M/s Sunev Pharma Solution Ltd., Panchkula V. ACIT, Panchkula

ITA 354/CHANDI/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4068 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GULSTHAN RAJ
• Assessee Lawyers: SSH S C GUPTA; JASPAL SHARMA S
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 354 /CHD/2017 ASSESSMENT YEAR : 2013-14 M/S SUNEV PHARMA SOLUTION LTD., VS. THE ACIT, PLOT NO. 52, INDUSTRIAL AREA, PANCHKULA CIRCLE, PHASE-I, PANCHKULA PANCHKULA PAN NO. AAKCS5651E & ITA NO. 1167/CHD/2017 ASSESSMENT YEAR : 2014-15 M/S SUNEV PHARMA SOLUTION LTD., VS. THE DCIT, PLOT NO. 52, INDUSTRIAL AREA, PANCHKULA CIRCLE, PHASE-I, PANCHKULA PANCHKULA PAN NO. AAKCS5651E (APPELLANT) (RESPONDENT) APPELLANT BY : S/SH. S.C.GUPTA & JASPAL SHARMA, ADVOCATES RESPONDENT BY : SH. GULSTHAN RAJ, CIT DR DATE OF HEARING : 08.05.2018 DATE OF PRONOUNCEMENT : 06. 08.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEALS HAVE BEEN PREFERRED BY THE ASSE SSEE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A), PANCHKULA [HEREINAFTER REFERRED TO AS CIT(A)] DA TED 19.12.2016 AND 25.5.2017 RESPECTIVELY. ITA NOS. 354 & 1167/CHD/2018- M/S SUNEV PHARMA SOLUTIONS, PANCHKULA 2 2. SINCE THE FACTS AND ISSUE INVOLVED IN BOTH THE A PPEALS ARE IDENTICAL, THEREFORE, THESE HAVE BEEN HEARD TOGETHE R AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.354/CHD/2017 IS TAKEN AS A LEAD CASE FOR NARRATION OF FACTS. ITA NO.354/CHD/2017 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE IMPUGNED ORDER OF THE CIT(A) IN BO TH THE APPEALS TO STATE THAT THE LD. CIT(A) HAS FOLLOWED THE ORDERS O F HIS PREDECESSOR IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEA R 2012-13 IN APPEAL NO. 33/PKL/15-16 DATED 16.9.2016 WHILE CONF IRMING / RESTRICTING THE IMPUGNED DISALLOWANCE MADE BY THE A SSESSING OFFICER U/S 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF EXPENDITURE INCURRED FOR EARNING OF TAX EXEMPT INCO ME. THE LD. COUNSEL HAS FURTHER INVITED OUR ATTENTION T O THE ORDER DATED 20.9.2017 OF THIS TRIBUNAL PASSED IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2012-13 IN RELATION T O THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE REVENUE BEARING ITA NOS. 1157/CHD/2016 AND 1185/CHD/2016 AND HAS SUBMITTED T HAT THE IMPUGNED ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 20 12-13 HAS BEEN SET ASIDE BY THE TRIBUNAL AND THE APPEAL OF THE ASS ESSEE HAS BEEN ALLOWED , WHEREAS, THE APPEAL OF THE REVENUE HAS B EEN DISMISSED. THAT SINCE THE LD. CIT(A) HAS FOLLOWED THE ORDER O F HIS PREDECESSOR FOR ASSESSMENT YEAR 2012-13 WHILE DECIDING THE APPE ALS IN THE ASSESSMENT YEARS UNDER CONSIDERATION I.E. 2013-14 A ND 2014-15 AND SINCE THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2 012-13 HAS BEEN ITA NOS. 354 & 1167/CHD/2018- M/S SUNEV PHARMA SOLUTIONS, PANCHKULA 3 SET ASIDE BY THE TRIBUNAL AND THE APPEAL OF THE ASS ESSEE HAS BEEN ALLOWED, HENCE, THE APPEALS FOR THESE YEARS ARE ALS O LIABLE TO BE ALLOWED IN FAVOUR OF THE ASSESSEE. 4. THE LD. DR, ON THE OTHER HAND, HAD RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THE APPEAL FOR ASSESSMENT YEAR 2012-13, THE TRIBUNAL VIDE ORDER DA TED 20.9.2017 HAS ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE OBSERVI NG AS UNDER:- 12. A CONCURRENT READING OF THE SECTION 14A AND T HE ORDER OF THE ASSESSING OFFICER SHOWS THAT WHILE IT IS MANDATORY TO RECORD A SATISFACTION FOR DETERMINATIO N OF EXPENDITURE THE ASSESSING OFFICER HAS FAILED TO DO IT. THE SUB SECTION (3) OF SECTION 14A FURTHER EMPHASIS THA T EVEN WHEN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM EVEN THEN ALSO RECORDING OF SATISFA CTION IS A PRE-REQUISITE. 13. JUDGMENT OF HONBLE HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES 380 ITR 652 (P&H)HELD AS UN DER SECTION 14A OF THE ACT REQUIRES THE ASSESSING OFFICER TO RECORD SATISFACTION THAT INTEREST BEARING FUNDS , HAVE BEEN USED TO EARN TAX FREE INCOME. THE SATISFACTION TO BE RECORDED MUST BE BASED UPON CREDIBLE AND RELEVANT EVIDENCE. THE ONUS, THEREFORE, TO PROVE THAT INTEREST BEARING FUNDS WERE USED, LIES SQUARELY ON THE SHOULDERS OF THE REVENUE. THUS, IF THE ASSESSING OFFICER IS ABLE TO REFER TO RELEVANT MATERIAL WHILE RECORDING SATISFACTION THAT BORROWED FUNDS WERE USED TO EARN INTEREST FREE INCOME AS OPPOSED TO THE ASSESSEE'S OWN FUNDS, THE ASSESSING OFFICER MAY LEGITIMATELY DISALLOW SUCH A CLAIM. THE ASSESSING OFFICER, HOWEVER, CANNOT, BY RECORDING GENERAL OBSERVATIONS, PARTICULARLY WHERE THE ASSESSEE HAS DENIED USING INTEREST BEARING FUNDS, ITA NOS. 354 & 1167/CHD/2018- M/S SUNEV PHARMA SOLUTIONS, PANCHKULA 4 PROCEED TO INFER THAT INTEREST BEARING INCOME MUST HAS BEEN USED TO EARN EXEMPTED INCOME. SECTION 14A OF THE ACT, BEING IN THE NATURE OF AN EXCEPTION, HAS TO BE CONSTRUED STRICTLY AND ONLY WHERE THE ASSESSING OFFICER RECORDS SATISFACTION, ON THE BASIS OF CLEAR AND COGENT MATERIAL, SHALL AN 5 ORDER BE PASSED UNDER SECTION 14A OF THE ACT, DISALLOWING SUCH A CLAIM CANNOT BE ACCEPTED. 6. WE FIND THAT FOR THE YEAR UNDER CONSIDERATION AL SO, THE ASSESSING OFFICER HAD NOT RECORDED THE OBJECTIVE SA TISFACTION HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE LD. COU NSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE RELEVANT RECORD AND HAS SUBMITTED THAT THERE WAS NO SATISFACTION RECORDED B Y THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNTS OF THE ASSESS EE TO THE EFFECT THAT THE BORROWED FUNDS HAD BEEN USED BY THE ASSESSEE FO R MAKING THE INVESTMENTS. THE LD. COUNSEL FOR THE ASSESSEE HAS F URTHER SUBMITTED THAT THE LOANS WERE TAKEN BY THE ASSESSEE FOR SPECI FIC PURPOSES AND THAT EVEN USED FOR THOSE PURPOSES AND NO PART OF IT WERE USED FOR MAKING THE INVESTMENTS IN QUESTION. THE LD. COUNSE L FOR THE ASSESSEE HAS ALSO RELIED UPON THE CASH FLOW STATEME NT / BANK ACCOUNT OF THE ASSESSEE TO STATE THAT THE INVESTMENTS WERE MADE OUT OF THE INTEREST FREE INCOME / RESERVES OF THE ASSESSEE. TH E INTEREST FREE FUNDS WERE CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE B EFORE THESE WERE UTILIZED FOR INVESTMENT. 7. THE ASSESSEE HAD TAKEN A SPECIFIC PLEA THAT NO E XPENDITURE WAS INCURRED FOR MAKING THE IMPUGNED INVESTMENT WHICH W ERE BASED ON THE RELEVANT EVIDENCE / ACCOUNTS OF THE ASSESSEE BU T THE ASSESSING OFFICER HAS FAILED TO RECORD HIS OBJECTIVE SATISFA CTION IN THIS RESPECT AND SIMPLY APPLIED RULE 8D OF THE INCOME TAX RULES. THE LD. ITA NOS. 354 & 1167/CHD/2018- M/S SUNEV PHARMA SOLUTIONS, PANCHKULA 5 CIT(A) FOLLOWED THE ORDER OF HIS PREDECESSOR FOR A SSESSMENT YEAR 2012-13, WHILE DECIDING THE APPEALS UNDER CONSIDE RATION AND SINCE THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2012-13 HAS BEEN SET ASIDE BY THE TRIBUNAL VIDE ORDER DATED 20.9.2017 (SUPRA) AND THE ISSUE HAS BEEN ALLOWED IN FAVOUR OF THE ASSESSEE, H ENCE, IN THE IDENTICAL FACTS AND CIRCUMSTANCES AND IN VIEW OF TH E OBSERVATIONS MADE ABOVE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2012-13, THE ISSUE FOR THE YEAR UNDER CONSIDERATION IS DECIDED IN FAVOUR OF T HE ASSESSEE AND THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFF ICER U/S 14A OF THE ACT IS ORDERED TO BE DELETED. ITA NO. 1167/CHD/2017 8. AS THE FACTS AND ISSUES RAISED IN BOTH THE APPEA LS ARE IDENTICAL, THEREFORE, OUR FINDINGS AND DECISION IN ITA NO.354 /CHD/2017 WOULD APPLY MUTATIS-MUTANDIS TO THIS APPEAL ALSO . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.08.2018 SD/- SD/- (B.R.R KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :06. 08.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR