M/s. Jindal Poly Films Ltd., New Delhi V. ACIT, New Delhi

ITA 3990/DEL/2016

AI Insights

The case involves M/s. Jindal Poly Films Ltd, which appealed against the order of the CIT(A)-30, New Delhi, concerning the assessment year 2006-07. The primary grievance was the rejection of their claim that a sales tax subsidy/incentive of Rs.22.63 crores should be treated as a capital receipt, not liable to tax under the Income Tax Act, 1961. This claim was made for the first time during the appellate proceedings. Additionally, the assessee contested disallowances made under section 14A and charges of interest under sections 234A, 234B, and 234D of the Act. The ITAT's decision was influenced by a preceding search and seizure operation and the subsequent assessment order, which was based on additions and disallowances made by the assessing officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121319 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 21-08-2023
• Assessment Year: 2006-2007
• Appeal Filed On: 10-07-2016
• Other Referred Cases: Abhisar Buildwell Private Limited 149 taxmann.com 399
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN
• Keywords: Search and seizure; Earning of tax free income; Capital receipt; Revised return; Set aside
• Section: 132; 153A; 234B; 14A; 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH.KUL BHARAT, JUDICIAL MEMBER ITA No.3990/Del/2016 Assessment Year: 2006-07 M/s. Jindal Poly Films Ltd 19 th K.M. Hapur- Bulandshahr Road, Gulaothi, Bulandshahr PAN No.AAACJ7650E Vs ACIT Central Circle-30 New Delhi (APPELLANT) (RESPONDENT) Appellant by Sh. Rohit Jain, Advocate Ms. Shivangi Jain, CA Respondent by Ms. Sapna Bhatia, CIT DR Date of hearing: 22/08/2023 Date of Pronouncement: 25/08/2023 ORDER PER N. K. BILLAIYA, AM: This appeal by the assessee is preferred against the order of the CIT(A)-30, New Delhi dated 20.05.2016 pertaining to A.Y.2006-07. 2. The substantive grievance of the assessee read as under :- 1. That the Commissioner of Income Tax (Appeals) [‘CIT(A)’] erred on facts and in law in rejecting grounds of appeal no. 1.1 (infra), raised by the appellant as additional ground, regarding claim of sales tax subsidy/ incentive as capital receipt, holding that there is no merit in the said claim made by the appellant which is made for the very 2 first time during the appellate proceedings. 1.1 That the CIT(A) erred on facts and in law in not appreciating that the sales tax subsidy/ incentive amounting to Rs.22.63 crores availed under the Package Scheme of Incentives (Maharashtra), 1993, ought to be treated as capital receipt not liable to tax under the provisions of the Income Tax Act, 1961 (‘the Act’). 1.2 That the CIT(A) erred on facts and in law in not discussing the merits of the above claim and rejecting the same alleging that: a) the appellant had, in earlier years, shown the amount of subsidy/ incentive as revenue receipt which was duly offered to tax; b) the amount/nature of subsidy/ incentive was nowhere accounted/shown by the appellant in the books of account of the appellant or the tax audit report; c) the appellant could have made the above claim by filing revised return of income under section 139(5) or return of income in response to notice issued under section 153A of the Act. 2. That the CIT(A) erred on facts and in law in confirming disallowance made by the assessing officer under section 14A of the Act without appreciating that the same was made de-hors any incriminating material/ document found/ seized during the course of search conducted in the case of appellant and therefore, bad in law. Without prejudice 2.1 That the CIT(A) erred on facts and in law in not appreciating that above disallowance was computed in a routine manner, without recording any finding/ satisfaction as to why the claim made by the appellant, that no expenditure was incurred to earn exempt income, was incorrect. 2.2 That the CIT(A) erred on facts and in law in not appreciating that disallowance computed under section 14A of the Act was incorrect inasmuch as the entire amount of investments was considered by the assessing officer including those investments on which no exempt income was earned by the appellant during the year under consideration. 2.3 2.That the CIT(A) further erred on facts and in law in directing the assessing officer to compute disallowance under section 14A on the basis of 0.5% of average 3 value of investments excluding only the amount of investments made in growth- oriented mutual funds. 3. That the CIT(A) erred on facts and in law in confirming action of the assessing officer in charging interest under section 234A, 234B and 234D of the Act. 3. Representative of both the sides were heard at length. Case records carefully perused and the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT Rules. 4. Briefly stated the facts of the case are that the return of income was filed on 24.11.2006 declaring total income at Rs.47698324/- which was assessed at Rs.47898324/- u/s. 143 (3) of the Act. The assessment was challenged before the CIT(A) and the CIT(A) allowed the relief and the assessed income was reduced to the returned income. Subsequently the assessment order dated 24.12.2009 was set aside by the CIT, Ghaziabad u/s. 263 of the Act. vide order dated 20.03.2012. 5. In the meantime a search and seizure action u/s. 132 of the Act was initiated in the case of the assessee group on 14.11.2011 and accordingly proceeding u/s. 153A were triggered which culminated into the assessment order dated 13.03.2015 framed u/s.153A of the Act at total income of Rs.62115752/-after making the addition on account of bogus expenses of Rs.10750651/- and disallowances u/s. 14A of Rs.3666777/-. 4 6. The assessment was challenged before the CIT(A) and an additional claim was made which read as under :- “That on the facts and circumstances of the case and in law, sales tax subsidy/ incentive amounting to Rs.22.63 crores availed under the Package Scheme of Incentives (Maharashtra), 1993 ought to be treated as capital receipt not liable to tax under the provisions of Income Tax Act, 1961”. 7. This additional ground was dismissed by the CIT(A) as the same was not claimed before the AO. 8. Before us the Counsel for the assessee vehemently justified the claim. As mentioned elsewhere a search and seizure operation was conducted on 14.11.2011 and, therefore, the impugned assessment year is unabated assessment year and, therefore, such unabated assessment can be reopened/ reassessed only on the basis of some incriminating material found at the time of search as held by the Hon’ble Supreme Court in the case of Abhisar Buildwell Private Limited 149 taxmann.com 399. since the impugned assessment is devoid of any incriminating material found at the time of search the assessment order deserves to be quashed. Since the assessment order has been quashed we do not find any merit in any claim of the assessee and we also do not 5 find it necessary to dwell into the merits of the claim. We order accordingly. 9. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 25.08.2023. Sd/- Sd/- [KUL BHARAT] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 25.08.2023 *Neha* Copy forwarded to: 1. Appellant 2. Respondent 3. CITi 4. CIT(A) 5. DR Asst. Registrar ITAT, New Delhi