(3) ON 08 .03.2013. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER MADE THE VA RIOUS DISALLOWANCES UNDER SECTION 40(A)(IA), DISALLOWANCE OF EXPENDITUR E ON COMPUTER SOFTWARE, MISMATCHING OF AIR DATA AND PRIOR PERIOD EXPENSES. 3. THE ASSESSMENT WAS REVISED BY LD. PCIT VIDE ORDER D ATED 27.03.2015 PASSED UNDER SECTION 263 OF THE ACT. THE LD PCIT IS SUED SHOW-CAUSE NOTICE UNDER SECTION 263 DATED 11.02.2015 AND 25.03 .2015. IN THE SHOW- CAUSE NOTICE DATED 11.02.2015, THE LD. PCIT WRITTEN THAT THE ASSESSEE MADE A SUO-MOTO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D OF RS. 23,40,01,809/- BEING EXPENSES ATTRIBUTABLE TO EARNI NG OF EXEMPT INCOME AFTER APPLYING THE RULE 8D. HOWEVER, IN THE PROFIT & LOSS ACCOUNT, DEBIT BALANCE A CONTRARY ENTRY USED TO BALANCE THE FIGURE OF LIABILITY ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 4 SHOWN IN THE BALANCE-SHEET, WHICH IS IN THE NATURE OF FICTITIOUS ENTRY WITHOUT ANY SUBSTANCE OR IN OTHER WORDS, THE SAME D OES NOT HAVE TANGIBLE OR INTANGIBLE ASSET IN ITS SUPPORT. ACCORD INGLY, DUE TO THIS ERROR IN WORKING/COMPUTATION OF FIGURE OF AVERAGE ASSET B Y THE ASSESSEE HAS RESULTANTLY INTO LESSER WORKING OF DISALLOWANCE UND ER SECTION 14A R.W. RULE 8D BY A SUM OF RS. 66 CRORE (APPROX.), THEREBY THE ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE. 4. IN THE SECOND SHOW-CAUSE NOTICE DATED 25.03.2015, T HE LD. PCIT OBSERVED THAT THE DISALLOWANCE UNDER SECTION 14A WA S MADE CONSIDERING THE AVERAGE INVESTMENT MADE FOR THE PURPOSE OF UNIT S OF MUTUAL FUNDS WHICH IS SEPARATELY ASSESSED UNDER THE HEAD 'CAPITA L GAIN AND NOT UNDER THE HEAD BUSINESS INCOME, WHICH SHOULD HAVE BEEN TAKEN SEPARATELY NOT FORMING PART OF A COMPUTATION UNDER RULE 8D(2)(II). HOWEVER, THE PROPORTIONATE DISALLOWANCE OF THIS ACC OUNT IN RESPECT OF INTEREST PAID SHOULD HAVE BEEN MADE SEPARATELY AS T HE ENTIRE INVESTMENT FOR THE PURPOSE OF UNITS OF MUTUAL FUNDS ARE FOUND TO BE DIRECTLY ATTRIBUTABLE TO THE BORROWED FUNDS. 5. THE ASSESSEE FILED REPLY TO THE SHOW-CAUSE NOTICE D ATED 11.02.2015 VIDE REPLY DATED 04.03.2015. IN THE REPLY, THE ASSESSEE STATED THAT THEY THEMSELVES HAVE MADE SUO-MOTO DISALLOWANCE OF RS. 2 3,40,01,809/- UNDER SECTION 14A R.W. RULE 8D BEING EXPENDITURE IN CURRED FOR EARNING EXEMPT INCOME. IT WAS FURTHER STATED THAT COMPUTATI ON WAS MADE IN ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 5 ACCORDANCE WITH THE MECHANISM PROVIDED IN RULE 8D, WHICH WAS ACCEPTED BY ASSESSING OFFICER. THE ASSESSEE ALSO FU RNISHED THE COPY OF WORKING FILED BEFORE THE ASSESSING OFFICER. FOR CAL CULATING THE AVERAGE VALUE OF ASSET UNDER RULE 8D(2)(II), THE ASSESSEE S TATED THAT TOTAL ASSET AS APPEARING IN THE BALANCE-SHEET (INCLUDING P&L A/C A ND DEBIT BALANCE AMOUNTING TO RS.890,32,72,961/-) AFTER EXCLUDING CU RRENT LIABILITY AND INVESTMENT ON WHICH INTEREST EXPENSES HAS ALREADY B EEN CONSIDERED SEPARATELY FOR DISALLOWANCE UNDER RULE 8D(2)(I). AC CORDINGLY, THE ASSESSEE STATED THAT THE PROPOSED DISALLOWANCE IN T HIS REGARD WOULD RESULT INTO DOUBLE DISALLOWANCE ON THE SAME INVESTM ENT UNDER CLAUSE (I) AS WELL AS CLAUSE (II) OF RULE 8D WHICH IS NOT LOGI CAL. THE ASSESSEE FURTHER STATED THAT INVESTMENT MADE FOR THE PURPOSE OF PURCHASE OF UNITS OF MUTUAL FUND CONSIDERED AS A PART OF ITS AVERAGE INVESTMENT AND THE SAME SHOULD BE CONSIDERED AS A PART OF AVERAGE INVE STMENT FOR WORKING OF DISALLOWANCE UNDER SECTION 14A. WITH REGARD TO E XCESS DEDUCTION ALLEGEDLY ALLOWED BY ASSESSING OFFICER ON SUCH INVE STMENT MADE IN THE PURCHASE OF MUTUAL FUND FORMING PART OF TOTAL INCOM E BUT TO BE ASSESSED AS A CAPITAL GAIN. THE ASSESSEE AGAIN VIDE ITS REPL Y DATED 26.03.2015 STATED THAT EVEN IF THE FUNDS FOR PURCHASING OF UNI TS OF MUTUAL FUNDS ARE OUT OF BORROWED FUNDS, THE INTEREST PAID THEREON IS TO BE ALLOWED UNDER SECTION 36(1)(III) AS THE FUNDS WERE BORROWED FOR B USINESS PURPOSE. THE ASSESSEE BESIDES THE OTHER CONTENTION ALSO CONTENDE D THAT THE ASSESSING ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 6 OFFICER WHILE PASSING THE ASSESSMENT ORDER CONSIDER ED THE MATERIAL AND ADOPTED PARTICULAR VIEW. MERELY A DIFFERENT VIEW CO ULD BE TAKEN; THIS SHOULD NOT HAVE BEEN BASIS FOR ACTION UNDER SECTION 263 OF THE ACT. THE ASSESSEE ALSO STATED THAT THE ORDER IS NOT ERRONEOU S OR PREJUDICIAL TO THE INTEREST OF REVENUE AS THE ASSESSING OFFICER PASSED THE ORDER AFTER CONSIDERING THE MATERIAL AND TOOK A POSSIBLE VIEW W HICH IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY LD. PCIT. THE LD. PCIT TOOK HIS VIEW THAT THE EXCLUSION OF THE DEBIT BALAN CE OF PROFIT & LOSS A/C FIRMING PART OF TOTAL ASSET AS PER RULE 8D(2)(I II) APPEARS TO BE LOGICAL WHICH MAY BE LOOKED INTO AND DETAILED BY AS SESSING OFFICER DURING THE SET-ASIDE ASSESSMENT PROCEEDING AS DIRE CTED HEREUNDER BASED ON THE DETAILS TO BE FURNISHED BY ASSESSEE. IT WAS FURTHER CONCLUDED THAT (TOTAL INVESTMENT) FOR THE WORKING OF (AVERAGE INVE STMENT) ARE EXCLUDE THE DIRECT INVESTMENT ON WHICH IT HAS ALREADY MADE DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(I) BECAUSE NO SPECIFIC PR OVISION EXIST EITHER IN RULE 8D(2)(I). THE LD. PCIT ACCEPTED THAT ARGUMENTS SEEMS TO BE LOGICAL BUT BEING A DEEMING PROVISION, THE SAID INTERPRETAT ION OF ASSESSEE CONSIDERING HIS OWN AFORESAID ARGUMENT IS NOT ACCEP TABLE. THE LD. PCIT FURTHER HELD THAT THE ASSESSEE WHILE COMPUTING THE AVERAGE INVESTMENT UNDER RULE 8D(2)(II) AS INCLUDED THE AMOUNT OF INVE STMENT MADE IN THE PURCHASE OF UNITS OF MUTUAL FUNDS WHICH HAS RESULTE D INTO CALCULATION OF ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 7 LESSER DISALLOWANCE WHICH IS NEITHER VERIFIED BY TH E ASSESSING OFFICER NOR ENQUIRED INTO BEFORE MECHANICALLY ALLOWING THE DISALLOWANCE. THE INCOME ATTRIBUTABLE TO THE PURCHASE OF UNITS OF THE MUTUAL FUND AS SHORT TERM CAPITAL GAIN IS ADMITTED BY ASSESSEE AND THERE FORE, NOT COVERED BY SECTION 14A. SECONDLY, ON THE ISSUE OF DIRECT AND I NDIRECT EXPENSES PERTAINING TO INVESTMENT MADE IN PURCHASE OF THE UN ITS OF MUTUAL FUND BEING ASSESSED UNDER CAPITAL GAIN IS NOT ACCEPTAB LE AS THE EARNING OF INCOME BY ASSESSEE UNDER THE HEAD CAPITAL GAIN AN D NOT UNDER THE BUSINESS INCOME. THERE IS NO PROVISION IN THE ACT THAT ANY EXPENSES ATTRIBUTABLE TO EARNING OF INCOME FROM CAPITAL GAIN ARE TO BE ALLOWED EXCEPT PROVIDED UNDER SECTION 48 AND 49 OF THE ACT. THE DEDUCTION CLAIMED BY ASSESSEE UNDER SECTION 36(1)(III) CANNOT BE CONSIDERED. THE SAID DEDUCTION IS TO BE ALLOWED AGAINST THE WORKING OF BUSINESS INCOME AND NOT FOR EARNING CAPITAL GAIN. FOR THE CONTENTIO N OF ASSESSEE THAT ASSESSING OFFICER RAISED QUERIES ABOUT THE ISSUE DU RING THE ASSESSMENT, THE LD. PCIT CONCLUDED THAT ALTHOUGH THE ISSUE WAS RAISED RELEVANT REPLY IN THE FORM OF COMPUTATION OF DISALLOWANCE WAS FILE D BUT THE ASSESSING OFFICER MECHANICALLY ACCEPTED THE SAME WITHOUT APPL YING HIS MIND AND THEREBY MADE LESS DISALLOWANCE. NO ISSUE REGARDING DISALLOWANCE OF DIRECT AND INDIRECT EXPENSES ATTRIBUTABLE TO ITS EA RNING OF CAPITAL GAIN WAS NEITHER RAISED NOR DISCUSSED. THE LD. PCIT FINA LLY CONCLUDED THAT ASSESSING OFFICER FAILED TO EXCLUDE THE AMOUNT OF I NVESTMENT OF RS. 561 ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 8 CRORE (APPROX.) AND THE AMOUNT OF INVESTMENT MADE I N THE PURCHASE OF MUTUAL FUND FROM THE AVERAGE VALUE OF INVESTMENT WH ILE CALCULATING DISALLOWANCE UNDER RULE 8D. SIMILARLY, THE ASSESSIN G OFFICER FAILED TO DISALLOW THE DIRECT INTEREST EXPENDITURE INCURRED B Y ASSESSEE FOR MAKING INVESTMENT FOR THE PURCHASE OF UNITS OF MUTUAL FUND , THE SHORT TERM CAPITAL GAIN INCOME EARNED THEREON IS ASSESSED UNDE R THE CAPITAL GAIN, THEREFORE, NO DEDUCTION EITHER ON ACCOUNT OF DIRECT EXPENSES OR INDIRECT EXPENSES ATTRIBUTABLE THERETO SHOULD HAVE BEEN ALLO WED IN THE COMPUTATION OF TOTAL INCOME. THE LD. PCIT CONCLUDED THAT IT IS A CLEAR CASE OF NON-APPLICATION OF MIND AND THERE CANNOT BE TWO OPINIONS ON THIS ISSUE. THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN THIS REGARD IN THE ASSESSMENT ORDER AND THAT ASSESSMENT ORDER IS SILENT. THE LD. PCIT FINALLY HELD THAT THE ISSUE OF PROPORTIONA TE DISALLOWANCE OF INTEREST AND OTHER DIRECT EXPENSES AGAINST ITS SHOR T TERM INVESTMENT MADE IN THE PURCHASE OF UNITS OF THE MUTUAL FUND ON WHIC H THE ASSESSEE EARNED SHORT TERM CAPITAL GAIN IS COMPLETELY OVERLOOKED BY ASSESSING OFFICER. THUS, THE ASSESSMENT ORDER IS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, THE ASSESSMENT ORDE R PASSED UNDER SECTION 143(3) DATED 08.03.2011 WAS SET-ASIDE WITH THE DIRECTION TO PASS THE FRESH ORDER AS PER LAW AFTER GIVING OPPORTUNITY TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. PCIT, THE ASSESSEE HA S FILED THE PRESENT APPEAL BEFORE US. ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 9 7. WE HAVE HEARD THE SUBMISSION OF LD. AR OF THE ASSES SEE AND LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT DURING THE ASSESSMENT PRO CEEDING, THE ASSESSING OFFICER RAISED QUESTIONNAIRE/QUERIES REGA RDING DISALLOWANCE UNDER SECTION 14A. THE ASSESSEE VIDE ITS REPLY DATE D 11.02.2013 FURNISHED THE DETAILED REPLY AND STATED THAT THEY H AVE NOT RECEIVED ANY TAX FREE/EXEMPT INCOME AND THEREFORE, NO DISALLOWAN CE UNDER SECTION 14A OUGHT TO BE MADE. THE ASSESSEE RELIED UPON THE DECISION OF TRIBUNAL IN AVSHESH MERCANTILE VS. DCIT IN ITA NO. 577/MUM/2 006 AND ITA NO. 208/MUM/2009. THE ASSESSEE FURTHER STATED THAT THEY MADE DISALLOWANCE UNDER SECTION 14A FOR ABUNDANT CAUTION , THOUGH NO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D SHOULD BE MADE. 8. THE ASSESSING OFFICER AFTER PASSING SATISFACTION MA DE NO DISALLOWANCE UNDER SECTION 14A. THE LD. AR OF THE ASSESSEE FURTH ER SUBMITS THAT PROVISION OF SECTION 14A R.W. RULE 8D CAN BE INVOKE D WHETHER NO EXEMPT INCOME WAS EARNED BY THE DIRECT RELEVANT ASS ESSMENT YEAR. THUS, WHEN SUO-MOTO DISALLOWANCE IS MADE IN ABSENCE OF EXEMPT INCOME, THERE IS NO QUESTION OF ORDER BEING ERRONEO US OR PREJUDICIAL TO THE INTEREST OF REVENUE. IN SUPPORT OF HIS SUBMISSI ON, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CHEMINVEST LTD. VS. CIT [378 ITR 33 (DEL.)], CIT VS . DELITE ENTERPRISES (ITA NO. 110/2009 (BOM), CIT VS. HOLCIM INDIA (P.) LTD. ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 10 (57 TAXMANN.COM 28) (DEL.), REDINGTON (INDIA) LTD. VS. ACIT [392 ITR 633 (MADRAS)], CIT VS. CHETTINAD LOGISTICS (P.) LTD . [80 TAXMANN.COM 221 (MADRAS)], DCIT VS. M/S. APEX REALTY PVT. LTD. (ITA NO. 2855/M/2013 & ACIT VS. M. BASKARAN [152 ITD 844 (CH ENNAI TRIB.)]. 9. IN ALTERNATIVE SUBMISSION, THE LD. AR OF THE ASSESS EE SUBMITS THAT IF INVESTMENT HAS ALREADY CONSIDERED IN RULE 8D(2)(I) ARE ONCE AGAIN CONSIDERED UNDER RULE 8D(2)(II), IT WOULD NEITHER B E IN-COMPLIANCE WITH THE LAW NOR IN CONSONANCE WITH THE AFFIDAVIT FILED BY REVENUE BEFORE THE HONBLE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE S CASE REPORTED VIDE [328 ITR 81]. THE LD. AR OF THE ASSESSEE FURTH ER SUBMITS THAT FOR INVOKING THE PROVISION OF SECTION 263, THE TWIN CON DITION AS ENUMERATED UNDER SECTION 263 MUST CO-EXIST I.E. ORDER IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 10. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASS ESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN MALABAR INDUST RIAL CO. LTD. VS. CIT [243 ITR 83(SC)] AND CIT VS. GREENWORLD CORPORA TION [181 TAXMAN 111 (SC)]. 11. IN OTHER ALTERNATIVE SUBMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT WHERE DISALLOWANCE OF EXPENDITURE OF EXEMPT INCOME WAS DEBATABLE AND ORDER OF ASSESSING OFFICER COULD NOT BE HELD AS UNS USTAINABLE, REVISION POWER CANNOT BE EXERCISED. IN SUPPORT OF HIS SUBMIS SION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE DE LHI HIGH COURT IN ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 11 CIT VS. DLF LTD. [350 ITR 555 (DEL HC)] AND THE DEC ISION OF AMRITSAR TRIBUNAL IN DABWALI TRANSPORT CO. LTD. VS. DCIT [16 3 ITD 579]. 12. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THE ASSESSING OFFICER HAS RAISED A ROUTINE QUERY. THE ASSESSING O FFICER HAS NOT VERIFIED THE DISALLOWANCES MADE BY ASSESSEE. THE AS SESSING OFFICER HAS NOT MADE ANY REVIEW OF RETURN INCOME. THE RETURN IN COME CANNOT BE REDUCED UNLESS THE INCOME IS REVISED. THE ASSESSING OFFICER HAS MECHANICALLY ACCEPTED THE REPLY OF ASSESSEE WITHOUT APPLYING HIS MIND AND THEREBY MADE A LESS DISALLOWANCE UNDER SECTION 14A. THEREFORE, THE ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE IN TEREST OF REVENUE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SE EN THAT IN THE ASSESSMENT ORDER, THERE IS NO REFERENCE ABOUT THE D ISALLOWANCE UNDER SECTION 14A. THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT DURING THE ASSESSMENT, THE ASSESSING OFFICER EXAMINED THE ISSUE OF SECTION 14A. THE ASSESSEE VIDE ITS REPLY DATED 11.02.2013 F URNISHED THE DETAILED REPLY INCLUDING RAISING THE CONTENTION THAT ASSESSE E HAS NOT EARNED ANY EXEMPT INCOME, THOUGH THERE SHOULD NOT BE ANY DISAL LOWANCE UNDER SECTION 14A. THOUGH THE ASSESSEE OUT OF ABUNDANT CA UTION MADE A SUO- MOTO DISALLOWANCE. WE HAVE FURTHER NOTED THAT IN RE PLY TO THE SHOW- CAUSE NOTICE UNDER SECTION 263, THE ASSESSEE VIDE I TS REPLY DATED 04.03.2015 STATED THAT THE ASSESSEE HAS MADE SUO-MO TO DISALLOWANCE OF ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 12 RS. 23.40 CRORE UNDER SECTION 14A AND THAT COMPUTAT ION OF SUO-MOTO DISALLOWANCE WAS MADE IN ACCORDANCE WITH THE MECHAN ISM PRESCRIBED UNDER RULE 8D. THE ASSESSEE FURTHER VIDE ITS REPLY DATED 17.03.2015 HAS AGAIN REITERATED BEFORE LD. PCIT THAT THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION A ND THAT NO DISALLOWANCE UNDER SECTION 14A IS WARRANTED. WE HAV E NOTED THAT THE LD. PCIT DESPITE THE FIRM STAND OF THE ASSESSEE THAT NO EXEMPT INCOME, THE INCOME WAS EARNED AND THAT NO DISALLOWANCES UNDER S ECTION 14A IS WARRANTED, HAS NOT EXAMINED THE FACT ABOUT THE NON- RECEIPT OF EXEMPT INCOME. MOREOVER, WE HAVE NOTED THAT DURING THE ASS ESSMENT, THE ASSESSING OFFICER EXAMINED THE ISSUE IF DISALLOWANC E UNDER SECTION 14A AND AFTER RECEIPT OF REPLY, NO DISALLOWANCE WAS MAD E. 14. THE HONBLE DELHI HIGH COURT CHEMINVEST LTD. VS. CI T (SUPRA) HELD THAT THE PROVISION OF SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING RELEVANT PREVIOUS YEA R. THE HONBLE DELHI HIGH COURT IN CIT VS. DLF LTD. (SUPRA) HELD THAT DI SALLOWANCE OF EXPENDITURE OF EXEMPT INCOME IS DEBATABLE AND THE O RDER OF ASSESSING OFFICER COULD NOT BE HELD AS UNSUSTAINABLE AND REVI SIONARY OF POWER COULD NOT BE EXERCISED. SIMILARLY, THE AMRITSAR TRI BUNAL DABWALI TRANSPORT LTD. VS. DCIT (SUPRA) ALSO HELD THAT WHEN NO EXEMPT INCOME DURING THE RELEVANT PERIOD REVISION POWER UNDER SEC TION 263 CANNOT BE INVOKED FOR MAKING DISALLOWANCE UNDER SECTION 14A. THE KOLKATA ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 13 TRIBUNAL IN ACIT VS. CHAMPION COMMERCIAL CO. LTD. [ 26 TAXMANN.COM 342 (KOL)] HELD THAT WHEN ASSESSEE HIMSELF OFFERS A DISALLOWANCE UNDER SECTION 14A, THE ASSESSING OFFICER NEED NOT RECORD ITS SATISFACTION. 15. THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL COM PANY LTD. (SUPRA) HELD THAT A BARE READING OF SECTION 263(1) MAKES IT CLEAR THAT THE PRE-REQUISITE TO EXERCISE OF JURISDICTION BY THE CO MMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CO MMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE - RECOURSE CANNOT BE HAD TO SECTION 263(1). IT WAS FURTHER HELD THAT THERE CAN BE NO DO UBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN IN CORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATIS FY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FAL L ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 14 16. THE HONBLE SUPREME COURT IN CIT VS. GREENWORLD COR PORATION (SUPRA) HELD THAT ASSESSMENT ORDER PASSED BY ASSESSING OFFI CER (ITO) CANNOT BE INTERFERED WITH ONLY BECAUSE ANOTHER VIEW IS POSSIB LE. 17. NOW TURNING TO THE FACTS OF THE PRESENT CASE AS THE STAND OF ASSESSEE DURING THE ASSESSMENT AS WELL AS IN REVISION PROCEE DING THAT NO EXEMPT INCOME IS EARNED BY THE ASSESSEE. WE HAVE PERUSED T HE BALANCE-SHEET AND PROFIT & LOSS ACCOUNT OF THE ASSESSEE WHEREIN I N SCHEDULE-14 (OTHER INCOME) FORMING PART OF BALANCE-SHEET SHOWS NIL INCOME. IN SCHEDULE-6 (INVESTMENTS), IN COLUMN-B ASSESSEE HAS SHOWN INVESTMENT IN UNITS OF MUTUAL FUND (GROWTH SCHEME) AND THE INC OME OF SUCH INVESTMENT IS NOT EXEMPTED. THUS, AS PER THE DECISI ON OF HONBLE DELHI HIGH COURT IN CHEMINVEST INVESTMENT LTD. (SUPRA), H ONBLE MADRAS HIGH COURT REDINGTON (INDIA) LTD. (SUPRA) THAT WHEN THERE IS NO EXEMPT INCOME IN THE RELEVANT PERIOD, THERE CANNOT BE DISA LLOWANCE OF EXPENDITURE UNDER SECTION 14A. ACCORDINGLY, THE ASS ESSMENT ORDER UNDER SECTION 143(3) IS NOT ERRONEOUS. THE ASSESSING OFFI CER HAS ADOPTED A POSSIBLE VIEW FOR NOT MAKING ANY DISALLOWANCE UNDER SECTION 14A. THOUGH, THERE IS NO DISCUSSION ABOUT THE ACCEPTANCE OF CONTENTION OF THE ASSESSEE IN ITS REPLY DATED 11.02.2013, FILED DURIN G THE ASSESSMENT PROCEEDING. 18. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER PASSED BY ASSESSING OFFICER WAS NOT ERRON EOUS AND THUS THE ITA NO. 3214/ MUM/2015-ADITYA BIRLA RETAIL LTD. 15 TWIN CONDITION AS LAID DOWN BY HONBLE APEX COURT I N MALABAR INDUSTRIAL CO. LTD. (SUPRA), THE RECOURSE OF SECTIO N 263 CANNOT BE INVOKED AGAINST THE ASSESSMENT ORDER. THEREFORE, TH E ASSESSEE SUCCEEDS ON LEGAL GROUND. SINCE, THE ASSESSEE SUCCEEDED ON L EGAL GROUND, THEREFORE, ADJUDICATION ON OTHER CONTENTIONS AND IS SUES RAISED BY ASSESSEE HAVE BECOME ACADEMIC. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COU RT ON 18/09/2019. SD/- SD/- G.S. PANNU PAWAN SI NGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 18.09.2019 SK COPY OF THE ORDER FORWARDED TO : 1 . ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI