Mamta Machinery Pvt. Ltd., Ahmedabad V. The ACIT.,(OSD)-I,Circle-4, Ahmedabad

ITA 469/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0042 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-09-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 21-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M J SHAH
• Keywords: Opportunity of being heard; Earning of tax free income; Condonation of delay
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ ITA NO. 469/AHD/2012 / ASSESSMENT YEAR : 2004-05 MAMATA MACHINERY PVT LTD, 5/1/1-A, PHASE-I, GIDC, VATVA, AHMEDABAD-382445 PAN : AABCM 8241 P VS ACIT (OSD)-I, CIRCLE-4, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.J. SHAH, AR REVENUE BY : SHRI PRASOON KABRA, SR DR / DATE OF HEARING : 06/10/2016 / DATE OF PRONOUNCEMENT: 11/11/2016 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, AHMEDABA D DATED 18.09.2007 FOR AY 2004-05. 2. THE SOLE GROUND RAISED BY THE ASSESSEE READS AS UNDER: THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING D ISALLOWANCE OF RS.22,02,856/- U/S 14A OF THE ACT, 1961. THE LD. C IT(A)-VIII, UPHELD DISALLOWANCE OF RS.12,84,860/- U/S 14A OF THE ACT, 1961 THOUGH EXPLAINED. 3. THE FACTS OF THE CASE ARE THAT DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE-COMPANY HAS EARNED DIVIDEND INCOME TO THE TUNE OF RS.28,20,980 /- . THE ASSESSEE COMPANY HAS MADE NEW INVESTMENT OF RS. L,44,18,616/- DURING THE YEAR. THE DIVIDEND INCOME ON THE ABOVE MENTIONE D INVESTMENT WAS EXEMPT FROM TAX. THE ASSESSEE COMPANY WAS ASKED TO EXPLAIN AS TO WHY THE INTEREST EXPENSES AND ADMINISTRATIVE EXPENSES INCUR RED FOR THE PURPOSE OF ITA NO. 469/AHD/2012 MAMATA MACHINERY PVT LTD VS. ACIT AY : 2004-05 2 EARNING THE EXEMPT INCOME SHOULD NOT BE DISALLOWED. IN RESPONSE TO THIS THE ASSESSEE COMPANY, VIDE ITS LETTER DATED 08.12.2006 HAS SUBMITTED ITS REPLY, THE RELEVANT PORTION OF WHICH READS AS UNDER: '......WE HAVE RECEIVED DIVIDEND OF RS.28,20,980/-. THE DIVIDEND INCOME IS CLAIMED AS EXEMPTED INCOME. THE COMPANY HAS NOT INC URRED ANY EXPENDITURE TO EARN SUCH INCOME. IN FACT, THERE ARE ONLY 4 TRAN SACTION CARRIED TO EARN DIVIDEND INCOME, WHICH REQUIRES NO ADMINISTRATION S UPPORT. THEREFORE, THERE IS NO COST TO EARN TAX FREE INCOME.....' 3.1 THE ASSESSEE HAS NOT FURNISHED DETAILS OF EXACT SOURCE OF INVESTMENTS IN SHARES/MUTUAL FUNDS DURING THE YEAR UNDER CONSID ERATION. THERE WAS NO MENTION AS TO WHETHER OR NOT THE ASSESSEE HAS MAINT AINED SEPARATE ACCOUNTS OF INTEREST BEARING FUND AND NON-INTEREST BEARING F UNDS UTILIZED FOR INVESTMENT. IN ABSENCE OF ANY SPECIFIC DETAILS OF S OURCE OF INVESTMENT IN SHARES/MUTUAL FUND AND IN THE LIGHT OF ITAT, AHMEDA BAD DECISION IN THE CASE OF HARISH KRISHNAKANT BHATT VS ITO (2004) 91 I TD 311 (AHD), THE ASSESSING OFFICER MADE THE TOTAL DISALLOWANCE OF RS .22,02,856/- U/S 14A OF THE ACT, INSTEAD OF CORRECT FIGURE OF RS.12,84,860/ -, MADE IN RESPECT OF INTEREST OF RS.4,32,280/- AND ADMINISTRATIVE EXPENS ES OF RS.8,52,580/-. 4. AGGRIEVED BY THE AFORESAID ORDER OF THE ASSESSIN G OFFICER, THE APPELLANT-ASSESSEE PREFERRED AN APPEAL BEFORE THE C IT(A) WHO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSEE WA S ASKED TO GIVE DETAILS OF INVESTMENTS MADE VIS--VIS BORROWED FUNDS. IT WAS REPLIED THAT THE DIVIDEND HAS BEEN RECEIVED ON SHARES OF KHS MACHINE RY PRIVATE LTD AND KLOCKNER DESMA MACHINERY PRIVATE LTD AND THE INVEST MENT IN THESE SHARES WERE MADE IN FY 1997-98 AND 1995-96 RESPECTIVELY OU T OF RIGHT ISSUE OF SHARES BY PRIVATE PLACEMENT. THESE FACTS WERE NOT P LACED BEFORE THE AO BY THE ASSESSEE. IN FACT, IN RESPONSE TO QUERY RAISED BY THE AO, THE ASSESSEE SIMPLY REPLIED THAT IT HAS NOT INCURRED ANY EXPENDI TURE TO EARN SUCH INCOME AND THE ASSESSEE DID NOT GIVE DETAILS OF SOURCE OF INVESTMENTS ON WHICH ITA NO. 469/AHD/2012 MAMATA MACHINERY PVT LTD VS. ACIT AY : 2004-05 3 DIVIDEND HAS BEEN RECEIVED. THE ONUS WAS ON THE AS SESSEE TO PROVE ITS CLAIM THAT IS HAS NOT INCURRED ANY EXPENDITURE TO EARN TH E DIVIDEND INCOME AS THE FACTS WERE IN ITS KNOWLEDGE. IN VIEW OF THESE FACT S, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS UPHELD BY THE LD. CIT( A). 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESS EE IS NOW IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND THAT THERE IS A DELAY OF 1557 DAYS IN FILING THE AP PEAL BEFORE THE ITAT, CHALLENGING THE ORDER OF THE CIT(A). THE ASSESSEE H AS FILED AN AFFIDAVIT OF SHRI DIPAK J. MODI, WHO IS MANAGER (FINANCE) OF ASS ESSEE-COMPANY, IN SUPPORT OF ITS CONTENTION, WHEREIN HE HAS STATED TH AT DUE TO HIS PREOCCUPATION WITH OFFICE WORK AT THAT POINT OF TIM E, HE COULD NOT ATTEND THE ORDER OF CIT(A) AND NOT ABLE TO FILE BEFORE THE ITA T IN TIME AS IN FACT THE ORDER OF THE CIT(A) WAS LYING WITH SOME OTHER PAPER S/FILES. THE ASSESSEE HAS FILED HONBLE SUPREME COURT JUDGMENT IN THE CAS E OF N. BALKRISHNAN VS. KRISHNAMURTHY, 7 SCC 123, WHEREIN IT HAS BEEN HELD THAT IN CASES OF CONDONATION OF DELAY THE SUFFICIENT CAUSE SHOULD BE CONSTRUED LIBERALLY AND THAT IN THE ABSENCE OF MALAFIDE OR DELIBERATE DELAY AS A DILATORY TACTICS, COURT SHOULD NORMALLY CONDONE THE DELAY. RELIANCE IS ALS O PLACED ON THE DECISION OF ITAT, AHMEDABAD BENCH IN THE CASE OF KAILPAR CRE DIT AND MERCANTILE P. LTD VS. DCIT, IN ITA NO.2390/AHD/1996, WHEREIN ALSO IN SIMILAR GROUND THE DELAY HAS BEEN CONDONED. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE AFORESAID DECISIONS OF THE HONBLE SUPREME COURT AND ITAT, WE CONDONE THE DELAY IN FILING THE APPEAL BEFORE ITAT. 7. WITH REGARD TO THE MERIT OF THE CASE ON HAND, WE SET ASIDE THE ORDER OF THE LD. CIT(A), BECAUSE THE CIT(A) OUGHT TO HAVE CONSIDER THE CONTENTION OF THE APPELLANT-ASSESSEE WITH REGARD TO FOREIGN DI VIDEND, BUT THE LD. CIT(A) ITA NO. 469/AHD/2012 MAMATA MACHINERY PVT LTD VS. ACIT AY : 2004-05 4 FAILED TO CONSIDER THE SAME. IN VIEW OF THE ABOVE, WE REMIT THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMI NE THE CLAIM OF THE APPELLANT-ASSESSEE AND IF IT IS FOUND THAT THERE IS FOREIGN DIVIDEND, THE SAME WILL BE CONSIDERED BY THE ASSESSING OFFICER AND THE REAFTER, A FRESH ASSESSMENT WILL BE FRAMED AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 11 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- N.K. BILLAIYA (ACCOUNTANT MEMBER) MAHAVIR PRASAD (JUDICIAL MEMBER) AHMEDABAD; DATED 11/11/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD