DCIT, New Delhi V. M/s. Matin Realtech Pvt. Ltd., Delhi

ITA 3359/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9303 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.3359/DEL/2017 ASSESSMENT YEAR: 2012-13 DCIT, CIRCLE-16(2), NEW DELHI VS. M/S. MATIN REALTECH PVT. LTD., 16/96, 1 ST FLOOR, NEAR SATNAM DHARM MANDIR, DAKSHINPURI, DELHI PAN :AAFCM9533L (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST OR DER DATED 30/01/2017 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-39, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2012-13 RAISING FOLLOWING GROUNDS: 1. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS . 3,67,68,492/- U/S 14A OF THE INCOME TAX ACT, 1961 (THE ACT) ON TH E GROUND THAT THE ASSESSEE HSTFNOT CLAIMED THE DEDUCTION OF ANY E XPENDITURE IN COMPUTATION OF INCOME BY IGNORING FINDING OF FACTS RECORDED BY THE ASSESSING OFFICER (THE AO) THAT THE ASSESSEE HAD CL AIMED DEDUCTION OF EXPENDITURE BOTH IN THE PROFIT & LOSS ACCOUNT AND APPELLANT BY MS. RAKHI VIMAL, SR.DR RESPONDENT BY NONE DATE OF HEARING 07.01.2020 DATE OF PRONOUNCEMENT 10.01.2020 2 ITA NO.3359/DEL/2017 COMPUTATION OF INCOME LEADING TO A CLAIM OF LOSS OF RS.3,51,16,991/- AND THE SAME WAS CORROBORATED WITH COMPUTATION OF INCOME FILED ALONG WITH THE RETURN? 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS . 3,67,68,492/- U/S 14 A OF THE ACT ON THE BASIS OF PERVERSE FINDIN G BY RELYING ON SELF-SERVING CLAIMS OF THE ASSESSEE WHICH WERE CONT RARY TO THE FACTS ON THE RECORD? 3. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN HOLDING THAT EVEN IN CASES WHERE THE ASSESSEE HAD REFUSED TO FURNISH DETAILS OF EXPENDIT URE NO DISALLOWANCE COULD BE MADE U/S 14 A OF THE ACT ON T HE GROUND THAT THE AO HAD NOT FURNISHED EVIDENCE TO LINK EXPE NDITURE RELATABLE TO EXEMPT INCOME? 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. AT THE OUTSET, WE MAY LIKE TO MENTION THAT NEITHER ANYONE REPRESENTED ON BEHALF OF THE ASSESSEE NOR ANY ADJOU RNMENT WAS SOUGHT DESPITE NOTIFYING THE DATE OF HEARING. IN TH E CIRCUMSTANCES, WE WERE OF THE OPINION THAT THE ASSE SSEE IS NOT INTERESTED IN PROSECUTING THE APPEAL AND ACCORDINGL Y WE HEARD THE APPEAL EX-PARTE QUA THE ASSESSEE, AFTER HEARING THE ARGUMENTS OF THE REVENUE. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE E-FILED ITS RETURN OF INCOME ON 29/09/2012 DECLARING NIL I NCOME. THE CASE WAS SELECTED FOR A SCRUTINY AND ASSESSMENT UND ER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) WAS COMPLETED ON 14/03/2015. IN THE ASSESSMENT, THE ASS ESSING OFFICER MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT AMOUNTING TO RS. 3,67,68,492/-. BEFORE THE ASSESSING OFFICER, THE ASSESSEE CLAIMED THAT INCOME OF THE COMPANY DID NOT INCLUDE ANY EXEMPTED INCOME AND THEREFORE, NO QUESTION OF DISAL LOWANCE ARISES. HOWEVER, BEFORE THE LD. CIT(A), THE ASSESSE E SUBMITTED THAT INCOME OF THE ASSESSEE INCLUDE LONG-TERM CAPIT AL GAIN OF 3 ITA NO.3359/DEL/2017 RS.62,48,509/- AND DIVIDEND INCOME OF RS. 15,66,500/-. REGARDING THE EXPENDITURE, THE ASSESSEE CLAIMED THAT IN THE B OOKS OF ACCOUNTS THERE WAS TOTAL LOSS OF RS. 2,88,68,482/- BUT SAME WAS NOT CLAIMED IN THE RETURN OF INCOME AND INCOME WAS DECLARED AT NIL. ACCORDING TO THE ASSESSEE IN VIEW OF NO EXPEND ITURE CLAIMED, DISALLOWANCE OF EXPENDITURE UNDER 14A TOWARDS EARNI NG EXEMPT INCOME WAS NOT JUSTIFIED AND AMOUNTED TO DOUBLE DIS ALLOWANCE. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSES SEE AND DELETED THE DISALLOWANCE, OBSERVING AS UNDER: 5.2 COMING TO THE REMAINING GROUNDS OF APPEAL [GRO UNDS AT (B) AND (C)] THEREFROM THESE GROUND CONVERGE ON THE DISALLO WANCE MADE IN THE IMPUGNED ORDER U/S 14A OF THE ACT. IN FACT, THE DISALLOWANCE IS RESTRICTED TO RS.3,67,68,492/-. IT IS OBSERVED FROM THE IMPUGNED ORDER THAT WHILE THE FIRST SENTENCE READS, THE RET URN OF INCOME WAS E-FILED BY THE ASSESSEE ON 29/09/2012 DECLARING AN INCOME OF RS. NIL', THE RECOMPUTATION OF INCOME OF THE APPELLANT AT THE END OF THE ASSESSMENT BEGINS WITH A NET LOSS OF RS.3,66,83,492 /- STATED TO BE 'AS DECLARED BY ASSESSEE'. ALL THESE DESPITE THE AP PELLANTS COMMUNICATION VIDE LETTER DATED 4/03/2015 TO THE AO STATING INTER ALIA AS UNDER- ...THE ASSESSEE MS. MATIN REALTECH PVT. LTD. HOLDI NG PAN: AAFCM-9533-L FILED ITS RETURN OF INCOME ELECTRONICA LLY FOR THE ASSESSMENT YEAR 2012-13 VIDE ACKNOWLEDGMENT NO. 50351071290912 DATED 29/09/2012 DECLARING NIL INCOM E. AS PER AUDITED BALANCE SHEET THE ASSESSEE COMPANY H AS BOOKED TOTAL REVENUE AMOUNTING TO RS. 79,00,009.99 AND INCURRED TOTAL EXPENSES FOR RS.3,67,68,492.22 THERE FORE THE ASSESSEE COMPANY HAS INCURRED BUSINESS LOSS OF RS.2,88,68,482.23 FOR THE ABOVE MENTIONED YEAR. AS ABOVE RETURN OF INCOME WAS FILED NIL INCOME THE ASSESSEE COMPANY HAD NOT CLAIMED BUSINESS LOSSES IN ITS ITR... .. .3. AT THE TIME OF FILING RETURN OF INCOME FOR T HE ASSESSMENT YEAR 2012-13 THE ASSESSEE COMPANY HAS NOT CLAIMED DEDUCTION UNDER CHAPTER VL-A, U/SEC 57, U/S 54 AND NO CLAIMED RELIEF U/S 90/91 OF IT ACT, 1961. HENCE AS REQUIRED BY YOUR HONOUR JUSTIFICATION OF CLAIMING DEDUCTION AND RELIEF IS NOT APPLICABLE TO ASSESSEE COMPANY... 4 ITA NO.3359/DEL/2017 THE COPY OF THIS COMMUNICATION AS WELL AS THAT OF T HE COMPUTATION OF INCOME FILED ALONG WITH ITS RETURN IN ITR 6 ON 29/0 9/2012, HAS BEEN FILED DURING THE COURSE OF APPEAL HEARING. THUS, TH E ARS SUBMISSION AT THE APPELLATE STAGE, THAT ...THE APPELLANT COMP ANY HAD NOT CLAIMED ANY BUSINESS LOSSES IN ITS RETURN OF INCOME AND HAD DISALLOWED ENTIRE EXPENDITURE INCURRED DURING THE Y EAR IN THE INCOME TAX RETURN FILED WITH THE DEPARTMENT... IS BORNE O UT FROM RECORDS. THE COMPUTATION OF INCOME WHICH FORMS AS INTEGRAL P ART OF THE RETURN OF INCOME FILED BY AN ASSESSEE FLOWS FROM THE P&L A /C WHEREIN THE RECEIPTS / SALES/ TURNOVER AS WELL AS EXPENSES WHIC H CONSTITUTE THE TWO SIDES OF ACCOUNTS ARE MENTIONED. IT IS THE NET PROFIT / LOSS THAT FORMS THE BEGINNING OF THE COMPUTATION OF INCOME. F URTHER, AN EXPENDITURE CAN BE DISALLOWED ONLY WHEN SUCH IS CLA IMED AS DEDUCTIBLE. THEREFORE, IT CAN BE SAFELY INFERRED TH AT THERE IS A DISTINCT FLAW IN THE IMPUGNED ORDER WHEREBY DISALLOWANCE U/S 14A R W RULE 8D HAS BEEN MADE THEREIN WHEN NO EXPENDITURE HAS BE EN CLAIMED AS DEDUCTIBLE. OF COURSE, THE FLAW IN NOT IDENTIFYI NG THE NEXUS BETWEEN THE TAX EXEMPT INCOME AND THE RELATABLE EXP ENDITURE AS WELL AS DETERMINING THE DISALLOWANCE OF EXPENDITURE U/S 14A R W RULE 8D IS NOT DISCUSSED HERE, AS IT IS, IN MY OPIN ION, NOT NECESSARY IN THE PRESENT CASE GIVEN THE SITUATION AS MENTIONE D ABOVE. ACCORDINGLY, THE DISALLOWANCE MADE U/S 14A R W RULE 8D IN THE IMPUGNED ORDER IS DELETED. 4. BEFORE US, THE LD. DR SUBMITTED THAT MERE MENTIONI NG NIL INCOME IN THE RETURN OF INCOME IS NOT SUFFICIENT AN D IT NEEDS VERIFICATION, WHETHER THE ASSESSEE HAS CLAIMED CARR Y FORWARD OF THE LOSSES OF THE YEAR UNDER CONSIDERATION, THEN ON LY IT CAN BE ASCERTAINED THAT ASSESSEE HAS NOT CLAIMED ANY EXPEN DITURE IN THE RETURN OF INCOME FILED. 5. WE HAVE HEARD THE SUBMISSION OF THE LD. DR AND PER USED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE AS FAR AS THE PRINCIPLE THAT DISALLOWANCE UNDER SECTION 14A CAN B E MADE TOWARDS EXPENDITURE ON EXEMPTED INCOME, ONLY OUT OF THE EXPENSES CLAIMED IN THE RETURN OF INCOME FILED. IF THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN THE RETURN OF INCOME FILED, THERE IS NO SCOPE FOR DISALLOWANCE TOWARDS EXEMPTED INCOME U NDER SECTION 14A OF THE ACT. THE ISSUE IN THE INSTANT CA SE IS THAT 5 ITA NO.3359/DEL/2017 ACCORDING TO THE ASSESSEE IN VIEW OF THE NIL RETURN OF INCOME FILED NO EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE. BE FORE US, NO COPY OF RETURN OF INCOME HAS BEEN FILED, ON THE BAS IS OF WHICH IT COULD BE ASCERTAINED WHETHER THE ASSESSEE HAS CLAIM ED ANY EXPENDITURE IN THE RETURN OF INCOME FILED. THIS FA CT CAN BE ASCERTAINED FROM THE CLAIM OF CARRY FORWARD OF THE LOSSES IN THE RETURN OF INCOME FILED FOR SUBSEQUENT YEARS ALSO. A S THE MATTER NEEDS VERIFICATION AT THE LEVEL OF THE ASSESSING OF FICER, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE M ATTER TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRESH IN ACCORDA NCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS OF THE REVENUE ARE ACCORDINGL Y ALLOWED FOR THE STATISTICAL PURPOSES 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR THE STATISTICAL PROPERTIES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH JANUARY, 2020. SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10 TH JANUARY, 2020. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI