ACIT, New Delhi V. M/s. Unitech Holdings Ltd., New Delhi

ITA 3266/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5479 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 05-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMIT MANGAL
• Keywords: Notional interest
• Section: 143(3); 14A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI J.S.REDDY, ACCOUNTANT MEMBER AND SHRI KULBHARAT, JUDICIAL MEMBER ITA NO. 3266/DEL/2014 (ASSESSMENT YEAR : 2010-11) ACIT, CIRCLE-18(1), NEW DELHI. VS UNITECH HOLDINGS LTD., 6, COMMUNITY CENTRE, SAKET, NEW DELHI-110017. PAN-AAACU0237C (APPELLANT) (RESPONDENT) APPELLANT BY SH. SUMIT MANGAL, ADV. & SH. SAKSHAM SINGHAL, CA RESPONDENT BY SH. AMIT JAIN, SR.DR DATE OF HEARING 04.04.2018 DATE OF PRONOUNCEMENT 04.04.2018 ORDER PER J.S.REDDY, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD.CIT(A)-XXI, NEW DELHI DATED 28.03.2014 FOR AY 2010-11 ON THE FOLLOW ING GROUNDS:- 1. LD. CIT(A) HAD ERRED IN DELETING ADDITION AMOUNTIN G TO RS.8,02,893/- MADE BY THE AO U/S 14 READ WITH RULE 8D. 2. LD.CIT(A) HAD ERRED IN DELETING ADDITION AMOUNTING TO RS.6,87,41,696/- MADE BY THE AO ON ACCOUNT OF NOTIONAL INCOME FOR IN TEREST FREE ADVANCE. 3. LD.CIT(A) HAD ERRED IN DELETING ADDITION AMOUNTING TO RS.1,54,00,000/- MADE BY THE AO U/S 41(1) OF THE I.T.ACT, 1961. 2. AFTER HEARING RIVAL CONTENTIONS, WE HOLD AS FOLL OWS:- 2.1. ON GROUND NO.1, LD.CIT(A) HELD AS FOLLOWS:- 3.3. I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSION OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMI SSIONS OF THE ASSESSEE THAT THERE IS NO FINDING OF THE AO REGARDING THE CL AIM OF ANY EXPENDITURE ITA NO. 3266/DEL/2014 PAGE | 2 HAVING DIRECT NEXUS WITH THE EARNING OF THE TAX FRE E DIVIDEND INCOME AND AS SUCH THE ACTION OF THE IS WITHOUT ANY PROPER JUS TIFICATION AND ACCORDINGLY THE ADDITION MADE BY THE AO IS DELETED. 3. THIS PROPOSITION HAS BEEN NEGATIVATED BY THE HON BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS CIT JUDGEMENT DATED 16.03 .2018. THE LD. COUNSEL FOR THE ASSESSEE ARGUES THAT THE AO HAS NOT RECORDED SATISFACTION AND THAT THERE IS NO ADMINISTRATIVE EXPENDITURE HAV ING NEXUSES WITH THE EARNING OF THE DIVIDEND INCOME. WE FIND THAT THE A O HAD REJECTED THE CONTENTION OF THE ASSESSEE THAT NO DISALLOWANCE CAN BE MADE U/S 14A OF THE ACT. HE HAS RECORDED REASON AND THIS IS NOTHING BU T RECORDING OF SATISFACTION. THUS, THIS ARGUMENT IS DEVOID OF MERIT. THERE IS N O NEED OF PROVING NEXUS OF EXPENDITURE WITH INCOME. IF THE EXPENDITURE IS INC URRED IN RELATION TO EARNING OF DIVIDEND INCOME THAN THE SAME SHOULD BE DISALLO WED U/S 14A OF THE ACT. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT DISALLOWANCE OF RS.1,00,000 /- (ONE LAKH ONLY) U/S 14A WOULD MEET THE ENDS OF JUSTICE AS CONSULTANCY AND R ETAINERSHIP CHARGES AS HAS BEEN PAID BY THE ASSESSEE AND THE PURPOSE FOR WHICH THESE ARE PAID, HAVE NOT BEEN CLARIFIED THE DOCUMENTARY EVIDENCES. HENCE, G ROUND NO.1 OF THE REVENUE IS ALLOWED IN PART. 4. GROUND NO.2 OF THE ASSESSEE HAS TO BE DISMISSED BY FOLLOWING THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE C ASE OF M/S SHIVNANDAN BUILDCON PVT. LTD. VS CIT & ANR. [2015] 60 TAXMANN. COM 347 (DEL.) WHEREIN IT IS HELD AS FOLLOWS:- ITA NO. 3266/DEL/2014 PAGE | 3 5. ON GOING THROUGH THE SAID DECISION (B AND A PLANTA TIONS AND INDUSTRIES LTD. V COMMISSIONER OF INCOME TAX), IT C AN BE DISCERNED THAT THE GUWAHATI HIGH COURT HELD THAT THERE WAS NOTHING TO SHOW THAT THE ASSESSEE HAD, IN FACT, RECEIVED INTEREST OR THAT TH E COMPANY TO WHOM THE LOAN WAS GIVEN HAD, IN FACT, PAID INTEREST TO T HE ASSESSEE. THERE WAS ALSO NOTHING ON RECORD TO SHOW THAT THE ALLEGED INTEREST WAS NOT REFLECTED IN THE ACCOUNTS. THE ONLY FINDING RECORD ED WAS THAT THE ASSESSEE OUGHT TO HAVE CHARGED INTEREST. REFERRIN G TO AN EARLIER DECISION OF THE GUWAHATI HIGH COURT, IN HIGHWAYS CO NSTRUCTION CO. PRIVATE LTD. VS CIT [1993] 199 ITR 702, THE COURT O BSERVED THAT THEIR ATTENTION HAD NOT BEEN INVITED TO ANY PROVISION OF THE INCOME TAX ACT EMPOWERING THE INCOME TAX AUTHORITIES TO INCLUDE IN THE INCOME, INTEREST WHICH WAS NOT DUE OR NOT COLLECTED. 6. IN SIMILAR VEIN, WHEN WE ASKED MR. SAHNI, WHO IS APPEARING FOR THE RESPONDENT TO POINT OUT SOME PROVISION OF THE INCOM E TAX ACT, WHEREUNDER SUCH NOTIONAL INTEREST COULD BE MADE T HE SUBJECT MATTER OF TAX, THE ONLY REFERENCE HE MADE WAS TO SECTION 144 OF THE SAID ACT. HOWEVER, WE ARE CLEAR THAT SECTION 144 DOES NOT AT ALL APPLY TO THE PRESENT PROCEEDINGS BECAUSE THE PRESENT PROCEEDINGS ORIGINATE FROM AN ASSESSMENT UNDER SECTION 143(3) OF THE SAID ACT. 5. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT NO TIONAL INCOME ON INTERESTS FREE ADVANCES CANNOT BE BROUGHT TO TAX. GROUND NO.3 IS AGAINST THE DELETION OF AN ADDITION MADE U/S 14A OF THE ACT. L D.CIT(A) AT PARA 5.4 OF THIS ORDER HAS HELD AS FOLLOWS:- 5.4 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMI SSIONS OF THE ASSESSEE THAT THE AO HAS IGNORED THE FACTS AND SUBMISSIONS O F THE ASSESSEE WHICH WERE SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME ARE ALSO MENTIONED BY THE AO IN THE ITA NO. 3266/DEL/2014 PAGE | 4 ASSESSMENT ORDER ITSELF. THE AO HAS MADE THE ADDITI ON U/S 41(1) UNDER WHICH THE ADDITION CAN BE MADE ONLY WHEN THERE IS C ESSATION OF A TRADING LIABILITY BUT IN THE PRESENT CASE THERE IS NO CESSA TION OF ANY TRADING LIABILITY AND THE LIABILITY WHICH WAS FOR THE INVESTMENT IN B HADOHI HOTEL LTD. HAS BEEN REPAID IN THE SUBSEQUENT YEARS AS PER THE DETA ILS AVAILABLE IN THE ASSESSMENT ORDER ITSELF. THE AO HAS NOT MADE ANY IN DEPENDENT ENQUIRY AND THE AO HAS ALSO NOT BROUGHT ANY ADVERSE MATERIA L EVIDENCE OR EVEN THE PROPER FACTS DURING THE COURSE OF ASSESSMENT PR OCEEDINGS AGAINST THE SUNDRY CREDITOR OR AGAINST THE ASSESSEE REGARDING T HE GENUINENESS OF THE INVESTMENT OR THE LIABILITY AND THE ADDITION HAS BE EN MADE IN A VERY ROUTINE MANNER AND AS SUCH IT IS DIFFICULT TO SUSTA IN SUCH ROUTINE ADDITION AND ACCORDINGLY THE ADDITION MADE BY THE AO IS DELE TED. 6. WE FIND NO INFIRMITY IN THE SAME. THIS ORDER OF LD.CIT(A) IS IN LINE WITH THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS HOTLINE ELECTRONICS LTD. [2012] 18 TAXMANN.COM 363 (DEL.). THEREFORE, R ESPECTFULLY FOLLOWING THE AFORESAID DECISIONS AND THE PROPOSITI ON OF LAW LAID DOWN THEREIN, WE DISMISS THIS GROUND. GROUND NO.4 IS GENERAL IN NATURE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED IN PART. PRONOUNCED IN THE OPEN COURT ON 04.04.2018. SD/- SD/- (KULBHARAT) (J.S.REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:- 04 TH APRIL, 2018 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI