DCIT, CHENNAI V. Southern Agrifurance Industries Pvt Ltd., CHENNAI

ITA 351/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2766 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 25-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SUBASHRI
• Assessee Lawyers: M VISWANATHAN
• Keywords: Opportunity of being heard; Earning of tax free income; Assessment record
• Section: 14A; 40(a)(ia); 2

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.351 AND 352/CHNY/2018 / ASSESSMENT YEARS: 2013-14 & 2014-15 THE DEPUTY COMMISSIONER OF INCOME TAX,CORPORATE CIRCLE 6(2), AAYAKAR BHAVAN, NEW BLOCK, 7 TH FLOOR, 121, M.G. ROAD, CHENNAI 600 034. VS. M/S. SOUTHERN AGRIFURANE INDUSTRIES PVT. LTD. NO. 1, MGM CENTRE, 9 TH STREET, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004. [PAN: AAGCS9705F] ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MS. M. SUBASHRI, JCIT / RESPONDENT BY : SHRI M. VISWANATHAN, CA / DATE OF HEARING : 19.02.2019 /DATE OF PRONOUNCEMENT : 27.02.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BOTH THE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 15, CHENNAI BOTH DATED 30.10.2017 RELEVANT TO THE ASSESSMENT YEARS 2013-14 AND 2014- 15. BESIDES RAISING COMMON GROUND WITH REGARD TO RESTRICTION OF DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 [ACT IN SHORT], THE REVENUE ALSO CHALLENGED THE ORDER OF THE LD. CIT(A) IN DIRECTING TO VERIFY THE ASSESSMENT RECORDS AND TO DELETE THE DISALLOWANCE I.T.A. NOS. 351 & 352/CHNY/18 2 UNDER SECTION 40(A)(IA) OF THE ACT FOR THE ASSESSMENT YEAR 2013-14. 2. WITH REGARD TO THE RESTRICTION OF DISALLOWANCE UNDER SECTION 14A OF THE ACT, THE LD. DR HAS SUBMITTED THAT BY APPLYING THE PROVISIONS OF RULE 8D, BEING THE RELEVANT ASSESSMENT YEARS 2013-14 & 2014-15, THE ASSESSING OFFICER DETERMINED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. IT WAS THE SUBMISSION THAT AS PER SECTION 251(1)(A) OF THE ACT, THE POWER TO SET ASIDE OR EXAMINING THE ISSUE AFRESH HAS BEEN OMITTED WITH EFFECT FROM 01.06.2001 AS PER FINANCE ACT, 2001. THUS, THE LD. DR PLEADED TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 3. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WHILE DETERMINING THE DISALLOWANCE UNDER RULE 8D, THE ASSESSING OFFICER HAS NOT EXAMINED THE FINANCIAL STATEMENTS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IN SUPPORT OF HIS CLAIM. BY FOLLOWING VARIOUS DECISIONS, THE LD. CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE AND PRAYED FOR SUSTAINING THE ORDER PASSED BY THE LD. CIT(A) FOR BOTH THE ASSESSMENT YEARS. 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS AN ADMITTED I.T.A. NOS. 351 & 352/CHNY/18 3 FACT THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME AGAINST ITS INVESTMENTS IN THE RELEVANT ASSESSMENT YEARS. RULE 8D OF INCOME TAX RULES MANDATED DISALLOWANCE. HOWEVER, THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE FINANCIAL STATEMENTS OF THE ASSESSEE FILED IN SUPPORT OF ITS CLAIM. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE LD. CIT(A) TO OBTAIN DETAILED REMAND REPORT ON THE FINANCIAL STATEMENTS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND ADJUDICATE THE ISSUE AFRESH IN ACCORDANCE WITH LAW BY KEEPING IN MIND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. V. CIT 402 ITR 640, WHICH SUBSCRIBES RESTRICTION OF DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE, WHEREAS, THE HONBLE SUPREME COURT DISMISSED THE SLP ON MERITS FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS (P) LTD. 257 TAXMAN 02 IN WHICH THE HONBLE HIGH COURT HAS HELD THAT WHEN THERE WAS NO DIVIDEND INCOME IN THE RELEVANT ASSESSMENT YEAR, THE ADDITION MADE BY THE ASSESSING OFFICER RELYING ON SECTION 14A OF THE ACT WAS COMPLETELY CONTRARY TO THE PROVISIONS OF THAT SECTION AS RULE 8D ONLY PROVIDES FOR A METHOD TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE. THUS, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES IN BOTH THE I.T.A. NOS. 351 & 352/CHNY/18 4 ASSESSMENT YEARS. 5. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2013-14 RELATES TO DELETION OF DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. THE LD. DR HAS SUBMITTED THAT AS PER SECTION 251(1)(A) OF THE ACT, THE POWER TO SET ASIDE OR EXAMINING THE ISSUE AFRESH HAS BEEN OMITTED WITH EFFECT FROM 01.06.2001 AS PER FINANCE ACT, 2001. IT WAS THE SUBMISSION THAT FOR THE ASSESSMENT YEAR 2014-15, THE ASSESSEE PRODUCED NECESSARY CERTIFICATES BEFORE THE ASSESSING OFFICER, WHEREAS, THE SAME WAS NOT PRODUCED BEFORE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2013-14 AND THEREFORE, THE ASSESSING OFFICER RIGHTLY DISALLOWED THE ENTIRE EXPENDITURE AND BROUGHT TO TAX. WITHOUT OBTAINING THE REMAND REPORT FROM THE ASSESSING OFFICER ON THE CERTIFICATES FROM THE PAYEES IN THE PRESCRIBED FORM NO. 26A AS PER RULE 31ACB, THE LD. CIT(A) HAS CONSIDERED THE SAME AS ACCEPTABLE. THUS, THE DR PLEADED THAT THE MATTER MAY BE REMITTED BACK TO THE LD. CIT(A) TO OBTAIN REMAND REPORT FROM THE ASSESSING OFFICER AND ADJUDICATE THE ISSUE AFRESH AGAINST WHICH THE LD. COUNSEL FOR THE ASSESSEE HAS NOT SERIOUSLY OBJECTED. SINCE AS PER SECTION 251(1)(A) OF THE ACT, THE POWER TO SET ASIDE HAS BEEN OMITTED W.E.F. 01.06.2001, WE DIRECT THE LD. CIT(A) TO OBTAIN REMAND REPORT FROM THE ASSESSING OFFICER ON THE CERTIFICATES FILED BY THE ASSESSEE FROM I.T.A. NOS. 351 & 352/CHNY/18 5 THE PAYEES AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 27 TH FEBRUARY, 2019 IN CHENNAI. SD/- SD/- (A.MOHAN ALANKAMONY) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 27.02.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.