Mihikita Infrastructure Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(4), Ahmedabad

ITA 4325/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6804 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-12-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Keywords: Opportunity of being heard; Earning of tax free income; Reasonable cause
• Section: 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.4325/AHD/2007 A. Y.: 2004-05 MIHIKITA INFRASTRUCTURE PVT. LTD. C/O. JINDAL JINDAL, 301, DHIRAJ AVENUE, AMBAWADI, AHMEDABAD VS THE INCOME TAX OFFICER, WARD 4(4), AHMEDABAD PA NO. AABCM 0492 J (APPELLANT) (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SMT. NEETA SHAH, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VI II, AHMEDABAD DATED 08-10-2007 FOR ASSESSMENT YEAR 2004-05. 2. EARLIER THIS APPEAL WAS DISMISSED IN DEFAULT VID E ORDER DATED 30-09-2010, HOWEVER THE SAME ORDER WAS RECALLED WHI LE ALLOWING MISC. APPLICATION OF THE ASSESSEE VIDE ORDER DATED 04-02-2011 AND THE ASSESSEE WAS DIRECTED TO APPEAR AND ARGUE THE M AIN APPEAL ON 11-04-2011. DESPITE NOTING THE ABOVE DATE OF 11-04 -2011 FOR HEARING OF THE MAIN APPEAL, NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE DATE FIXED FOR HEARING DESPITE NOTIFYING THE SAME. THE ASSESSEE HAS ONLY FORWARDED WRITTEN SUBMISSION WITH CERTAIN PAPE RS. THE LEARNED DR SUBMITTED THAT SINCE THE PAPERS FILED IN THE PAP ER BOOK ARE NOT ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 2 FILED AS PER RULE 18 OF THE APPELLATE TRIBUNAL RULE S AND NO CERTIFICATE IS GIVEN IN THE PAPER BOOK AS TO BEFORE WHICH AUTHO RITY THE SAME DOCUMENTS WERE FILED, THE LEARNED DR SUBMITTED THAT THE PAPERS/PAPER BOOK FILED NOT CONFORMING TO THE RULE MAY BE IGNORED. THE APPEAL IS HEARD IN THE ABSENCE OF THE ASSESSEE. SINCE NO CERTIFICATE IS GIVEN IN THE PAPERS/PAPER BOOK AND T HE PAPERS ARE ALSO NOT CERTIFIED TO BE TRUE COPY AND NO CERTIFICATE IS GIVEN AS TO WHETHER THESE PAPERS/PAPER BOOK WERE FILED BEFORE THE AUTHO RITIES BELOW, THE PAPERS/PAPER BOOK IS CONSIDERED AS NOT FILED IN CON FORMING TO RULE 18 OF THE APPELLATE TRIBUNAL RULES, SAME IS THEREFORE IGNORED. HOWEVER, WRITTEN SUBMISSION FILED BY THE ASSESSEE IS TAKEN I NTO CONSIDERATION. 3. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. 4. ON GROUND NO.1, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.8,53,515/- U/S 14A OF THE IT ACT. THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.1,62,375/- AND HAD INCURRED E XPENSES OF RS.8,46,724/- FOR SERVICE TAX, IPO FUNDING AND OTHE R EXPENSES WHICH ARE DIRECTLY FOR THE PURPOSE OF SHARES ON WHICH THE DIVIDEND IS RECEIVABLE. ALTHOUGH, THE DIVIDEND HAS NOT BEEN REC EIVED FROM 3 COMPANIES FOR WHICH THE ASSESSEE HAD OBTAINED IPO F UNDING FROM IL & FS, THE AO OBSERVED THAT THE DECISION IN THE C ASE OF MARUTI UDYOG LTD. AND S. G. INVESTMENTS & INDUSTRIES LTD., DO NOT HELP THE ASSESSEE AND THAT DIRECT NEXUS WAS ESTABLISHED AS T HE AMOUNTS GIVEN TO IL & FS FOR IPO FUNDING ARE THE AMOUNTS GI VEN FOR PURCHASE OF SHARES, SO THE AO DISALLOWED THE EXPENDITURE OF RS.8,46,724/- AND ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 3 FURTHER DEMAT CHARGES OF RS.6,791/-. IT WAS SUBMIT TED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE IS DEALING IN SHAR ES AND SECURITIES. DURING THE YEAR THE ASSESSEE HAD INVESTED IN THE IN ITIAL PUBLIC OFFER (IPO) OF COMPANIES AND BORROWED FUNDS FOR SUBSCRIPT ION IN IPO FROM IL & FS AND PAID SERVICE AND OTHER CHARGES. THE ASS ESSEE HAD SUBSCRIBED THE SAID SHARES FOR ITS BUSINESS AND NOT MERELY FOR INVESTMENT. THE MAIN MOTIVE OF THE ASSESSEE WAS TO EARN PROFIT ON SALE OF SUCH SHARES. THE DIVIDEND RECEIVED IS ONLY INCIDENTAL BENEFIT. THE ASSESSEE RELIED UPON THE DECISION IN THE CASE O F MAFATLAL HOLDING LTD. VS ADDL. CIT 85 TTJ 821 (MUM) IN WHICH IT WAS HELD DEALING IN SHARES WAS THE BUSINESS OF THE COMPANY AND THE EXPE NDITURE WAS ALLOWABLE U/S 36 (1) (III) OF THE IT ACT IN SPITE O F THE FACT THAT NO DIVIDEND INCOME HAS BEEN EARNED ON THE SAID SHARES. IT WAS SUBMITTED THAT PROVISIONS OF SECTION 14A OF THE IT ACT WOULD BE APPLICABLE IF INTEREST PAID IS IN RELATION TO THE D IVIDEND EARNED. THE PRIMARY MOTIVE OF THE ASSESSEE WAS TO SUBSCRIBE SHA RES FOR BUSINESS AND NOT TO EARN THE TAX FREE INCOME. THE ASSESSEE A LSO RELIED UPON OTHER DECISIONS BEFORE THE LEARNED CIT(A). IT WAS S UBMITTED THAT DISALLOWANCE U/S 14 A OF THE IT ACT IS CALLED FOR O NLY IF EXPENDITURE HAS BEEN INCURRED FOR EARNING SUCH EXEMPT INCOME WH ICH IS NOT THE CASE OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ALL OTTED SHARES HAVE BEEN INCLUDED IN THE STOCK IN TRADE OF THE ASSESSEE . THE LEARNED CIT(A) CONSIDERING THE SUBMISSION OF THE ASSESSEE C ONFIRMED THE ADDITION. HIS FINDINGS IN PARA 6.2 ARE REPRODUCED A S UNDER: 6.2 SUBMISSIONS OF THE LD. COUNSEL HAVE BEEN CONSIDERED. I DO NOT AGREE WITH THE CONTENTION OF T HE LD. A. R. AS DIVIDEND INCOME IS EXEMPT THE CORRESPONDIN G ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 4 EXPENDITURE INCURRED FOR EARNING THE DIVIDEND INCOM E IS NOT ALLOWABLE U/S 14A OF THE I. T. ACT. I FIND THAT IN THE CASE CITED BY THE LD. A. R. I. E. VIDYUT INVESTMENT LTD., THE ASSESSING OFFICER HAS FOUND THAT EARNING OF PROFIT BY TRADING IN SHARES AND EARNING OF DIVIDEND ARE INSEP ARABLE, SO THE ASSESSING OFFICER HAS RESTORED TO PROPORTION ATE DISALLOWANCE OF EXPENSES. THE FACTS OF THE CITED CA SE ARE DIFFERENT FROM THE PRESENT CASE AS IN THE PRESENT C ASE THE EXPENDITURE OF RS.8,46,724/- FOR SERVICE TAX, IPO F UNDING AND OTHER EXPENSES HAVE BEEN DIRECTLY INCURRED FOR PURCHASE OF SHARES ON WHICH THE DIVIDEND IS RECEIVA BLE AND DIRECT NEXUS HAS BEEN ESTABLISHED AS THE AMOUNT S GIVEN TO IL & FS FOR IPO FUNDING ARE THE AMOUNTS GI VEN FOR PURCHASE OF SHARES. FURTHER THE CASE OF MAFATLA L HOLDINGS LTD. WAS ON CLAIM ON DEDUCTION U/S 36(1) ( III) FOR INTEREST ON BORROWED CAPITAL. FURTHER I FIND THAT I N FOLLOWING CASES DISALLOWANCE HAS BEEN UPHELD:- (1) EVERPLUS SECURITIES & FINANCE LTD. 101 ITD 151/285 ITR (AT) 112 (DEL) (2) RHYTHM EXPORTS (P) LTD. VS CIT 2 SOT (MUM) 429/97 TTJ 493 (MUM) (3) HARISH KRISHNAKANT BHATT VS ITO 278 ITR (AT) 1 (AHD.) (4) MUMBAI BENCH IN THE CASE OF ACIT VS CITI CORP FINANCE INDIA LTD., REPORTED IN 111 TTJ 82 (MUM) WH EREIN IT HAS BEEN HELD THAT IT IS NOT CORRECT TO SAY THAT DIVIDEND INCOME CAN BE EARNED BY INCURRING NO OR NOMINAL EXPENSES AND ALL EXPENSES CONNECTED WITH SUCH EXEMP T INCOME HAVE TO BE DISALLOWED U/S 14A REGARDLESS OF WHETHER THEY ARE DIRECT OR INDIRECT., FIXED OR VARI ABLE AND MANAGERIAL OR FINANCIAL AND PROVISIONS OF SUB SECTI ON 2 AND 3 OF SEC. 14A INSERTED BY FINANCE ACT 2006 ARE PROCEDURAL IN NATURE AND HENCE APPLY TO ALL PENDING MATTERS. IN VIEW OF THE ABOVE FACTS AND LEGAL POSIT ION, THIS GROUND OF APPEAL IS DISMISSED. ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 5 5. IN THE WRITTEN SUBMISSION SAME SUBMISSIONS HAVE BEEN REITERATED AND IT IS SUBMITTED THAT ASSESSMENT YEAR UNDER APPEAL IS 2004-05 AND SUB-SECTION (2) AND (3) OF SECTION 14A OF THE IT ACT HAVE BEEN INSERTED IN THE ACT WITH EFFECT FROM 01-04-200 7 AND ARE NOT PROCEDURAL IN NATURE AND NOT APPLICABLE TO ALL THE PENDING MATTERS, HENCE NOT APPLICABLE TO THE ASSESSEES CASE. RELIAN CE WAS MADE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF GODREJ & BOYCE AND MANUFACTURING CO. LTD., MUMBAI. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIE S BELOW. 6. ON CONSIDERATION OF THE FACTS AND SUBMISSIONS OF THE PARTIES, WE ARE OF THE VIEW THE MATTER IS NOT COVERED BY THE RECENT DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS DCIT AND ANOTHER 328 ITR 81 IN WHICH IT WAS HELD AS UNDER: HELD, THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAD TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON RECORD. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED TO THE ASSESSING OFFICER. THE ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 6 ASSESSING OFFICER SHOULD DETERMINE AS TO WHETHER THE ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) IN RELATION TO DIVIDED INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHOULD PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IN VIEW OF THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND R ESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE SAME AFRESH AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS DCIT AND ANOTHER (SUPRA). THE ASSESSEE IS AT LIBERTY TO RAISE ANY OTHER LEGAL PLE A BEFORE THE AO WITH REGARD TO APPLICABILITY OF THE PROVISIONS OF SECTIO N 14A OF THE IT ACT IN THE MATTER. THE AO SHALL DECIDE THE ISSUE IN ACCORD ANCE WITH LAW AND CONSIDERING THE ABOVE DECISION. THE AO SHALL GIVE R EASONABLE SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF PRODUCING RELEVANT MATERIAL BEFORE HIM ON THE FACTS AND CIRCUMSTANCES OF THE CA SE. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. 7. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.33,700/- U/S 94(7) OF THE IT ACT FOR DISALLOWANC E OF DIVIDEND STRIPPING. THE AO OBSERVED THAT THE ASSESSEE HAD AC QUIRED SHARES WITHIN A PERIOD OF 3 MONTHS PRIOR TO THE RECORD DAT E AND AFTER RECEIVING ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 7 THE DIVIDEND HAS SOLD THE SHARES AFTER INCURRING LO SSES. THE DISALLOWANCE WAS ACCORDINGLY MADE. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE IS DEALING IN SHAR ES AND SECURITIES WHICH IS THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE . AFTER SELLING THE SAID SECURITIES THE ASSESSEE HAS NOT RE-PURCHASED O R RE-SOLD THE SAID SECURITIES. THEREFORE, PROVISIONS OF SECTION 94(7) OF THE IT ACT ARE NOT ATTRACTED. THE LEARNED CIT(A) HOWEVER, DID NOT ACCE PT THE CONTENTION OF THE ASSESSEE BECAUSE AS PER THE PROVISIONS OF SE CTION 94 (7) OF THE IT ACT, IF ANY PERSON, PURCHASES SECURITIES WITHIN THE PERIOD OF 3 MONTHS PRIOR TO THE RECORD DATE AND SELLS WITHIN A PERIOD OF 3 MONTHS AFTER SUCH DATE, THE LOSS ARISING TO HIM ON ACCOUN T OF TRANSACTION IN SECURITIES TO THE EXTENT SUCH LOSS DOES NOT EXCEED THE AMOUNT OF DIVIDEND SHALL BE IGNORED. 8. IN THE WRITTEN SUBMISSION THE ASSESSEE REITERATE D THE SAME SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ON T HE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHOR ITIES BELOW. 9. CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. IN THE CASE OF ASSESSMENTS BEFORE 01-04-2002 I.E. BEFORE THE INSER TION OF SECTION 94(7) OF THE IT ACT, THE LOSSES PERTAINING TO EXEMP TED INCOME CANNOT BE DISALLOWED. HOWEVER, AFTER 01-04-2002, SUCH LOSS ES TO THE EXTENT OF DIVIDEND RECEIVED BY THE ASSESSEE COULD BE IGNOR ED BY THE AO IN VIEW OF SECTION 94 (7) OF THE IT ACT. APPLYING SECT ION 94(7) OF THE IT ACT TO THE CASES FOR ASSESSMENT FALLING AFTER 01-04 -2002, THE LOSSES TO BE IGNORED WOULD BE ONLY TO THE EXTENT OF DIVIDE ND RECEIVED AND NOT ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 8 THE ENTIRE LOSSES. IN OTHER WORDS, LOSSES OVER AND ABOVE THE AMOUNT OF RECEIPTS WOULD STILL BE ALLOWED FROM WHICH IT FO LLOWED THAT THE PARLIAMENT HAD NOT TREATED THE DIVIDEND STRIPPING I NCOME AS SHAM OR BOGUS. AFTER 01-04-2002 LOSSES OVER AND ABOVE DIVID END RECEIVED WOULD NOT BE IGNORED U/S 94 (7) OF THE IT ACT. WE R ELY UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS WALFORD SHARE & STOCK BROKERS PVT. LTD. 326 ITR 1. IN THE CASE OF CIT VS SHAMBHU MERCANTILE LTD. REPORTED IN 25 DTR 164 (DEL HI), IT WAS HELD THAT CONDITIONS OF SECTION 94(7) (A), (B) AND ( C ) ARE TO BE CUMULATIVELY SATISFIED IN INVOKING PROVISIONS OF SE CTION 94(7) OF THE ACT. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE PROVISIONS, WE FIND THAT THE AO HAS NOT DISCUSSED T HE COMPLETE FACTS IN THE ASSESSMENT ORDER AS PER THE REQUIREMENT OF L AW. ONLY THE NAME OF 3 COMPANIES ARE RECORDED FOR WHICH THE SECU RITIES WERE INVOLVED. THE NUMBER OF DAYS, DIVIDEND AND LOSS HAS BEEN NOTED. THE EXPLANATION OF THE ASSESSEE HAS NOT BEEN CONSIDERED . IT WOULD, THEREFORE, SHOW THAT THE MATTER REQUIRES RECONSIDER ATION AT THE LEVEL OF THE AO. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH D IRECTION TO RE-DECIDE THE ISSUE AS PER LAW BY GIVING REASONABLE SUFFICIEN T OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 10. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.30,000/- U/S 40A (3) OF THE IT ACT. IT IS NOTED THAT THE ASSESSEE HAS PAID REMUNERATION TO THE DIRECTORS IN CASH TO T HE TUNE OF RS.1,50,000/- AND NO REASONABLE CAUSE COULD BE EXPL AINED. ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 9 DISALLOWANCE WAS ACCORDINGLY MADE U/S 40A (3) OF TH E IT ACT. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT SALARY IS PAID TO THE DIRECTORS AND THEREFORE, ACCORDING TO RULE 6DD (J) OF THE IT RULES FOR SUCH PAYMENT IS NOT HIT BY SECTION 40A (3) OF THE I T ACT. THE LEARNED CIT(A) HOWEVER, REJECTED THE CONTENTION OF THE ASSE SSEE BECAUSE RULE 6 DD (J) OF THE IT RULES WILL APPLY WHEN SALAR Y IS PAID TO THE EMPLOYEES AFTER DEDUCTING TDS FROM SALARY AND WHEN THE EMPLOYEE DOES NOT MAINTAIN BANK ACCOUNT. ADDITION WAS ACCORD INGLY CONFIRMED. NOTHING IS STATED IN THE WRITTEN STATEMENT. THE LEA RNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 11. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS GROUND OF APPEAL OF THE A SSESSEE. NO EXPLANATION IS MADE BEFORE THE AO AT THE TIME OF AS SESSMENT AND THE ASSESSEE COULD NOT FURNISH ANY REASONABLE CAUSE FOR MAKING PAYMENT IN CASH IN VIOLATION OF THE ABOVE PROVISION S OF LAW. WHATEVER EXPLANATION WAS GIVEN BEFORE THE LEARNED CIT(A) WAS NOT IN ACCORDANCE WITH THE RULES. THE LEARNED CIT(A) CORRE CTLY NOTED THAT RULE 6 DD (I) OF THE IT RULES WOULD APPLY WHEN THE SALARY IS MADE TO THE EMPLOYEE AFTER DEDUCTING INCOME TAX FROM THE SA LARY AND THAT THE EMPLOYEE DOES NOT MAINTAIN ANY BANK ACCOUNT AT SUCH PLACE. SINCE THE CONDITIONS OF RULE 6 DD (I) OF THE IT RULES HAV E NOT BEEN SATISFIED IN THIS CASE, WE DO NOT FIND ANY MERIT IN THE CASE OF THE ASSESSEE. SAME IS ACCORDINGLY DISMISSED. ITA NO.4325/AHD/2007 MIHIKITA INFRASTRUCTURES PVT. LTD. VS ITO W-4(4), A HMEDABAD 10 12. ON GROUND NO.4, THE ASSESSEE CHALLENGED LEVY OF INTEREST U/S 234A AND 234B OF THE IT ACT WHICH IS MANDATORY AND CONSEQUENTIAL IN NATURE. THE SAME IS ACCORDINGLY DISMISSED. 13. ON GROUND NO.5, THE ASSESSEE CHALLENGED IMPOSIT ION OF PENALTY U/S 271 (1) (C) OF THE IT ACT WHICH IS DISTINCT AND SEPARATE PROCEEDINGS AND AS SUCH THIS GROUND IS PRE-MATURED AND INFRUCTUOUS AND IS ACCORDINGLY REJECTED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21-04-2011 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 21-04-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD