M/s. Elegant Security Services Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3877/DEL/2014

• Counselvise Citation: 387720114 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 08-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Assessee Lawyers: SURENDER KR
• Keywords: Earning of tax free income
• Section: 143(3); 133A; 14A; 132; 11

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH SMC - 2 : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 3877 /DEL/201 4 A.Y. : 20 10 - 11 M/S ELEGANT SECURITY SERVICES PVT. LTD., VS. DCIT, CENTRAL CIRCLE - 13, ZB - 9, SAH VIKASH SOCIETY, NEW DELHI 68 - I.P. EXTENSION, DELHI - 110 0 92 (PAN: AABCE3756D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SURENDER KR., CA DEPARTMENT BY : SH. ROBIN RAWAL, SR. DR DATE OF HEARING : 08 - 07 - 2015 DATE OF ORDER : 2 4 - 0 8 - 2015 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I , NEW DELHI DATED 08 .5.2014 PERTAINING TO ASSESSMENT YEAR 20 10 - 1 1 . 2. T HE GROUND RAISED IN THE APPEAL READ AS UNDER: - THAT THE ORDER DATED 8.5.2014 PASSED U/S. 250 OF THE INCOME TAX ACT, 1961 BY THE LD. CIT(A) - I, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LD. DCIT, CENTRAL CIRCLE - 13, NEW DELHI IN DISALLOWING AN ADDITIONAL SUM OF RS. 8,74,650/ - IN RESPECT OF EXPENSES INCURRED IN RELATION TO EARNING EXEMPT INCOME BY RESORT TO PROVISIONS OF SECTION 14A OF THE INCOME TAX 2 ACT, 1961 READ TOGETHER WITH RULE 8D OF THE INCO ME TAX RULES, 1962 AS AGAINST DISALLOWANCE OF RS. 42,718/ - ALREADY MADE BY THE APPELLANT COMPANY WHILE FILING THE RETURN OF INCOME. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH, SEIZURE AND SURVEY OPERATION U/S. 132 AND 133A OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT IN THE BHUSHAN STEEL GROUP OF CASES ON 3.3.2010. THE CASE OF THE ASSESSEE COMPANY WAS COVERED UNDER THE SURVEY OPERATION U/S. 133A OF THE INCOME TAX ACT, 1961. THE CASE OF THE ASSESSEE COMPANY WAS CENTRALIZED BY THE CIT, DELHI - IV, NEW DELHI VIDE ORDER U/S. 127(2) OF THE INCOME TAX ACT, 1961 ON 3.9.2010. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR THE AY 2010 - 11, DECLARED AN INCOME OF RS. 4,00, 049/ - ON 28.9.2010. THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961. THE CASE OF THE ASSESSEE COMPANY WAS SELECTED FOR SCRUTINY ASSESSMENT. INITIAL NOTICE U/S. 143(2) WAS ISSUED ON 26.5.2011. ANOTHER NOTICE U/S. 143(2) OF THE I.T. ACT , 1961 WAS ISSUED ON 16.9.2011. THE DETAILED QUESTIONNAIRE WAS ISSUED ON 3.10.2011. IN RESPONSE, ASSESSEE S AUTHORIZED REPRESENTATIVE SH. SANJEEVA NARAYAN, CA ATTENDED THE PROCEEDINGS FROM TIME TO TIME, FILED NECESSARY DETAILS/ CLARIFICATIONS. THE ASSESS EE COMPANY WAS ASKED TO GIVE DETAILED NOTE ON THE APPLICABILITY OF SECTION 14A OF THE INCOME TAX ACT, 1961 IN RESPECT OF THE ASSESSEE COMPANY VIDE QUESTIONNAIRE DATED 3.10.2011. THE ASSESSEE COMPANY HAS SUBMITTED ITS REPLY DATED 11.11.2011 STATING THEREI N THAT THE ASSESSEE COMPANY HAS EARNED DIVIDENDS DURING THE YEAR UNDER ASSESSMENT AND THE ASSESSEE COMPANY HAS DISALLOWED RS. 42,718/ - U/S. 14A. HOWEVER, THE AO BY MAKING THE DETAILED COMPUTATION OF EXPENSES INCURRED IN 3 RELATION TO EXEMPT INCOME AS PER T HE PROVISIONS OF SECTION 14A R.W.R. 8D AS UNDER: - S.NO. PARTICULARS AMOUNT (RS.) 1. THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES FORM PART TOTAL INCOME. A 2. EXPENDITURE ON INTEREST B RS. 2,467/ - 3. THE AVERAGE OF VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME C RS. 18,29,90,861/ - 4. THE AVERAGE OF TOTAL ASSET APPEARING IN THE BALANCE SHEET OF THE ASSESSEE D RS. 18,70,00,585/ - 5. B X C/D RS. 2,414/ - 6. % OF THE AVERAGE OF THE VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. E RS. 9,14,954/ - TOTAL RS. 9,17,368/ - THE DISALLOWANCE U/S. 14A R.W.R 8D WAS AMOUNTING TO RS. 9,17,368/ - . AO OBSERVED THAT THE ASSESSEE COMPANY HAS ALREADY DISALLOWED OF RS. 42,718/ - U/S. 14A. HENCE, HE ADDED THE TOTAL AMOUNT OF RS. 8,74,650/ - (RS. 9,17,368 RS. 42,718) TO THE TOTAL INCOME OF THE ASSESSEE COMPANY VIDE ORDER DATED 28 .3.2013 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961. 4 . AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 8 .5.2014 DISMISSED THE APPEAL O F THE ASSESSEE. 4 5 . AGAINST THE ABOVE MENTIONED IMPUGNED ORDER DATED 8 .5.2014, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. COUNSEL OF THE ASSESSEE HAS REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND STATED THAT ADDITION IN DISPUTE AMOUNTING TO RS. 8,74,650/ - MAY BE DELETED. 7 . ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER S OF THE REVENUE AUTHORITIES AND REQUESTED THAT THE SAME MAY BE UPHELD. 8 . I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES. IN REGARD TO THE ISSUE IN DISPUTE RELATING TO DISALLOWANCE U/S 14A, READ WITH RULE 8D IS CONCERNED, I FIND FORCE IN THE ASSESSEE S CONTENTION THAT IN TERMS OF THE PROVISIONS OF SECTION 14A(2), PRESCRIBED METHOD U/R. 8D CAN BE APPLIED ONLY WHERE THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, REGARDING THE EXPENSES INCURRED FOR EARNING EXEMPT INCOME, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. I FURTHER FIND THAT LD. COUNSEL OF THE ASSESS EE RELIED UPON THE HON BLE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. MAXOPP INVESTMENT LTD. (ITA NO. 687/2009), SUCH A LACK OF SATISFACTION SHOULD BE ON COGENT GROUND. THEREFORE, IN LACK OF SATISFACTION OF THE A O WITH THE CLAIM OF THE A SSESSEE, CANNOT BE HELD TO BE ON ANY COGENT GROUND. IN VIEW OF THIS, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAXOPP (SUPRA), IT IS HELD THAT THE A O COULD NOT HAVE AUTOMATICALLY INVOKED THE PROVISION OF RULE 8D. IN VIE W OF THIS, THE DISALLOWANCE MADE U/S 14A READ WITH RULE 8D DESERVE TO BE DELETED. 8.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT AS AFORESAID, I QUASH THE ORDERS OF THE REVENUE AUTHORITIES AND DELETE THE 5 ADDITION AND ACCORDINGLY, ALLO W THE ISSUE IN DISPUTE IN FAVO U R OF THE ASSESSEE. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON 2 4 / 8 /201 5 . S D / - [ H.S. SIDHU ] JUDICIAL MEMBER DATE: 2 4 / 8 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES 6