CHANDLER INVESTMENT & TRADING CO.P.LTD, MUMBAI V. CIT 5, MUMBAI

ITA 440/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4053 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 143(3); 14A; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.440/M/14 ( %' ( / ASSESSMENT YEAR: 2008-09) CHANDLER INVESTMENT & TRADING CO. PVT. LTD. 101, DOCTOR CENTRE, 135, AUGUST KRANTI MARG, KEMPS CORNER, MUMBAI - 400036 ' / VS. COMMISSIONER OF INCOME TAX -5 ROOM NO.559, AAYAKAR BHAWAN, M.K.ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACC1588J ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 22.09.2015 !' /DATE OF PRONOUNCEMENT: 03.02.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX - 5, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT] DATED 16.12.2013 RELEVANT TO THE A.Y. 2008-09. ASSESSEE BY: SHRI PANKAJ TOPRANI DEPARTMENT BY: SHRI T. ROUMAUN PAITE ITA NO. 440/M/14 A.Y. 2008-09 2 2. THE ASSESSEE COMPANY WAS INCORPORATED AS AN INVE STMENT COMPANY IN 1994 AND WAS INITIALLY CONDUCTING THE IN VESTMENT ACTIVITIES. HOWEVER FROM LAST 7 TO 8 YEARS, ITS MA IN ACTIVITY AND BUSINESS IS DEALING IN LAND AND REAL ESTATE. THE A SSESSEE HAS PURCHASED VARIOUS PIECES OF LAND AROUND DELHI AND MUMBAI FOR THE PURPOSE OF DEVELOPMENT. THE COMPANY WAS ALSO INVESTING IN MUT UAL FUND AND WAS EARNING DIVIDEND. INITIALLY THE ASSESSMENT ORDE R WAS PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961( IN S HORT THE ACT) ON 07.02.2013 VIDE WHICH THE TOTAL LOSS OF COMPANY WAS DETERMINED TO THE TUNE OF RS.2.26 CRORES. DURING THE COURSE OF A SSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAD EA RNED EXEMPT INCOME OF RS.1,65,677/- IN THE FORM OF DIVIDEND FRO M MUTUAL FUNDS. THE ASSESSING OFFICER MADE DISALLOWANCE U/S 14 A OF THE ACT OF RS.2,15,006/- I.E. EXPENSES DIRECTLY RELATED TO EAR NING OF DIVIDEND INCOME OF RS.56,930/-(RS.1200/- + RS.55730/-) AND 0 .5% OF AVERAGE INVESTMENT OF RS.1,58,076/-. THEREAFTER THE MATTER WAS TAKEN UP BY THE CIT 5, MUMBAI IN VIEW OF THE PROVISION U/S. 263 OF THE ACT AND THE SAID AUTHORITY ARRIVED AT THIS CONCLUSION THAT ASSESSING OFFICER HAS NOT CONSIDERED THE AMOUNT OF INTEREST OF RS.2.17 CR ORES WHICH HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT FOR MAK ING DISALLOWANCE WITH REFERENCE TO RULE 8D(II) OF THE INCOME TAX RUL ES. THE SAID AMOUNT WAS LIABLE TO BE DISALLOWED COMES TO THE TUN E OF RS.11,22,594/- ON THE BASIS OF FOLLOWING FACTS AND FIGURES:- ITA NO. 440/M/14 A.Y. 2008-09 3 AS ON 31.03.2008 31.03.2008 AVERAGE ASSETS 59,90,10,532 62,46,17,771 61,18,14,151 INVESTMENTS 3,61,311 6,28,69,271 3,16,15,291 FEELING AGGRIEVED THE ASSESSEE HAS BEEN FILED THE P RESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D CAREFULLY. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED T HAT THE ASSESSING OFFICER HAS ALREADY CONSIDERED THE FACTS AND FIGURE S OF THE ACCOUNT REGARDING DISALLOWANCE U/S 14A OF THE ACT, THEREFO RE, THE MATTER WAS NOT REQUIRED TO BE TAKEN UP AGAIN IN VIEW OF THE PR OVISION 263 OF THE ACT AND ALSO PLACED RELIANCE UPON THE LAW SETTLED I N [2009] 227 CTR(DEL)133 IN CASE TITLED AS CIT VS. SUNBEAM AUTO LTD. IT IS ALSO ARGUED BY THE LEARNED REPRESENTATIVE OF THE ASSESSE E THAT ON THE BASIS OF THE SIMILAR FACTS AND CIRCUMSTANCES OF THE PRESE NT CASE, THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH HAS ALSO PASSE D THE ORDER DATED 11.12.2014 IN ITA NO.2170/M/13 IN CASE TITLED AS SOUTH SEAS DIST & BREW PVT. LTD. VS. CIT 5, MUMBAI THEREFORE I N THE SAID CIRCUMSTANCES THE ORDER IN QUESTION U/S 263 OF THE ACT IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE . WHILE, ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT H AS STRONGLY RELIED UPON THE ORDER PASSED U/S 263 OF THE ACT. THE ASSE SSMENT ORDER DATED ITA NO. 440/M/14 A.Y. 2008-09 4 07.02.2013 PASSED IN VIEW OF SECTION 143(3) R.W.S. 147 OF THE ACT PERUSED AND WE NOTICED THAT THE LEARNED ASSESSING O FFICER APPLIED HIS MIND WHILE FINALIZING THE ASSESSMENT OF ASSESSEE U/ S 143(3) OF THE ACT AFTER GIVING THE PROPER OPPORTUNITY OF BEING HEARD. ASSESSEE ALSO FILED REPLY DATED 12.01.2013 STATING THEREIN THAT THE SOU RCE OF INVESTMENT IN THE MUTUAL FUND IS OUT OF OWN FUNDS EXCEPT OUT OF B ORROWED MONEY TO THE TUNE OF RS.3,99,37,913/- FOR A SHORT PERIOD OF 3 TO 5 DAYS, HENCE, INTEREST OF RS.55,730/- ON BORROWED FUNDS IS ONLY T O BE CONSIDERED FOR WORKING OUT DISALLOWANCE U/S. 14A OF THE ACT. THER EFORE, ASSESSING OFFICER ASSESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME TO THE TUNE OF RS.2,15,006/-THIS MATTER WAS AGAIN TAKEN UP BY THE LEARNED CIT(A) IN VIEW OF THE PROVISION CONTAINED IN SECTIO N 263 OF THE ACT. NOW IT IS TO BE SEEN WHETHER THE ASSESSING OFFICER HAS PROPERLY APPLIED HIS MIND OR NOT AND THEREAFTER MATTER WAS A GAIN TAKEN BY THE LEARNED CIT(A) WITH REGARD TO THE REASSESSMENT OF T HE EXPENDITURE INCURRED FOR THE EARNING OF EXEMPTED INCOME IS QUIT E LEGAL OR NOT. THE SIMILAR CONTROVERSY HAS CAME BEFORE THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN ITA NO.2170/M/13 IN CASE TITLED AS SOUTH SEAS DIST & BREW PVT. LTD DATED 11.12.2014WHEREIN THE ORDER PASSED U/S 263 OF THE ACT IS HELD TO BE UNJUSTIFIABLE SPEC IFICALLY IN THE CIRCUMSTANCES WHEN THE ASSESSING OFFICER HAS APPLIE D HIS MIND AFTER GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE THEN THE CIT(A) WAS HELD NOT TO ENTITLE TO TAKE UP THE MATTE R IN VIEW OF THE PROVISION CONTAINED IN SECTION 263 OF THE ACT. MOR EOVER, HONBLE ITA NO. 440/M/14 A.Y. 2008-09 5 HIGH COURT OF DELHI IN CASE TITLED AS CIT VS. SUNBE AM AUTO LTD. HAS HELD THAT WHERE THE TWO VIEWS ARE ARISEN AND ONE VI EW HAS BEEN TAKEN BY THE ASSESSING OFFICER AND THE OTHER VIEW HAS BE EN TAKEN BY THE CIT(A) THEN IN THE SAID CIRCUMSTANCES THE MATTER DO ES NOT COME WITHIN THE AMBIT OF SECTION 263 OF THE ACT. IN VIE W OF THE SAID CIRCUMSTANCES AND BY FOLLOWING THE ORDER PASSED BY THE CO-ORDINATE BENCH ALSO PASSED THE ORDER DATED 11.12.2014 IN ITA NO.2170/M/13 IN CASE TITLED AS SOUTH SEAS DIST & BREW PVT. LTD B ENCH DATED 12.11.2014. WE ARE OF THE VIEW THAT THE ORDER DATE D 16.12.2013 UNDER SECTION 263 OF THE ACT PASSED BY THE CIT(A) IS WRON G AGAINST LAW AND FACTS THEREFORE THE SAME IS HEREBY ALLOWED TO BE SE T ASIDE. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD FEBRUARY, 2016 . SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 3 RD FEBRUARY, 2016. MP MP MP MP ITA NO. 440/M/14 A.Y. 2008-09 6 * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI