The Assistant Commissioner of Income Tax, Circle-2 (1), Panaji., Panaji V. Shri Prasad Vasudev Keni., Panaji

ITA 460/PAN/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2968 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S SUNDARESAN
• Assessee Lawyers: D E ROBINSON
• Keywords: Earning of tax free income
• Section: 14A; 12; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO S . 460 & 461 /P A N/201 5 (ASST. YEAR : 20 1 0 - 1 1 ) ACIT, CIRCLE - 1(1), PANAJI GOA. VS. 1) SHRI PRASAD VASUDEV KENI, V.G. QUENIM & BROTHERS, KENI BUILDING, DR. DADA VAIDYA ROAD, PANAJI GOA. PAN NO. ADVPK 4775 E 2) SMT. VINI PRASAD KENI, V.G. QUENIM & BROTHERS, KENI BUILDING, DR. DADA VAIDYA ROAD , PANAJI GOA. PAN NO. ADPPK 9767 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.E. ROBINSON ADV. DEPARTMENT BY : DR. S. SUNDARESAN - D R DATE OF HEARING : 29 / 0 3 /201 6 . DATE OF PRONOUNCEMENT : 29 / 0 3 /201 6 . O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THESE TWO APPEALS FILED BY THE REVENUE ARE IN THE CASE OF HUSBAND AND WIFE , TO WHOM THE PROVISIONS OF SEC. 5 OF THE INCOME TAX ACT, 1961 APPLY. 2. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI - 1 IN APPEAL NO. 109/PNJ/13 - 14 , DATED 10/08/2015 FOR THE ASSESSMENT YEAR 2010 - 11 IN 2 ITA NO S . 460 & 461 /P A N/201 5 THE CASE OF SHRI PRASAD VASUDEV KENI AND IN APPEAL N O . 110/PNJ/13 - 14 , DATED 10/08/2015 FOR THE ASSESSMENT YEAR 2010 - 11 IN THE CASE OF SMT. VINI PRASAD KENI . 3 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE ORDER OF THE LD. CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO U/S 14A AND HAS FAILED TO AP PRECIATE THE FACT THAT SECT ION 1 4A CLEARLY MANDATES THAT ONCE THE ASSESSING OFFICER IS SATISFIED THAT THE CLAIM OF THE ASSESSEE IS NOT CORRECT, HE HAS NO OTHER OPTION BUT TO INVOKE THE METHODS PRESCRIBED IN RULE 8D FOR QUANTIFYING THE EXPENDITURE INCURRED IN RELATION TO THE EXEMPT I NCOME. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE A O ON ACCOUNT OF COMMISSION PAID TO THE RELATED PARTY BY IGNORING THE FACT THAT THE PAYMENT OF COMMISSION IS JUST AN AFTERTHOUGHT EXERCISE OF THE ASSESSEE TO REDUCE THE TAX LIABILITY. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF THE HEARING, THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER RESTORED. THE GROUNDS ARE COMMON IN BOTH THE APPEALS. CONSEQUENTLY, BOTH THE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER . 4 . DR. S. SUNDARESAN, DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF THE REVENUE AND SHRI D.E. ROBINSON, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEES. 5 . IN REGARD TO GROUND NO.2 OF THE REVENUES APPEAL, IT WAS SUBMITTED BY THE DEPARTMENTAL REPRESENTATIVE THAT IN THE COURSE OF ASSESSMENT , THE ASSESSING OFFICER HAD INVOKED THE PROVISIONS OF SEC. 14A IN RESPECT OF EXPENSES IN RELATION TO EARNING OF THE EXEMPT INCOME. IT WAS THE SUBMISSION THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAD DELETED THE DISALLOWANCE HOLDING THAT THE BASIC PRE - CONDITION THAT THE ASSESSING OFFICER HAS TO RECORD HIS SATISFACTION THAT THE ASSESSEE 3 ITA NO S . 460 & 461 /P A N/201 5 HAS INCURRED EXPENDITURE FOR EARNING INCOME , WHICH IS EXEMPT FROM THE INCIDENCE OF TAX , HAS NOT BEEN RECORDED . ON A SPECIFIC QUERY BY THE BENCH , WHETHER SUCH REASONS HAVE BEEN RECORDED OR SATISFACTION HAS BEEN SPECIFIED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OR IN THE R ECORDS, THE DEPARTMENTAL REPRESENTATIVE WAS UNABLE TO POINT OUT SUCH RECORDING OF SATISFACT I ON. 6 . IN REPLY, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD . REPORTED IN 366 ITR 505 (BOM.) AS ALSO THE DECISION OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF I.P. SUPPORT SERVICES INDIA (P) LTD . REPORTED IN 378 ITR 240 (DEL.) TO SUBMIT THAT THE PROVISIONS OF SEC. 14A WAS NOT AUTOMATIC AND THE CONDITIONS PRECEDENT FOR DISALLOWANCE UNDER SEC. 14A WAS RECORDING OF SATISFACTION BY THE ASSESSING OFFICER. 7 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS . 8 . AS THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THE RECORDING OF SATISFACTION IN RESPECT OF DISALLOWANCE MADE UNDER SEC. 14A IN THE HANDS OF THE ASSESSEE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT AS ALSO THE DECISION OF THE HONBLE DELHI HIGH COURT REFERRED TO SUPRA, THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE STANDS CONFIRMED . 9 . IN REGARD TO GROUND NO.3 , IT WAS SUBMITTED BY THE DEPARTMENTAL REPRESENTATIVE THAT IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER HAD DISALLOWED THE COMMISSION PAID TO M/S. VILMAN PACKAGING PVT. LTD. IT WAS THE SUBMISSION THAT THERE WAS NO AGREEMENT BETWEEN THE ASSESSEE AND M/S. VILMAN PACKAGING PVT. LTD. IN RESPECT OF PAYMENT OF COMMISSION ON ACCOUNT OF SALE OF IRON ORE. IT WAS THE SUBMISSION THAT COMMISSIONER OF INCOME TAX (APPEALS) HAD DELETED THE DISALLOWANCE ON 4 ITA NO S . 460 & 461 /P A N/201 5 THE GROUND THAT THE DISALLOWANCE HA S BEEN MADE BY THE A SSESSING OFFICER BASED ON PRESUMPTIONS AND SURMISES , AND THE SAME CANNOT BE SUSTAINED. IT WAS SUBMITTED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WAS LIABLE TO BE REVERSED. 10 . IN REPLY , AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE COMMISSION WAS PAID IN THE EARLIER YEARS ALSO TO M/S. VILMAN PACKAGING PVT. LTD. AND NO DISALLOWANCE WAS MADE , EVEN IN THE SUBSEQUENT YEARS COMMISSION HAS BEEN PAID AND NO DISALLOWANCE HA S BEEN M ADE . HE ALSO REITERATED THE SUBMISSIONS MADE AT PAGE NO S . 10 TO 12 OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) . IT WAS THE SUBMISSION THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WAS LIABLE TO BE UPHELD . 1 1 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 1 2 . ADMITTEDLY, THE ASSESSING OFFICER HAS NOT INVOKED ANY PARTICULAR SECTION FOR DISAL L OW A NCE SUCH EXPENDITURE. ALL THAT THE ASSESSING OFFICER SAYS THAT IT IS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND THAT THE PAYMENT I S JUST AN ARRANGEMENT AS WELL AS AFTERTHOUGHT TO INCREASE THE EXPENSES . HOWEVER , THE FACT REMAINS THAT THE ASSESSEE HAS BEEN DEALING WITH M/S. VILMAN PACKAGING PVT. LTD., A SISTER CONCERN, EARLIER AND LA TER A N D NO DISALLOWANCE HAS BEEN MADE. IT IS ALSO UNDISPUTED THAT BOTH THE ASSESSEE AND M/S. VILMAN PACKAGING PVT. LTD. ARE IN THE MAXIMUM TAX BRACKET. TDS HAS ALSO BEEN DEDUCTED . THE REVENUE HAS ALSO NOT BEEN ABLE TO POINT OUT AS TO WHY SUCH CONCLUSION AS DRAWN BY THE ASSESSING OFFICER IS SUSTAINABLE . THE REVENUE HAS ALSO NOT BEEN A B L E T O DISLODGE THE FINDING OF THE FACT AS ARRIVED AT BY THE COMMISSIONER OF INCOME TAX (APPEALS). IN THESE CIRCUMST AN CES, WE ARE OF THE VIEW THAT THE FINDING OF COMMISSIONER OF INC OME TAX (APPEALS) ON THIS IS SUE I S ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. 5 ITA NO S . 460 & 461 /P A N/201 5 1 3 . IN THE RESULT, APPEAL S OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON TUESDAY , THE 29 TH DAY OF MARCH , 201 6 AT GOA . S D / - S D / - (N.S.SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH MARCH, 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE. 1) SHRI PRASAD VASUDEV KENI . 2) SMT. VINI PRASAD KENI . 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI .