Shorewala & Co. Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4453/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53230 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: AASHISH SARASWAT
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER I.T.A NO. 4453/DEL/11 ASSTT. YEAR 2007-08 SHOREWALA & CO. PVT. LTD. 2524, LAJPAT RAI STREET, OPP. RAM LILA GROUND, FACING ASAF ALI ROAD, NEW DELHI, 110 006 AABCS7540R VS. ITO WARD-8(2) C.R. BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AASHISH SARASWAT, ADVOCATE RESPONDENT BY: SHRI S. MOHANTY, DR ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT(A) DATED 2 ND FEBRUARY, 2011 PASSED FOR ASSTT. YEAR 2007- 08. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT(A) HAS ITA NO. 4453/DEL/11 ASSTT. YEAR 2007-08 2 ERRED IN CONFIRMING THE PENALTY OF `. 17,081/- IMPO SED U/S 271(1)(C) OF THE INCOME TAX ACT. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME DECLAR ING AN INCOME OF `. 6,38,640/-. AN ASSTT. ORDER WAS PASSED U/S 14 3(3), WHEREIN TAXABLE INCOME OF THE ASSESSEE WAS DETERMINED AT ` 6,69,150/- AND AN ADDITION OF `. 26,512/- WAS MADE IN THE RETU RN OF INCOME. THE DISALLOWANCE WAS MADE U/S 14A. THE LD. AO HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) AND ISSUED A SHOW CAUSE NOTICE U/S 274 OF THE INCOME TAX ACT. IT EMERGES OUT FROM THE RECORD THAT AO HAS MADE AN ADDITION OF `. 26,512/- WITH THE ASSISTANCE OF RULE 8D OF THE INCOME TAX RU LES. HE OBSERVED THAT ASSESSEE HAS DECLARED A DIVIDEND INCO ME OF `. 2,47,267/- WHICH IS EXEMPT FROM TAX. THE EXPENSES A TTRIBUTABLE TO EARNING OF TAX FREE INCOME DESERVED TO BE DISALL OWED U/S 14A AND FOR THE PURPOSE OF QUANTIFICATION LD. AO TOOK T HE HELP OF RULE 8D. THE AO HAS SIMILARLY RESTRICTED THE CLAIM OF ASSESSEE U/S 88E TO ` 1,91,592/- CLAIMED BY THE ASSESSEE. TH E AO HAS OBSERVED THAT IN RESPONSE TO THE NOTICE, NO ONE HAS APPEARED BEFORE HIM. THEREFORE, HE PASSED AN EX PARTE ORDER AND IMPOSED A PENALTY OF `. 17,081/-. ITA NO. 4453/DEL/11 ASSTT. YEAR 2007-08 3 2. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F. LD. FIRST APPELLATE AUTHORITY HAS ALSO OBSERVED THAT ASSESSEE FAILED TO AVAIL THE OPPORTUNITY OF HEARING. 3. LD. COUNSEL FOR THE ASSESSEE HAS FILED A PAPER B OOK CONTAINING 11 PAGES. HOWEVER, IT DOES NOT CONTAIN T HE CERTIFICATE DEMONSTRATING THAT THESE PAPERS WERE FILED BEFORE THE LOWER AUTHORITIES. THEREFORE, IT CAN NOT BE TAK EN INTO CONSIDERATION EXCEPT THE AFFIDAVIT OF SHRI SURESH C HAND SHORAWALA WHO IS DIRECTOR OF THE COMPANY AND WHO ALLEGED THAT THE NOTICE OF HEARING FIXED BY THE LD. CIT(A) WAS NEVER RECEIVED BY THE ASSESSEE. LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT EX PARTE ORDERS BE SET ASIDE AND PEN ALTY BE DELETED. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF REVENUE AUTHORITY BELOW. SHE POINTED OUT THAT DUE O PPORTUNITY OF HEARING WAS GRANTED TO THE ASSESSEE BUT IT FAILE D TO AVAIL THEM AND FAILED TO FILE THE SUBMISSIONS BEFORE THE AO. 4. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE DID NOT CHALLENGE ITA NO. 4453/DEL/11 ASSTT. YEAR 2007-08 4 THE DISALLOWANCE MADE BY THE AO IN THE ASSTT. ORDER . BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DISALLO WANCE U/S 14A HAS BEEN MADE WITH THE HELP OF RULE 8D WHICH IS NOT APPLICABLE IN THIS ASSTT. YEAR IN VIEW OF HONBLE B OMBAY HIGH COURT DECISION IN THE CASE OF GODREJ BOYCE REPORTED IN 328 ITR 81. THE HONBLE BOMBAY HIGH COURT HAS HELD THAT RUL E 8 D HAS BEEN INCORPORATED IN THE STATUTE BOOK ON 24 TH MARCH, 2008. IT WILL BE APPLICABLE FROM ASSTT. YEAR 2008-09. IN VIE W OF THIS SITUATION, THE DISALLOWANCE WITH THE HELP OF RULE 8 D COULD HAVE NOT BEEN MADE BUT THAT WAS NOT CHALLENGED BY THE AS SESSEE. HOWEVER, IN THE PENALTY PROCEEDING IT CAN TAKE UP S UCH PLEA FOR DEMONSTRATING THAT ASSESSEE SHOULD NOT BE VISITED W ITH PENALTY U/S 271(1)(C). CONSIDERING THESE ASPECTS AND THE AF FIDAVIT OF THE DIRECTOR THAT NOTICE OF HEARING WAS NOT RECEIVED, W E DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDERS AND RE STORE THIS ISSUE TO THE FILE OF LD. AO FOR READJUDICATION. THE ASSESSEE WILL BE AT LIBERTY TO PRODUCE ANY DOCUMENT IN SUPPORT OF ITS EXPLANATION THAT PENALTY IS NOT IMPOSABLE UPON IT. THE AO SHALL PROVIDE DUE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE READJUDICATING THE ISSUE. THE OBSERVATIONS MADE BY US WILL NOT ITA NO. 4453/DEL/11 ASSTT. YEAR 2007-08 5 IMPAIR OR INJURE THE CASE OF AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE / EXPLANATION OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08.12.2011. SD/- SD/- [A.N. PAHUJA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8.12.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT