DCIT, Circle-11(1), New Delhi V. Hero Corporate Services Pvt. Ltd., New Delhi

ITA 4341/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4613 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 30-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIMA
• Keywords: Depreciation; Earning of tax free income; Revised return; TDS; Rule 8D
• Section: 143(3); 14A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.4341/DEL/2017 (ASSESSMENT YEAR 2011-12) DY. CIT, CIRCLE-11(1), NEW DELHI. VS. M/S HERO CORPORATE SERVICES PVT. LTD., E-1, QUTAB HOTEL COMPLEX, SHAHEED JEET SINGH MARG, NEW DELHI-110 016. PAN AAACH 1277P (APPELLANT) (RESPONDENT) APPELLANT BY MS. ANIMA, SR. DR RESPONDENT BY NONE DATE OF HEARING 14.07.2021 DATE OF PRONOUNCEMENT 30.09.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST O RDER DATED 06.03.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-39, NEW DELHI {CIT(A)} AND PERTAINS T O ASSESSMENT YEAR 2011-12. 2 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE RESPONDENT IS ENGAGED IN THE BUSINESS OF CONSULTANC Y, ONLINE DATA, RETRIEVAL SERVICES, CORPORATE INSURANCE AGENCY, SOF TWARE DEVELOPMENT ETC. THE RETURN OF INCOME FOR THE YEAR WAS FILED DECLARING AN INCOME OF RS.18,41,86,642/- WHICH WAS SU BSEQUENTLY REVISED DECLARING AN INCOME OF RS.18,41,86,642/- BY CLAIMING ENHANCED AMOUNT OF TAX DEDUCTED AT SOURCE (TDS). TH E ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) WAS COMPLETED AT AN INCOME OF RS.22,13,85,570/- AFTE R MAKING THE FOLLOWING ADDITIONS AND DISALLOWANCES:- (I) ADDITION U/S 14A RS.2,76,36,280/- (II) ADDITION ON ACCOUNT OF DISALLOWANCE OF BANK CHARGES INCURRED FOR CORPORATE GUARANTEES RS.94,55,537/- (III) ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES RS.1,07,111/- 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE L D. FIRST APPELLATE AUTHORITY CHALLENGING THE ADDITIONS AND DISALLOWANCE S. THE APPEAL OF THE ASSESSEE WAS ALLOWED BY THE LD. CIT(A). 3 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. 2.2 NOW, THE DEPARTMENT HAS APPROACHED THIS TRIBUNA L CHALLENGING THE ACTION OF THE LD. CIT(A) IN DELETIN G THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE GROUNDS RAISED BY THE DEPARTMENT ARE AS UNDER:- 1. WHETHER ON THE FACTS & CIRCUMSTANCES OF CASE, THE ID. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE U/S 14A R.W.R. 8D IGNORING THE FACT THAT THE ASSESSEE COMPA NY DIDN'T PRODUCE THE SPECIFIC DOCUMENTS IN THE SHAPE OF SCRI PTS OF THE MUTUAL FUNDS/SHARES IN ALL THE CASES OF THE INV ESTMENT MADE AS APPEARING IN THE BALANCE SHEET SO THAT THE INVEST WHICH MAY YIELD EXEMPT INCOME. 2. WHETHER ON THE FACTS & CIRCUMSTANCES OF CASE, THE LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE U/S 14A R.W.R 8D EVEN WITHOUT INDENTIFYING THE INVESTMENT W HICH IS NOT RELATED TO EXEMPT INCOME. 3. WHETHER ON THE FACTS & CIRCUMSTANCES OF CASE, THE LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE U/S 14A OF RS. 15,42,508/- SUO-MOTO MADE BY THE ASSESSEE BY RELYING UPON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF M/S GOETZE (INDIA) LTD. VS. CIT WHICH SAYS OTHER WISE. 4. WHETHER ON THE FACTS & CIRCUMSTANCES OF CASE, THE LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE U/S 14A R.W.R. 8D IGNORING THAT THERE IS NO CO-RELATION BET WEEN THE DIVIDEND EARNED AND DISALLOWANCE OF U/S 14A AS PER CBDT'S CIRCULAR NO. 5/2014 DATED 11.02.2014. 4 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. 5. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF TH E HEARING. 3.0 NONE WAS PRESENT FOR THE ASSESSEE/RESPOND ENT WHEN THE APPEAL WAS CALLED OUT FOR HEARING NOR WAS ANY ADJOURN MENT APPLICATION RECEIVED BY THE REGISTRY OF THIS TRIBUN AL ON BEHALF OF THE ASSESSEE/RESPONDENT. A PERUSAL OF THE CASE RECORD S HOWS THAT THIS APPEAL OF THE DEPARTMENT WAS EARLIER FIXED FOR HEARI NG ON 27.11.2019, THEN ON 28.12.2020 AND LATER ON 08.03.2 021 BUT ON ALL THESE THREE OCCASIONS, THE ASSESSEE/RESPONDENT DID NOT CHOOSE TO BE REPRESENTED. THE SAME IS THE CASE ON 14.07.202 1. IT IS ALSO SEEN THAT THE NOTICES OF THE HEARING WERE DULY DISP ATCHED TO THE ADDRESS OF THE ASSESSEE/RESPONDENT BUT THE ASSESSEE /RESPONDENT HAS NOT BOTHERED TO COMPLY WITH THE NOTICES SO SENT. WE ALSO NOTE THAT IN THE NOTICES SENT BY THE REGISTRY OF THIS TR IBUNAL, THE ADDRESS IN THE ASSESSMENT ORDER, THE ADDRESS IN FORM-35 FIL ED BY THE ASSESSEE AND THE ADDRESS IN THE IMPUGNED ORDER ARE THE SAME. THEREFORE, THIS GIVES AN IMPRESSION THAT THE ASSESS EE/RESPONDENT IS NOT BOTHERED ABOUT GETTING ITS CASE PROPERLY REPRES ENTED BEFORE THIS 5 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. TRIBUNAL. THEREFORE, LOOKING INTO THE FACTS OF THE CASE AND CONSIDERING THE CONTINUED NON-COMPLIANCE BY THE ASS ESSEE/ RESPONDENT, WE DEEM IT APPROPRIATE TO HERE THIS APPE AL EX-PARTE QUA THE ASSESSEE /RESPONDENT. 4.0 THE LD. SR. DEPARTMENTAL REPRESENTATIVE (DR), WHILE REFERRING TO THE GROUNDS OF APPEAL, SUBMITTED THAT THE LD. CIT(A) HAD INCORRECTLY DELETED THE DISALLOWANCE MADE U/S 14 A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (HEREINAFTER CALLE D THE RULES) IGNORING THAT THE ASSESSEE HAD NOT PRODUCED ANY DOC UMENTARY EVIDENCES TO DEMONSTRATE THAT THE INVESTMENTS WERE NOT RELATED TO EARNING EXEMPT INCOME. IT WAS ALSO SUBMITTED THAT TH E LD. CIT(A) WAS NOT CORRECT IN DELETING THE DISALLOWANCE OF RS.15 ,42,508/- MADE SUO MOTO BY THE ASSESSEE BY RELYING ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF M/S GOETZE (INDIA) LTD. V S. CIT. THE LD. SR. DR ALSO SUBMITTED THAT THE LD. CIT(A) WAS NOT CO RRECT IN DELETING THE DISALLOWANCE U/S 14A OF THE ACT COMPLET ELY IGNORING THAT THERE WAS NO CO-RELATION BETWEEN THE DIVIDEND E ARNED AND 6 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. DISALLOWANCE U/S 14A IN TERMS OF CBDT CIRCULAR NO.5/ 2014 DATED 11.10.2014. THE LD. SR. DR ALSO SUBMITTED THAT, ALT HOUGH, THE ASSESSEE HAS SUBMITTED THE CALCULATION OF DISALLOWAN CE U/S 14A OF THE ACT, THE SAME WAS NOT FOUND CORRECT AS PER THE R ECORDS AVAILABLE AND THE SUBMISSIONS FILED BY THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT SINCE THERE WAS ABSENCE OF DETAILS O F SCRIPTWISE INVESTMENTS MADE BY THE ASSESSEE COMPANY, THE ASSES SING OFFICER HAD NO OPTION BUT TO COMPUTE THE DISALLOWANCE BY TAK ING THE ENTIRE INVESTMENTS WHILE DOING SO. IT WAS ALSO SUBMITTED THA T THE ASSESSEE HAD INCURRED RENTAL EXPENDITURE, PERSONNEL COST, DE PRECIATION, COMMUNICATION COST ETC. WHICH WAS DIRECTLY RELATED TO THE VOLUME OF TRANSACTIONS AND, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT INCURRED ANY ADMINISTRATIVE EXPENSES FOR EARNIN G TAX FREE INCOME. THE LD. SR. DR SUPPORTED THE ORDER OF ASSES SMENT AND PRAYED THAT THE LD. CIT(A)S ORDER DESERVES TO BE D ISMISSED. 5.0 WE HAVE HEARD THE LD. SR. DR AND HAVE ALSO GONE THROUGH THE IMPUGNED ORDER. FINDINGS OF THE LD. CIT (A) ON THE ISSUE ARE CONTAINED IN PARAGRAPHS 5.1,5.2, 5.3 AND 5.4. T HE SAME ARE BEING REPRODUCED HEREIN UNDER FOR A READY REFERENCE :- 7 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. 5. I HAVE CONSIDERED THE ORDER U/S 14 3(3) OF THE ACT, THE SUBMISSION OF THE AR ALONG WITH THE CASE LAWS R ELIED UPON BY HIM AND THE EXTANT LAW IN THIS REGARD. IT IS OBS ERVED FROM THE GROUNDS OF APPEAL AT PAGE 3 ABOVE THAT THE GROUND A T (I) IS OVERARCHING, IT IS INCLUDED IN ALL THE OTHER GROUND S. FURTHER, WHILE THE GROUND AT (V) IS CONSEQUENTIAL AND THAT A T (VI) IS GENERAL AND NOT PRESSED BY THE APPELLANT DURING THE COURSE OF APPELLANT PROCEEDINGS, THESE ARE NOT DISCUSSED IN T HIS ORDER. 5.1 AS REGARDS THE GROUNDS AT (IA), (IIB) , (IIC), (IID) AND (IIE), IT IS OBSERVED FROM THE GROUNDS OF APPEAL TH AT THESE RELATE TO THE DISALLOWANCE U/S 14A R W RULE 8D MADE IN THE IMPUGNED ORDER. IT IS OBSERVED THEREFROM THAT THE AO HAS REJ ECTED THE CONTENTION OF THE APPELLANT TOWARDS THE PROPOSED DI SALLOWANCE OF EXPENSES U/S 14A ON THE STRENGTH OF THE MEANING OF SECTION 14A ITSELF, ITS DETERMINATION VIDE APPLICATION OF RULE 8D OF THE INCOME TAX RULES 1962 AND HAVING PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS - CIT VS. UNITED GENERAL TRUST LTD., 200ITR 455 (SC) ITO WARD 6(2) MUMBAI VS. M/S. DAGA CAPITAL MANAGEMENT PVT. LTD. IT A NO. 8057/MUM/2003 M/S. MAXOPP INVESTMENT LTD. VS. ACIT CIR 6(1), NEW DELHI IT A NO. 1372/DEL/2005 5.1 FROM A PLAIN READING OF SECTION 14A (1), IT IS CLE AR THAT THE OBJECTIVE BEHIND THE PROVISION IS TO DISALLOW ONLY SUCH EXPENSE WHICH IS RELATABLE TO TAX-EXEMPT INCOME AND NOT EXP ENDITURE IN RELATION TO ANY TAXABLE INCOME. WHILE THERE IS NO D OUBT THAT THE METHOD FOR DETERMINING AMOUNT OF EXPENDITURE IN REL ATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME IS AVAILABLE IN RULE 8D OF THE INCOME TAX RULES 1962 [INSERTED BY IT (FIFTH AMDT.) RUIES2008 W.E.F. 24/3/2008], YET THE INTENTION OF T HE LEGISLATURE ON THIS ASPECT IS CLEAR. THE AO IS REQU IRED TO FIRST SATISFY HIMSELF/HERSELF BEFORE EMBARKING ON THE DIS ALLOWANCE U/S 14A R W RULE 8D. 8 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. THUS, WHILE SECTION 14A OF THE IT ACT STIPULATES TH AT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT F ORM PART OF THE TOTAL INCOME UNDER THIS ACT, IT ALSO PLACES A D UTY ON THE AO TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE INCURRE D, IN ACCORDANCE WITH THE PRESCRIBED METHOD (RULE 8D), SA TISFACTION OF THE AO REGARDING THE ASSESSEES CLAIM OF EXPENDITUR E OR NIL EXPENDITURE. FURTHER, THE ISSUE STANDS FAIRLY SETTL ED (ALBEIT THE REVENUES SLP HAS BEEN ADMITTED BY THE APEX COURT) IN VIEW OF THE PLETHORA OF JUDICIAL PRONOUNCEMENTS AS UNDER DISALLOWANCE OF EXPENSES RELATED TO TAX EXEMPT INCOME SATISFACTION OF AO, REGARDING CLAIM OF EXPENDITURE / NIL EXPENDITURE DISALLOWED BY ASSESSEE FROM ITS BOOKS OF ACCOUNTS, COMPULSORY DISALLOWANCE U/S 14A NOT AUTOMATIC. AO TO SHOW NEXUS BETWEEN TAX EXEMPT INCOME AND RELATED EXPENDITURE EARNING OF TAX EXEMPT INCOME NECESSARY FOR DETERMINING DISALLOWANCE U/S 14A DISALLOWANCE RESTRICTED TO THE QUANTUM OF TAX EXEMP T INCOME RECEIVED ONLY NET INTEREST EXPENSES ON BORROWED FUNDS TO BE CONSIDERED FOR DISALLOWANCE U/S 14A 5.2 IN THE IMPUGNED ORDER IT IS MENTIONED, INTER AL IA, ...THE ASSESSEE COMPANY DID NOT PRODUCE THE SPECIFIC DOCUM ENTS IN THE SHAPE OF SCRIPTS OF THE MUTUAL FUND/SHARES IN A LL THE CASES OF THE INVESTMENT MADE AS APPEARING IN THE BALANCE SHEET SO THAT THE INVESTMENTS WHICH ARE YIELDING EXEMPT INCO ME OR SUPPOSED TO BE YIELD EXEMPT INCOME IN FUTURE YEARS CAN BE TAKEN FOR THE PURPOSE OF CALCULATION DISALLOWANCE U /S 14A R.W.R. 8D IN THE ABSENCE OF THOSE FIGURES OF THE DETAILS O F THE SCRIPT WISE INVESTMENT I AM BOUND TO CALCULATE THE DISALLO WANCE BY TAKING WHOLE OF THE INVESTMENTS TO PROTECT THE INTE REST OF THE 9 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. REVENUE. FURTHER, THE ASSESSEE HAS ITSELF DETEMNINE D THE EXPENSES U/S 14A AT RS. 15,42,508/-...THE EARNING O F EXEMPT INCOME IS NOT IN NATURE OF PASSIVE ACTIVITY HAVING NO INPUT. IN FACT IN PRESENT SITUATION MAKING OF INVESTMENT, MAI NTAINING OR CONTINUING INVESTMENT AND TIME OF EXIT FROM INVESTM ENT ARE WELL INFORMED AND WELL-COORDINATED MANAGEMENT DECISIONS INVOLVING NOT ONLY INPUTS FROM VARIOUS SOURCE BUT ALSO ACUMEN OF SENIOR MANAGEMENT FUNCTIONARIES. THEREFORE, COST IS INBUIL T INTO EVEN SO CALLED PASSIVE INVESTMENT. THERE ARE INCIDENTAL E XPENDITURES OF COLLECTION, TELEPHONE, FOLLOW UP ETC. SINCE IN T HE PRESENT CASE, OUT OF TOTAL FUNDS AVAILABLE/RAISED BY THE ASSESSEE , A SUBSTANTIAL PORTION OF IT AMOUNTING TO RS.1,01,78,4 7,180/- HAS BEEN INVESTED IN SHARES AND MUTUAL FUNDS, THEREFORE , IT CAN BE HELD THAT EXPENDITURE IN RELATION TO EARNING OF EXE MPT DIVIDEND INCOME ARE EMBEDDED IN INDIRECT EXPENSES THE INVEST MENT TO THE EXTENT OF RS.1,01,78,47,180/- MADE BY THE ASSES SEE COMPANY , BEING A CONSCIOUS DECISION AND HAVING DEP LOYMENT OF FUNDS CLEARLY BRINGS INTO PICTURE EXPENDITURE BY WA Y OF COST OF FUNDS INVESTED. COMPOSITE FUND HAVING COST NEEDS TO BE SPREAD SO AS TO APPORTION APPROPRIATE COST OF FUNDS INVESTED IN THE ACTIVITY LENDING TO EARNING OF EXEMPT INCOME. THE ASSESSEE COMPANY HAS TOTAL TURNOVER OF 49 CRORES AN D TOTAL TURNOVER OF MUTUAL FUNDS IS AT RS.101 CRORES. FOR B OTH THE TURNOVER THE MAJOR EXPENSES RELATED TO TURNOVER ARE AUDIT EXPENSES AS THE AUDITOR OF THE COMPANY AUDITED ALL THE TRANSACTION EXPENSES RELATED TO TURNOVER ARE AUDITE D EXPENSES AS THE AUDITOR OF THE COMPANY AUDITED ALL THE TRANS ACTION RECORDED IN THE BOOKS OF ACCOUNT EITHER FOR TURNOVE R OF FOR SALE OF MUTUAL FUNDS. THE ASSESSEE COMPANY HAS ALSO INCURRE D BANKING CHARGERS FOR ALL THE BANKING TRANSACTIONS W HICH ALSO INCLUDED THE TRANSACTION OF MUTUAL FUND. THE ASSE SSEE COMPANY ALSO INCURRED RENTAL EXPENSES OF, PERSONNEL COST, DEPRECIATION, COMMUNICATION COST OF ETC. AS REFLECT ED IN ACCOUNTS OF THE COMPANY. ALL THE EXPENSES ARE DIRECTLY RELAT ED TO THE VOLUME OF TRANSACTIONS AND THEREFORE THE UNDERSIGN ED IS PROPOSED HIS HEREBY ALLOCATE ALL THE ABOVE EXPENSES ON THE 10 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. BASIS OF TURNOVER OF THE COMPANY FOR VARIOUS ITEMS AND FOR TURNOVER OF MUTUAL FUNDS... 5.3 IT CAN THEREFORE BE SAFELY BE INFERRED FROM THE IMPUGNED ORDER THAT THE SATISFACTION OF THE AO FOR DISALLOWA NCE OF EXPENSES, IN VIEW OF THE PRESUMED TAX-EXEMPT DIVIDE ND INCOME, U/S 14A OF THE ACT IS DRAWN FROM THE FACT THAT THE APPELLANT SUO MOTU MADE A DISALLOWANCE OF RS. 15,42,508/-. ALSO, THERE APPEARS TO HAVE BEEN NO OBJECTIVE ANALYSIS OF THE A PPELLANTS EXPENSE IN THIS REGARD VIS-A-VIS ITS ACCOUNTS. ONLY PRESUMPTIONS REGARDING POSSIBLE COMMON EXPENSES HAVE BEEN TAKEN AS CONCLUSION IN THE IMPUGNED ORDER. AGAIN, THE LEGISL ATIVE INTENT OF SECTION 14A WHICH IS TO DISALLOW THE EXPENDITURE IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME-RE QUIRES PROPER IDENTIFICATION RATHER THAN DISALLOWING ALL OR PROPO RTIONATE INTEREST AND ADMINISTRATIVE EXPENSES ON AN AD HOC B ASIS. IN FACT, THE ARS VERSION OF THE FACTS IS BORNE OUT FR OM RECORDS. ACCORDINGLY, IN VIEW OF THE EXTANT LAW ON THE SUBJE CT, PRESENTLY SETTLED BY JUDICIAL PRECEDENTS FROM THE COURTS INCL UDING THE JURISDICTIONAL HIGH COURT (DELHI HC) MAXOPP INVESTMENT LTD VS. CIT (A Y 2002-03) IT A NO . 687/2009 (DEL HC) CHEMINVEST LTD. VS. CIT (AY 2004-05) (2015) 61 TAXMANN.COM 118 (DEL HC) COMMISSIONER OF INCOME TAX-IV VS. HOLCIM INDIA PVT. LTD., IT A NO. 486/2014 AND 299/2014 CIT VS. TAIKISHA ENGINEERING INDIA LIMITED IT A 115/2014 & 119/2014 DATED 25/11/2014 (DEL) DCM LTD. VS. DCIT, CIRCLE 10 (1) NEW DELHI AND VIC E- VERSA 2015 (9) TM11110ITAT DELHI JOINT INVESTMENTS PVT. LTD. VS. COMMISSIONER OF INC OME TAX 372ITR 694 CIT VS. HERO CYCLES LTD.[2010] 189 TAXMANN 50 (PUNJ . & HAR.) 11 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. AND IN DUE DEFERENCE TO THE AFOREMENTIONED COURT DE CISIONS, I AM INCLINED TO AGREE WITH THE CONTENTION OF THE APP ELLANT IN THIS REGARD AND DELETE THE DISALLOWANCE MADE U/S 14A OF THE ACT (RS.2,76,36,280/-) OVER AND ABOVE MADE BY THE APPEL LANT (RS. 15,42,508/-) IN THE IMPUGNED ORDER. 5.4 FURTHER, AT THE TIME OF APPEAL HEARING, TH E AR OF THE APPELLANT SOUGHT FOR MODIFICATION OF ITS DISALLOWAN CE OF RS. 15,42,508/- U/S 14A MADE SUO MOTU IN ITS RETURN OF INCOME AS THE DATE FOR FILING THE REVISED RETURN WAS OVER. IN THIS CONNECTION, THE AR ARGUED THAT THE CASE REGARDING M /S. GOETZE INDIA IN THE APEX COURT RELATED TO MAKING A FRESH C LAIM OF DEDUCTION BEFORE THE AO. IT IS ALSO GATHERED FROM A VAILABLE RECORDS THAT THE SUBMISSIONS / ARGUMENTS PUT FORTH BY THE AR OF THE APPELLANT ARE BORNE OUT FROM RECORDS AND IN ACC ORDANCE WITH THE EXTANT LAW AS PROMULGATED BY THE JURISDICTIONAL HIGH COURT (HONBLE DELHI HC). FURTHER, I AGREE WITH THE APPEL LANTS CONTENTION ON THE POINT REGARDING ADMITTANCE OF A F RESH CLAIM OF DEDUCTION BY THE FIRST APPELLATE AUTHORITY AS IT IS IN SYNC WITH THE EXTANT PROVISIONS OF THE ACT. ALSO, THE FIRST A PPELLATE AUTHORITY UNDER THE INCOME TAX ACT 1961 STILL RETAI NS THE CHARACTER OF AN INCOME TAX OFFICER ESPECIALLY WITH REGARD TO ADHERENCE TO THE CBDT CIRCULAR NO. 14 (XL-35) OF 19 55 DATED 11 APRIL 1955. THE ARS ARGUMENT REGARDING WITHDRAWAL OF ITS SUO MOTU DISALLOWANCE U/S 14A RELYING ON THE DECISION O F THE GUJARAT HC IN CIT VS. UTI BANK LTD, 223 TAXMAN 157 (GUJ) (MAG) APPEARS PLAUSIBLE. THE INVESTMENT IN GROUP CO NCERNS AND IN FUNDS YIELDING DIVIDEND INCOME THAT IS TAXABLE I S NOT REQUIRED TO BE INCLUDED WHILE WORKING OUT THE DISALLOWANCE O F EXPENSES U/S 14A IN VIEW OF THE COURT DECISIONS CITED SUPRA. ACCORDINGLY, THE SUO MOTU DISALLOWANCE MADE BY THE APPELLANT TOW ARDS SECTION 14A OF THE ACT IS REDUCED TO NIL. 5.1 A PERUSAL OF THE ABOVE PARAGRAPHS FROM THE ORDER OF THE LD. CIT(A) SHOWS THAT WHILE ALLOWING COMPLETE RELIEF TO TH E ASSESSEE ON 12 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT, THE LD . CIT(A) HAS COMPLETELY IGNORED THE OBSERVATIONS OF THE ASSESSIN G OFFICER THAT THE TOTAL TURNOVER OF THE MUTUAL FUND WAS RS.101/- C RORES AND THAT THE MAJOR EXPENDITURE RELATING THE TURNOVER WERE AU DIT EXPENSES AS THE AUDITOR OF THE COMPANY HAD AUDITED ALL THE T RANSACTION EXPENSES RELATING TO TURNOVER. THE ASSESSING OFFICE R HAD ALSO POINTED OUT INCURRENCE OF BANKING CHARGES FOR THE B ANKING TRANSACTIONS AND ALSO INCURRENCE OF RENTAL EXPENSE, PERSONNEL COST, DEPRECIATION, COMMUNICATION COST ETC. HOWEVER, THE LD. CIT(A) DID NOT CONSIDER THESE OBSERVATIONS OF THE ASSESSING OF FICER AS BEING RELEVANT WHILE ALLOWING ENTIRE RELIEF TO THE ASSESSEE COMPANY. A PERUSAL OF THE IMPUGNED ORDER ALSO SHOWS THAT THE LD . CIT(A) DID NOT REFER TO ANY DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE IN THIS REGARD WHICH THE ASSESSEE WOULD HAVE RELIED U PON TO REFUTE THE OBSERVATIONS OF THE ASSESSING OFFICER. THERE IS ALSO NO BIFURCATION OF INCOME EARNED AS TAX FREE INCOME AND TAXABLE INCOME. THUS, APPARENTLY THE LD. CIT(A) HAS ACCEPTED THE CO NTENTION OF THE ASSESSEE WITHOUT GIVING A PROPER AND THOUGHTFUL CONS IDERATION TO THE ISSUE BEFORE HIM. IN SUCH CIRCUMSTANCE, WE HAVE NO OPTION BUT 13 ITA NO.4341/DEL/2017 DCIT VS. M/S HERO CORPORATE SERVICES PVT. LTD. TO DIRECT THE LD. CIT(A) TO RE-EXAMINE THE ISSUE BE FORE HIM AND ADJUDICATE THE SAME AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. 6.0 IN THE FINAL RESULT, THE APPEAL OF T HE DEPARTMENT STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 30 TH SEPTEMBER, 2021. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 30/09/2021 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI