Shree Durga Syntex Pvt Ltd, Surat V. PCIT-1, Aayakar Bhavan, Surat

ITA 383/SRT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6062 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-07-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 04-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Earning of tax free income; Rule 8D; Set aside
• Section: 263; 154; 143(3); 14A

Judgement Text

आयकर अपीलीय अिधकरण, सुरत Ɋायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आ.अ.सं./ITA No.383/SRT/2024 (AY 2018-19) (Hearing in Physical Court) Shree Durga Syntex Pvt. Ltd. Plot No.2, Block No.90, Kadodra, Jolva, Surat-394005 [PAN : AABCD 8894 P] Vs Principal Commissioner of Income-tax, Surat-1, Aaykar Bhavan, Majura Gate-395001 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Ms. Chaitali Shah, CA राजˢ की ओर से /Revenue by Shri S.M.Keshkamat, CIT-DR अपील पंजीकरण/Appeals instituted on 05.04.2024 सुनवाई की तारीख/Date of hearing 03.07.2024 उद्घोषणा की तारीख/Date of pronouncement 03.07.2024 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of learned Principal Commissioner of Income-tax-Surat-1 [for short to as ‘Ld. PCIT’] passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 13.03.2024 for assessment year (AY) 2018-19 which in turn the assessment order under section 143(3) r.w.s. 144B of the Act on 21.04.2021. The assessee has raised the following grounds of appeal:- “1. On the facts and circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in passing the order u/s 263, although the assessment order passed u/s 143(3) r.w.s. 14B of the I.T. Act, 1961 was neither erroneous nor prejudicial to the interest of the Revenue. 2. On the facts and circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in giving direction to Assessing ITA No.383/SRT/2024 (A.Y 18-19) Shree Durga Syntex Pvt. Ltd. 2 Officer in para no.6.1 and 6.2 of the revision order to make the addition of Rs.1,06,234/- u/s 14A when there was no exempt income. 3. On the facts and circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in setting aside the order passed/s 143(3) r.w.s.144B with a direction to the Assessing Officer as per para no.9 of the revision order to pass fresh assessment order after taking into consideration, the issues as may be considered together with the issues discussed in order. Accordingly, PCIT has erred in setting aside the assessment order making it wide open instead of restricting the issues raised in show cause notice. 4. It is therefore prayed that the above order passed by Pr.CIT u/s 263 may please be quashed or modified as your honours deem it proper. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of appeal.” 2. Rival submissions of both the parties heard and record perused. Ld. Authorized Representative (Ld.AR) for the assessee submits that Ld. PCIT while exercising his jurisdictional under section 263 of the Act set aside the assessment order passed under section 143(3) r.w.s. 144B passed on 21.04.2021. The Ld. AR of the assessee submits that before passing the impugned order under section 263, the Ld. PCIT issued show cause notice on 22.02.2024, copy of show cause notice is filed at page No. 1 to 5 of paper book(PB). In the show cause notice, the Ld. PCIT identified two issues for his consideration for revising assessment order; (i) issue relates to delay in deposit in PF & ESI contribution deposited the assessment order and disallowed such contribution; (ii) issue relates to disallowance under ITA No.383/SRT/2024 (A.Y 18-19) Shree Durga Syntex Pvt. Ltd. 3 section 14A read with rule 8D. The Ld. PCIT on the basis of detailed available in the balance-sheet, forming part for income tax return, noted that assessee made investment in listed / unlisted equity shares during the year under consideration. The Ld. PCIT extracted such details from financial reporting and also noted that assessee has made certain investments as has been recorded in para-4 of show cause notice. On the basis of such observation, the Ld. PCIT was of the view that no exempt income can be earned without any investment and assessee must have made certain expenditure in connection with investment made on unlisted equity share of private limited companies, however, no disallowance in connection with such expenditure is made. The average opening and closing balance of investments, which may have yielded exempt income is Rs.1,06,23,475/-. The Ld. PCIT further recorded that it appears that Assessing Officer has failed to make appropriate disallowance under section 14A read with Rule 8D disallowance, with regard to exempt income which may have earned. On the basis of such observation, Ld. PCIT was of the view that assessment order dated 21.04.2021 is erroneous so far as prejudicial to the interest of revenue. There is lack of enquiry as well as verification by Assessing Office. The Ld. PCIT accordingly, issued show cause notice to the assessee file reply on or before 29.02.2024. 3. The ld AR for the assessee submits that assessee filed their reply to the said show cause brought to the notice of Ld. PCIT. In the reply the assessee stated that Assessing Officer has already passed rectification ITA No.383/SRT/2024 (A.Y 18-19) Shree Durga Syntex Pvt. Ltd. 4 order under section 154 by disallowing employees contribution towards PF and ESI in his order dated 18.01.2022. On the second issue, assessee contended that no investment is made during the year, all investments are old investments as can be verified from Note No.10 of audited balance- sheet where previous year figure was also mentioned. Further, assessee has not earned any exempt income on such investment, so averment made in the show cause notice are factually incorrect. The assessee reiterated that they have not earned any exempt income, as no exempt income is earned no disallowance was made by Assessing Officer in the assessment order. Similar issue was examined in assessment for assessment year 2013-14, wherein certain disallowance was made under section14A of the Act, which was deleted by Ld.CIT(A) on the ground that assessee has not earned any exempt income by following the decisions of Hon’ble jurisdictional High Court in the case of Corrtech Energy (P.) Ltd. [2014] 45 taxmann.com 116 (Guj). On further appeal by the Revenue, the order of Ld.CIT(A) was confirmed by this Tribunal in the case of DCIT vs. M/s Shree Durga Syntex Pvt. Ltd. in ITA No.58/SRT/2020 for assessment year 2013-14 dated 29.06.2022 (copy of said decision was also filed). The Ld. AR of the assessee also relied upon the decision of other Hon’ble High Court on similar issue that when no exempt income is earned, no disallowance is warranted. The Ld. PCIT despite recording such fact, in para-6 of his order has held that assessee has claimed various decisions in his order for dropping the proceedings under section 263 of the Act. ITA No.383/SRT/2024 (A.Y 18-19) Shree Durga Syntex Pvt. Ltd. 5 The submission of assessee is not supported by the facts or documentary evidence. The Ld. PCIT has not examined or verified audited balance-sheet all financial statements, which were placed before him. The Ld. PCIT in his order reiterated that assessee made investments of Rs.1.06 crores as on 31.03.2018 and assessee has claimed financial expenses during the year. The Ld. PCIT by disregarding the judicial pronouncement proposed disallowance @1% of average investment of Rs.1.06 crores. The ld PCIT held that omission on the part of Assessing Officer resulted underassessment of income to the extent of Rs.1,06,234/- and directed the Assessing Officer to pass fresh assessment order after taking into consideration the issues which may have been already considered together with the issue discussed by him. The Ld. AR of the assessee submits that direction in para-9 of his order is beyond the scope of show cause notice under section 263 of the Act. The Ld.AR of the assessee submits that the assessment order passed by Assessing Officer is neither erroneous nor prejudicial to the interest of revenue. The Assessing Officer has not made any disallowance consciously as there was no exempt income. The assessee has not made any fresh investment during the year and all the investments are old investments as has been pointed out in Note No.10. The Ld. AR of the assessee further submits that moreover the grounds of appeal / issue raised by assessee already covered in favour of assessee in assessee’s own case for assessment year 2013-14 in ITA No.30/SRT/2020 dated 29.06.2022. To support her submission, Ld.AR of the assessee also ITA No.383/SRT/2024 (A.Y 18-19) Shree Durga Syntex Pvt. Ltd. 6 filed copy of Note No.10 about non-current investment showing the same investment as on 31.03.2018 which was shown on 31.03.2017. The Ld. AR of the assessee submits that these details were available before Assessing Officer and was furnished before Ld.PcIT also. To support her legal contention, that when no exempt income is received no disallowance under section 14A is to be made relied upon following case law:  CIT vs. Corrtech Energy (P.) Ltd. [2014] 45taxmann.com 116 (Guj)  Cheminvest Ltd. vs. CIT [2015] 61taxmann.com 18 (Del) 4. On the other hand, Ld. Commissioner of Income-tax Departmental Representative (Ld.CIT-DR) for the Revenue supported the order of Ld. PCIT. The Ld.CIT-DR submits that assessment order is silent about the issue, if the issue is examined by Assessing Officer, the Ld. PCIT has passed a detailed and reasoned order, which he supports. 5. We have considered the rival submission of both the parties and perused record carefully. We have also deliberated on various case law relied by Ld.AR of the assessee. We find that there is no dispute that case of assessee was selected for complete scrutiny on the issue of “Duty Drawback” to ICDS and expenditure by way of penalty or fine on violation of law. The impugned issue was not specifically mentioned in the selection note. We find that Ld. PCIT in his show cause notice issued under section 263 dated 22.02.2024 identified two issues –(i) on disallowance of employees contribution towards PF and ESI, which was deposited after due date prescribed under the relevant statues. We find that on such issue, the assessee has already brought to the notice of Ld. PCIT that on such ITA No.383/SRT/2024 (A.Y 18-19) Shree Durga Syntex Pvt. Ltd. 7 issue, the Assessing Officer has already passed order under section 154 of the Act for disallowing such expenditure. Thus, issue will no more survive. So far as issue (ii) identified by Ld. PCIT relates to disallowance under section 14A read with Rule 8D is concern, we find that first and foremost contention of assessee was that there was no fresh investment and moreover no exempt income on such investment is yielded during the year. We find that Ld.AR of the assessee has invited our attention on non- current investment as shown as on 31.03.2018 was exactly same as on 31.03.2017. Thus, there is no fresh investment, moreover assessee has not claimed any exempt income any computation their total income. We find that such fact was brought in the notice of Ld. PCIT, which is not otherwise disputed by him in his entire order. We find that it is settled law that when no exempt income is earned during relevant financial year and no disallowance under section 14A is warranted, as has been held by Hon’ble jurisdictional High Court as well as Hon’ble Delhi High Court in the case of Corrtech Energy (P.) Ltd (supra) and Cheminvest Ltd. (supra) respectively. Considering the settled legal position that when no exempt income was earned by the assessee on making investment, moreover no fresh investment was made no disallowance under section 14A is to be made. Therefore, the assessment order is not at all erroneous on this issue. Thus, the twin conditions prescribed by invoking power under section 263 of the Act by Ld. PCIT is not made out in the present case. Thus, in view of the aforesaid factual and legal discussion, the impugned ITA No.383/SRT/2024 (A.Y 18-19) Shree Durga Syntex Pvt. Ltd. 8 order passed by Ld.P CIT on 13.03.2024 is quashed / set aside. This ground of assessee’s appeal is allowed. 6. In the result, appeal of assessee is allowed. Order pronounced in the open court on 03/07/2024. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) [लेखा सद˟/ACCOUNTANT MEMBER][Ɋाियक सद˟ JUDICIAL MEMBER] सूरत /Surat, Dated: 03 /07/2024 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order Sr.P.S./Assistant Registrar, ITAT, Surat