ASIA INVESTMENTS P. LTD, MUMBAI V. JCIT (OSD) 2(1), MUMBAI

ITA 4779/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0391 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 15-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: H P MAHAJANI; PRASAD BAPAT
• Keywords: Opportunity of being heard
• Section: 143(3); 142(1); 260A; 115JB; 37(1); 246

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.7539/M/2013 ASSESSMENT YEAR: 2003-04 M/S. ASIA INVESTMENTS PRIVATE LIMITED, 4 TH FLOOR, MAGNET HOUSE, N.M. MARG, BALLARD ESTATE, MUMBAI 400 038 PAN: AAACA4539K VS. ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-2(1), AAYAKAR BHAVAN, CHURCHGATE, MUMBAI (APPELLANT) (RESPONDENT) ITA NO.4779/M/2014 ASSESSMENT YEAR: 2003-04 M/S. ASIA INVESTMENTS PRIVATE LIMITED, MAGNET HOUSE, DOGGALL ROAD, BALLARD ESTATE, MUMBAI 400 038 PAN: AAACA4539K VS. JOINT COMMISSIONER OF INCOME TAX (OSD) 2(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -20 (APPELLANT) (RESPONDENT) ITA NO.62/M/2014 ASSESSMENT YEAR: 2003-04 DCIT - 2(1), R.NO.561, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 VS. M/S. ASIA INVESTMENTS PRIVATE LIMITED, MAGNET HOUSE, 4 TH FLOOR, N.M. ROAD, BALLARD ESTATE, MUMBAI 400 038 PAN: AAACA4539K (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI H.P. MAHAJANI, A.R. & SHRI PRA SAD BAPAT, A.R. REVENUE BY : SHRI RAJESH KUMAR YADAV, D.R. DATE OF HEARING : 29.01.2018 DATE OF PRONOUNCEMENT : 23.02.2018 ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 2 O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE ARE DIRECTED AGAINST ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-4, MUMBAI DATED 09.10.2013 ARISEN OUT OF ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 254 OF THE INCOME TAX ACT, 1961. THE SECOND APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS)-4, MUMBAI DATED 04.06.2014, CONFIRMING PE NALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR A SSESSMENT YEAR 2003-04. SINCE THE FACTS ARE IDENTICAL AND THE ISSUES ARE CO MMON, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT IN GROUP COMPANIES FOR CONTR OLLING INTEREST. THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2003-04 ON 25.11.03 DECLARING TOTAL INCOME AT RS. NIL UNDER TH E NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS.1,01,51,321/- UNDER SECTI ON 115JB OF THE INCOME TAX ACT, 1961. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 24.03.06 DETERMINING TOTAL INCOME AT RS.5,35,87,040 /-, AFTER MAKING ADDITIONS ON ACCOUNT OF DISALLOWANCE OF MISCELLANEOUS AND STA FF WELFARE EXPENSES AMOUNTING TO RS.91,453/- AND FINANCE CHARGES AMOUNT ING TO RS.4,89,55,754/-. 3. THE ASSESSEE HAS CARRIED THE MATTER IN APPEAL BE FORE THE FIRST APPELLATE AUTHORITY. THE LD. CIT(A) VIDE HIS ORDER DATED 24. 11.08 HAS PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE WHEREIN HE HAS GIVEN R ELIEF OF RS.8,511/- TOWARDS MISCELLANEOUS AND STAFF WELFARE EXPENSES. HOWEVER, CONFIRMED ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF FINANCE CHAR GES AMOUNTING TO RS.4,89,55,754/-. THE ASSESSEE CARRIED THE MATTER IN FURTHER APPEAL BEFORE THE ITAT. THE ITAT VIDE ITS ORDER DATED 15.07.11 IN IT A NO.705/M/2009 HAS ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 3 CONFIRMED THE DISALLOWANCE OF MISCELLANEOUS AND STA FF WELFARE EXPENSES AS THE SAME WAS NOT PRESSED BY THE ASSESSEE, HOWEVER, SET ASIDE THE ISSUE OF DISALLOWANCE OF FINANCE CHARGES TO THE FILE OF THE AO WITH A DIRECTION THAT THE LD. CIT(A) HAS CONFIRMED ADDITIONS MADE BY THE AO T OWARDS FINANCE CHARGES BY FOLLOWING THE ORDER OF THE LD. CIT(A) FOR THE AS SESSMENT YEAR 2001-02 IN ASSESSEES OWN CASE, WHEREAS THE FACTS OF ASSESSMEN T YEAR 2001-02 ARE ENTIRELY DIFFERENT FROM FACTS OF THE IMPUGNED ASSESSMENT YEA R AS THE DIVIDEND RECEIVED FOR THE ASSESSMENT YEAR 2001-02 WAS EXEMPT UNDER SE CTION 10(34) OF THE ACT, WHEREAS THE DIVIDEND RECEIVED FOR THE YEAR UNDER CO NSIDERATION IS TAXABLE. THE ABOVE FACT MAKES A DIFFERENCE IN DETERMINING THE TO TAL INCOME OF THE ASSESSEE. BOTH THE AUTHORITIES BELOW DECIDED THE ISSUE IN THE YEAR UNDER CONSIDERATION FOLLOWING THE EARLIER YEARS ORDER AS THE SAME WAS ENTIRELY DIFFERENT FROM THE PRESENT YEAR. WITH THESE DIRECTIONS, SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ENTIRE FACTS OF THE CASE AND DECIDE THE ISSUE AFRESH KEEPING IN VIEW OF THE OBSERVATIONS MADE ABO VE. 4. CONSEQUENT TO ORDER OF THE ITAT, THE AO ISSUED N OTICE UNDER SECTION 142(1) DATED 03.10.12. IN RESPONSE TO THE NOTICE, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILE D THE VARIOUS DETAILS, AS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.4,89,55,754/- UNDER THE HEAD FINANCE CHARGES WHICH REPRESENTS INTEREST PAYMENT MADE ON B ORROWED FUNDS, THEREFORE CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE F INANCE CHARGES SHOULD NOT BE CONSIDERED AS EXPENSES NOT RELATABLE TO THE BUSINES S, SINCE NO BUSINESS WAS CARRIED OUT FOR THE YEAR UNDER CONSIDERATION. IN R ESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED THAT IT IS IN THE BUSINESS OF IN VESTMENTS IN SHARES OF GROUP COMPANIES FOR ACQUIRING CONTROLLING INTEREST AND AL SO MANAGING FINANCE AND REHABILITATING THOSE COMPANIES. THE ASSESSEE FURTH ER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, DIVIDEND INCOME OF RS.3,3 7,25,873/- WAS EARNED AND THE SAME HAS BEEN CONSIDERED FOR TAX. IT WAS FURTH ER SUBMITTED THAT THE OBJECT ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 4 WAS ALWAYS TO ACQUIRE SHARES IN THE GROUP COMPANIES AND THE INTEREST EXPENDITURE INCURRED WAS NEVER TO EARN INCOME BUT I T HAD INCIDENTALLY FLOWED IN THE NORMAL COURSE OF BUSINESS AND ACCORDINGLY IN TEREST PAID WAS DEDUCTABLE UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 196 1. THE ASSESSEE ALSO MADE AN ALTERNATE SUBMISSION IN AS MUCH AS DIVIDEND EARN ED FROM SHARES IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, AS SUCH I NTEREST PAID ON BORROWED FUNDS NEEDS TO BE ALLOWED AS A DEDUCTION UNDER SECT ION 57(III) OF THE INCOME TAX ACT, 1961. 5. THE AO AFTER CONSIDERING THE RELEVANT SUBMISSION S OF THE ASSESSEE AND ALSO ANALYSIS OF PROVISIONS OF SECTION 36(1)(III) A ND 57(III) OF THE ACT, OBSERVED THAT ON GOING THROUGH THE MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION OF THE ASSESSEE COMPANY, IT IS SEEN THA T THE MAIN OBJECTS DO NOT ENCOMPASS ANY OF THE ACTIVITIES CARRIED ON AS ABOVE . THE ASSESSEE HAS CARRIED OUT ONLY ACTIVITY DURING THE YEAR UNDER CONSIDERATI ON IS INVESTMENT IN SHARES OF ANAND GROUP OF COMPANIES AND SUCH INVESTMENTS HAD B EEN SHOWN UNDER THE HEAD INVESTMENTS. EVEN DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSEE FAILED TO EXPLAIN AS TO HOW ACQUISITION OF SHARES FOR HOLDING CONTROLLING INTEREST IN GROUP COMPANIES WAS IN THE NATURE OF BUSINESS ACTIVITY. 6. IN SO FAR AS ALTERNATE PLEA OF THE ASSESSEE TO A LLOW FINANCE CHARGES UNDER SECTION 57(III), THE AO OBSERVED THAT DURING THE YE AR THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.3,37,25,873/-. EVEN THOUGH T HE DIVIDEND INCOME IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, THE ASSESSEE IN HIS OWN SUBMISSIONS HAS STATED THAT DIVIDEND IS NOT EARNED ON ALL INVESTMENTS. THE ASSESSEE ALSO FAILED TO FILE ANY BREAKUP OF THE FUN DS FOR THE PURPOSE OF MAKING EACH AND EVERY INVESTMENT. SINCE THE ASSESSEE HAS FAILED TO FURNISH BREAKUP OF INVESTMENTS WHICH EARNED DIVIDEND INCOME AND ALSO B REAKUP OF FUNDS BORROWED, OPINED THAT INTEREST EXPENSES OF RS. RS.4 ,89,55,754/- IS NOT EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. ACCORDINGLY, THE CLAIM OF FINANCE CHARGES AMOUNTING TO ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 5 RS.4,89,55,754/- HAS BEEN DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDER, THE A SSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 7. BEFORE THE LD. CIT(A), THE ASSESSEE HAS REITERAT ED ITS SUBMISSIONS MADE BEFORE THE AO. THE ASSESSEE FURTHER SUBMITTED THAT ITS MAIN ACTIVITY IS INVESTMENT IN SHARES OF GROUP COMPANIES FOR ACQUIRI NG CONTROLLING INTEREST AND IT HAS EARNED DIVIDEND INCOME FROM SUCH SHARES WHIC H IS TAXABLE UNDER THE ACT AND HENCE THE CORRESPONDING EXPENDITURE INCLUDING F INANCE CHARGES ARE DEDUCTABLE. THE ASSESSEE FURTHER CONTENDED THAT TH E OBJECT OF THE EXPENDITURE BY WAY OF INTEREST WAS NEVER TO EARN INCOME, THOUGH IT MAY HAVE INCIDENTALLY FLOWED, HAD THE COMPANIES PAID ANY DIVIDEND AT ANY POINT OF TIME AND THE OBJECT ALWAYS WAS TO ACQUIRE SHARES IN THE INTEREST OF BUSINESS CARRIED ON BY THE COMPANY. THEREFORE, DEDUCTION TOWARDS INTEREST EXP ENSES NEEDS TO BE ALLOWED UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSEE ALSO MADE AN ALTERNATE PLEA IN AS MUCH AS THE DIVIDEND INCOME IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, AS SUCH CORRESPONDING EXPENDITURE I NCLUDING INTEREST NEEDS TO BE ALLOWED UNDER SECTION 57(III) OF THE ACT. IN TH IS REGARD, THE LD. A.R. RELIED UPON PLETHORA OF JUDGMENTS. 8. THE LD. CIT(A), AFTER CONSIDERING RELEVANT SUBMI SSIONS OF THE ASSESSEE, OBSERVED THAT THE ACTIVITY CARRIED OUT BY THE ASSES SEE BY INVESTING IN SHARES OF GROUP COMPANIES FOR ACQUIRING CONTROLLING INTEREST CANNOT BE CONSIDERED AS THE ACTIVITY IN THE NATURE OF BUSINESS AND HENCE THE EX PENDITURE INCURRED UNDER THE HEAD FINANCE CHARGES CANNOT BE ALLOWED UNDER SECT ION 36(1)(III) OF THE ACT, AS, THE SAME HAS NOT BEEN INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS. THE LD. CIT(A), FURTHER, OBSERVED THAT O N THE BASIS OF THE STATUTORY AUDIT REPORT READ WITH MEMORANDUM OF ASSOCIATION AN D ARTICLES OF ASSOCIATION OF THE ASSESSEE COMPANY, IT TRANSPIRES FROM THE REC ORDS THAT THE ASSESSEE HAS CARRIED OUT ONLY INVESTMENT ACTIVITY IN SHARES OF G ROUP COMPANIES. THE ASSESSEE COMPANY HAS RECORDED SUCH INVESTMENTS IN S HARES UNDER THE HEAD ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 6 INVESTMENTS. THE ASSESSEE ALSO FAILED TO EXPLAIN AS TO HOW ACQUISITION OF SHARES FOR ACQUIRING CONTROLLING INTEREST IN ANAND GROUP OF COMPANIES WAS IN THE COURSE OF BUSINESS ACTIVITY. THE LD. CIT(A), F URTHER OBSERVED THAT IN SO FAR AS ALTERNATE PLEA OF THE ASSESSEE IN THE LIGHT OF T HE OBSERVATION OF ITAT THAT DIVIDEND INCOME EARNED FOR THE YEAR UNDER CONSIDERA TION IS TAXABLE, THE CORRESPONDING EXPENDITURE INCURRED INCLUDING INTERE ST NEEDS TO BE ALLOWED ON PROPORTIONATE BASIS CONSIDERING THE TOTAL DIVIDEND INCOME EARNED BY THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS EXTRACTED BELOW: 5.1 I HAVE CAREFULLY AND DISPASSIONATELY CONSIDERE D THE FACTS AND CIRCUMSTANCES OF THE CASE, STATEMENT OF FACTS, RELEVANT RECTIFICA TION ORDER, WRITTEN SUBMISSION AND THE ARGUMENTS MADE BY THE LAR BEFORE THE UNDERSIGNE D. 5.2 EARLIER APPELLATE AUTHORITY HAS GIVEN A FINDING OF FACT WHICH MAY BE SUMMARIZED AS UNDER:- ' 11. IN THE ANNUAL ACCOUNTS FOR THE YEAR ENDED 31.3. 2003, IN THE AUDITORS REPORT, THE AUDITOR IN CLAUSE (XVIII) HAS REPORTED AS UNDER : 'AS PER THE OPINION OBTAINED BY THE COMPANY, SINCE THE COMPANY IS NOT ENGAGED IN CARRYING ON ANY BUSINESS OR AS PART OF ITS BUSINESS THE ACTIVITY OF ACQUISITION OF SHARES EXCEPT MAKING 'LONG TERM INVESTMENTS'............... 12. ON PERUSAL OF THE MEMORANDUM & ARTICLES OF ASS OCIATION OF THE APPELLANT COMPANY, IT IS SEEN THAT THE MAIN OBJECT ' DOES NOT ENCOMPASS ANY OF THE ACTIVITIES CARRIED ON BY THE A PPELLANT COMPANY. EVEN THE 'OBJECTS INCIDENTAL OR ANCILLARY FOR THE A TTAINMENT OF MAIN OBJECTS' DO NOT SPECIFICALLY ENCOMPASS THE ACTIVITY OF ACQUISITION OF CONTROLLING INTEREST. 13. AS PER THE BALANCE SHEET AS AT 31.3.2003, THE FINANCIAL POSITION IS AS UNDER: AS ON 31.3.2003 AS ON 31.3.2002 SHARE CAPITAL & RESERVES 57,71,91,847 59,89,80,739 LOAN FUNDS 31,28,43,544 15,11,48,240 FIXED ASSETS 17,72,854 17,78,350 INVESTMENTS 93,53,95,636 77,95,31,104 NET CURRENT ASSETS (4,71,55,989) (6,12,52,595) FROM THE ABOVE CHART IT IS CLEAR THAT THE ENTIRE BO RROWINGS HAVE BEEN UTILIZED FOR THE PURPOSES OF MAKING INVESTMENTS.' ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 7 5.3 HE CONCLUDED ON THE BASIS OF THE STATUTORY REPO RT OF THE CHARTERED ACCOUNTANTS READ WITH MOA AND AOA OF THE APPELLANT COMPANY THAT THE APPELLANT WAS NOT ENGAGED IN ANY BUSINESS ACTIVITY. THE ONLY ACTIVITY CARRIED OUT BY THE APPELLANT WAS INVESTMENT IN SHARES OF ANAND GROUP OF COMPANIES. T HE APPELLANT COMPANY HAS RECORDED THE INVESTMENT IN SHARES UNDER THE HEAD 'I NVESTMENTS'. THE APPELLANT FAILED TO EXPLAIN AS TO HOW ACQUISITION OF SHARES F OR ACQUIRING CONTROLLING SHARES IN ANAND GROUP OF COMPANIES WAS IN THE COURSE OF BUSIN ESS ACTIVITY. 5.4 HOWEVER, IN THE LIGHT OF THE DIRECTION OF HON'B LE ITAT, THE PRESENT APPEAL FOR A.Y.2003-04 STANDS ON A DIFFERENT FOOTING WHEN COMP ARED WITH THE EARLIER A.Y.2001-02 MAINLY BECAUSE IN THE EARLIER A.Y.2001-02 THE DIVIDEND EARNED WAS EXEMPT U/S.10(34) OF THE ACT, WHEREAS, IN THE RELEV ANT A.Y.2003-04, THE DIVIDEND INCOME OF RS.3,37,25,837/- HAS BEEN OFFERED TO TAX AND IS NOT EXEMPT U/S.10(34) OF THE ACT. THIS ASPECT HAS NOT BEEN DEALT WITH BY THE LAO IN THE SET-ASIDE ASSESSMENT PROCEEDINGS. IN THE COURSE OF APPELLATE PROCEEDING S, IT IS SEEN THAT THE APPELLANT HAS NOT EARNED DIVIDEND AND THEREFORE, NOT DISCLOSE D ANY TAXABLE INCOME OUT OF THE FOLLOWING INVESTMENTS IN SHARES:- 5.5 AS ON 31.03.2003, THE APPELLANT HAD AN INVESTM ENT PORTFOLIO OF RS.93.54 CRORES. DURING THE F.Y. RELEVANT TO A.Y.2003-04, TH E APPELLANT HAD ADMITTEDLY NOT SOLD ANY INVESTMENTS. DURING THE YEAR (A.Y.2003-04) , THE APPELLANT EARNED DIVIDEND INCOME OF RS.3,37,25,873/- WHICH WAS OFFERED TO TAX , AS CONTENDED BY THE APPELLANT BEFORE THE ITAT. ADMITTEDLY, THE APPELLAN T HAS NOT EARNED DIVIDEND ON ALL INVESTMENTS. HAVING REGARD TO THE FACTS AND CIRCUMS TANCES, THE LAO IS DIRECTED TO ALLOW DEDUCTION U/S.57(III)OF THE ACT BY MAKING PRO -RATA DISALLOWANCE OF FINANCIAL CHARGES OF RS.4,89,55,754/- AFTER VERIFYING THE FAC TS AND FIGURES AND AFTER APPLYING DUE DILIGENCE AT THE TIME OF GIVING APPEAL EFFECT. 9. AGGRIEVED BY THE ABOVE ORDER OF THE LD. CIT(A), THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 10. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT TH E LD. CIT(A) ERRED IN NOT DIRECTING THE AO TO ALLOW DEDUCTION IN RESPECT OF F INANCE CHARGES ENTIRELY UNDER SECTION 36(1)(III) OR SECTION 37(1) OF THE AC T, AS TOTAL INTEREST EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS OF THE DATE INVESTMENT IN SHARES NO. OF SHARES AMOUNT (RS.) 02.01.2001 SPICER INDIA LTD. 19,60,000 1,96,00,000 02.01.2001 DYTEK INDIA LTD. 25,573 89,53,306 02.01.2001 DYTEK INDIA LTD. 25,861 92,47,700 02. 01.2001 DYTEK INDIA LTD. 25,337 88,00,750 02.01.2001 DYTEK INDIA LTD. 19,667 70,28,170 02.01.2001 DEGRAMONT INDIA LTD. 81,960 81,96,000 ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 8 ASSESSEE. THE LD. A.R. FURTHER SUBMITTED THAT THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION UNDER SECTION 57(III) OF THE ACT, BY MAKING PRO-RATA DISALLOWANCE OF FINANCE CHARGES INCURRED ON THE INV ESTMENT IN EQUITY SHARES ON WHICH NO DIVIDENDS WERE RECEIVED BY THE ASSESSEE DU RING THE YEAR UNDER CONSIDERATION. 11. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE CLAIM OF DEDUCTION UN DER SECTION 57(III) OF THE ACT, ON PRO-RATA BASIS, OUT OF THE TOTAL FINANCE CH ARGES OF RS.4,89,55,754/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAI LED TO EXPLAIN AS TO HOW THE ACQUISITION OF SHARES FOR ACQUIRING CONTROLLING INT EREST IN ANAND GROUP OF COMPANIES FORMED PART OF ASSESSEES BUSINESS ACTIVI TY. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE ITSELF ADM ITTED THAT DIVIDEND IS NOT EARNED ON ALL THE INVESTMENTS AND FURTHER FAILED TO SUBSTANTIATE THAT INTEREST PAYMENT WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING DIVIDEND INCOME. THE ASSESSEE FAILED TO IDENTIFY INVESTMENT S WHICH EARNED DIVIDEND INCOME AGAINST WHICH THE CLAIM OF INTEREST UNDER SE CTION 57(III) OF THE ACT WAS LIABLE AS DEDUCTION. 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE AO DISALLOWED FINANCE CHARGES ON THE GROUND THAT THE E XPENDITURE INCURRED UNDER THE HEAD FINANCE CHARGES IS NOT INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, WHICH IS EVIDE NT FROM THE FACT THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY DU RING THE YEAR UNDER CONSIDERATION, EXCEPT HOLDING INVESTMENTS IN SHARES OF GROUP COMPANIES FOR ACQUIRING CONTROLLING INTEREST. ACCORDING TO THE A O, INVESTMENTS IN SHARES OF GROUP COMPANIES FOR ACQUIRING CONTROLLING INTEREST CANNOT BE FORMED PART OF BUSINESS ACTIVITY OF THE ASSESSEE. THE AO FURTHER WAS OF THE OPINION THAT THE STATUTORY AUDITORS IN THEIR AUDIT REPORT CATEGORICA LLY OBSERVED THAT THE COMPANY IS NOT ENGAGED IN CARRYING ON ANY BUSINESS OR AS A PART OF ITS BUSINESS ACTIVITY ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 9 OF ACQUISITION OF SHARES EXCEPT MAKING LONG TERM IN VESTMENTS. THE AO FURTHER WAS OF A VIEW THAT THE MEMORANDUM OF ASSOCIATION AN D ARTICLES OF ASSOCIATION OF THE ASSESSEE COMPANY DOES NOT ENCOMP ASS ANY OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE AS PER ITS MAIN OBJECTS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAS INCURRED FINANCE CHARGES WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHICH IS EVIDENT FROM THE FACT THAT ITS MAIN BUSINESS ACTIVITY IS INVESTMENT IN SHARES OF ANAND GROUP OF COMPANIES FOR ACQUIRING CONTROLLING INTEREST. THE ASSESSEE FURTHER CONTEND ED THAT ITS MAIN OBJECTS CLAUSE IN MEMORANDUM OF ASSOCIATION IS ONLY INVESTM ENT IN SHARES OF GROUP COMPANIES. THE ASSESSEE FURTHER CONTENDED THAT ITS INVESTMENTS IN GROUP COMPANIES ARE YIELDING DIVIDEND INCOME AND SUCH DIV IDEND INCOME IS TAXABLE UNDER THE ACT, AS SUCH ALL EXPENSES INCURRED FOR EA RNING DIVIDEND INCOME INCLUDING FINANCE CHARGES NEEDS TO BE ALLOWED AS DE DUCTION UNDER SECTION 57(III) OF THE ACT. 13. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIALS AVAILABLE ON RECORD, WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE ACTIVITY CARRIED OUT BY THE ASSESSE E I.E. INVESTMENT IN SHARES OF ANAND GROUP OF COMPANIES FOR HOLDING CONTROLLING IN TEREST CANNOT BE CONSIDERED AS MAIN BUSINESS ACTIVITY OF THE ASSESSE E IN THE NATURE OF TRADE OR COMMERCE. THE ASSESSEE ITSELF HAS ADMITTED THAT IT IS IN THE ACTIVITY OF INVESTMENT IN GROUP COMPANIES FOR ACQUIRING CONTROL LING INTEREST AND SUCH INVESTMENT HAS BEEN TREATED AS LONG TERM INVESTMENT IN ITS FINANCIAL STATEMENTS. IT IS ALSO AN ADMITTED FACT THAT THE STATUTORY AUDI TORS OF THE COMPANY HAVE REPORTED THAT THE COMPANY IS NOT ENGAGED IN CARRYIN G ON ANY BUSINESS OR AS PART OF ITS BUSINESS ACTIVITY OF ACQUISITION OF SHARES E XCEPT MAKING LONG TERM INVESTMENTS. WE FURTHER NOTICED THAT THE MAIN OBJE CTS CLAUSE IN MEMORANDUM OF ASSOCIATION DOES NOT ENCOMPASS ANY OF THE ACTIVI TIES CARRIED ON BY THE ASSESSEE AND EVEN THE OBJECTS INCIDENTAL OR ANCILLA RY FOR THE ATTAINMENT MAIN OBJECTS DO NOT SPECIFICALLY ENCOMPASS THE ACTIVITY OF THE ACQUISITION OF SHARES ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 10 FOR CONTROLLING INTEREST. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO AND THE LD. CIT(A) WERE RIGHT IN TREATING THE ACTIV ITY CARRIED OUT BY THE ASSESSEE AS INVESTMENT ACTIVITY AND ACCORDINGLY FIN ANCE CHARGES IS NOT DEDUCTABLE UNDER SECTION 36(1)(III) OF THE INCOME T AX ACT, 1961. 14. COMING TO THE ALTERNATE PLEA OF THE ASSESSEE, T HE ASSESSEE HAS MADE AN ALTERNATE PLEA IN AS MUCH AS FINANCE CHARGE INCURRE D SHALL BE DEDUCTABLE UNDER SECTION 57(III) OF THE ACT, AS ITS DIVIDEND INCOME IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. WE FIND MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT DIVIDEND INCOME EARNED BY THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION IS TAXABLE UNDER THE HEAD INCOME FRO M OTHER SOURCES AND ACCORDINGLY ANY EXPENDITURE INCURRED TO EARN DIVIDE ND INCOME INCLUDING FINANCE CHARGES NEEDS TO BE DEDUCTED UNDER SECTION 57(III) OF THE ACT. HOWEVER, THE FACTS REMAIN THAT THE ASSESSEE HAS FAI LED TO FURNISH ANY DETAILS IN RESPECT OF INVESTMENTS WHICH EARNED INCOME AND INVE STMENTS WHICH DO NOT EARN DIVIDEND INCOME FOR THE YEAR UNDER CONSIDERATI ON. IN FACT, THE ASSESSEE ITSELF HAD ADMITTED THAT ALL ITS INVESTMENTS ARE NO T EARNED DIVIDEND INCOME. THE LD. CIT(A), AFTER CONSIDERING RELEVANT FACTS, H AS DIRECTED THE AO TO ALLOW FINANCE CHARGES ON PROPORTIONATE BASIS IN RESPECT O F INVESTMENTS WHICH EARNED DIVIDEND INCOME AFTER VERIFYING THE FACTS. THE LD. CIT(A) HAS GIVEN FACTUAL FINDING, AFTER CONSIDERING THE RELEVANT FACTS OF TH E CASE. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE LD. CIT(A), HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD. CIT(A) AND REJECT GR OUNDS RAISED BY THE REVENUE AS WELL AS THE ASSESSEE. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.7539/M/2013 AND APPEAL FILED BY THE REVENUE IN ITA NO.62/M/2014 ARE DISMISSED. ITA NO.4779/M/2014 16. THIS APPEAL FILED BY THE ASSESSEE IS ARISEN OUT OF ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI DATE D 04.06.2014, ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 11 CONFIRMING PENALTY LEVIED UNDER SECTION 271(1)(C) O F THE INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT REVERSING THE PENALTY ORDER PAS SED BY THE ASSESSING OFFICER (AO). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAS NOT FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT WAS LEVIED WAS SET AS IDE BY THE INCOME TAX APPELLATE TRIBUNAL AND IN THE REASSESSMENT PROCEEDI NGS THE AO HAS NOT INITIATED PENALTY PROCEEDINGS AND THEREFORE NO PENALTY COULD SURVIVE IN SUCH CASES. 4. THE ORDER LEVYING PENALTY BE CANCELLED. 17. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES OF GROUP COMPA NIES FOR ACQUIRING CONTROLLING INTEREST. THE ASSESSEE HAS FILED RETUR N OF INCOME DECLARING NIL TOTAL INCOME UNDER NORMAL PROVISIONS OF THE INCOME TAX AC T, AND BOOK PROFIT OF RS.1,01,51,321/- UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 24 .03.06 DETERMINING THE TOTAL INCOME UNDER NORMAL PROVISIONS OF INCOME TAX ACT AT RS.5,35,87,040/- BY MAKING ADDITIONS TOWARDS DISALLOWANCE OF MISCELL ANEOUS EXPENSES AND STAFF WELFARE EXPENSES OF RS.91,453/- AND FINANCE CHARGES OF RS.4,89,55,754/-. 18. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY. THE LD. CIT(A) VIDE HIS ORDER DATED 24. 11.08 PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE, WHEREIN HE HAS ALLOWE D PARTIAL RELIEF IN RESPECT OF MISCELLANEOUS EXPENSES AND STAFF WELFARE EXPENSES A ND CONFIRMED ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF FINANCE CHAR GES. THE ASSESSEE CARRIED THE MATTER IN FURTHER APPEAL BEFORE THE ITA T. THE ITAT, VIDE ITS ORDER DATED 15.07.2011 IN ITA NO.705/M/09, HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ENTIRE FACTS OF THE CASE IN THE LIGHT OF ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 12 DIVIDEND INCOME EARNED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. MEANTIME, THE AO HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE PASSED PENALTY ORDER UNDER SECTION 271(1)(C) ON 05.03.10 AND LEVIED PENA LTY OF RS.1,79,91,239/- BEING 100% OF TAX SOUGHT TO BE EVADED. 19. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSE E HAS FILED ELABORATE WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODUCED BY TH E LD. CIT(A) IN HIS ORDER AT PARAGRAPH 4.1 PAGE NOS.4 TO 23. THE SUM AND SUB STANCE OF THE ARGUMENTS OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT, WHEN T HE ASSESSMENT HAS BEEN SET ASIDE BY THE TRIBUNAL, THE PENALTY ORDER PASSED BY THE AO CANNOT SURVIVE IN THE EYES OF LAW AS THE ADDITION ON WHICH PENALTY HAS BE EN LEVIED IS SET ASIDE BY THE ITAT TO THE AO FOR FRESH CONSIDERATION. AS REGARDS MERITS OF THE CASE, THE ASSESSEE SUBMITTED THAT THERE IS NO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AS A LLEGED BY THE AO, AS THE AO HAS MADE ADDITIONS TOWARDS DISALLOWANCE OF INTEREST ON THE GROUND THAT EXPENDITURE INCURRED BY THE ASSESSEE CANNOT BE ALLO WED UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSEE FURTHER SUBMITS THAT ONLY IF THERE IS A CONCEALMENT, THE NECESSITY TO DETERMINE THE NATURE OF THE CONCEALMEN T SHALL ARISE, I.E. WHETHER SUCH CONCEALMENT IS WILLFUL OR NOT, HOWEVER, IN CAS E THERE IS NO CONCEALMENT AT ALL, THE QUESTION OF DETERMINING WHETHER OR NOT SUC H CONCEALMENT IS WILLFUL DOES NOT ARISE, CONSEQUENTIALLY NO PENALTY IS LEVIA BLE. IN THIS REGARD, RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF CIT V. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158 (SC). 20. THE LD. CIT(A), AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELIED UPON THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCE SSORS REPORTED IN (2008) 306 ITR 277, OBSERVED THAT THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IS JUSTIFIED IN THIS CASE. HOWEVER, THIS IS A CASE COVERED BY PROVISIONS OF ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 13 SUB SECTION (1A) TO SECTION 275 OF THE ACT. THIS I S A CASE WHERE THE RELEVANT ASSESSMENT ORDER WAS THE SUBJECT MATTER OF AN APPEA L TO THE LD. CIT(A) UNDER SECTION 246 OR SECTION 246A(A) AND AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTION 253 OF THE ACT AND AN ORDER IMPOSING PENALT Y IS PASSED BEFORE THE ORDER OF THE ITAT WAS RECEIVED BY THE CHIEF COMMISSIONER OR THE COMMISSIONER. THEREFORE, AN ORDER REDUCING OR CANCELLING PENALTY OR DROPPING THE PROCEEDINGS FOR THE IMPOSITION OF PENALTY MAY BE PASSED BY THE AO ON THE BASIS OF ASSESSMENT AS REVISED BY GIVING EFFECT TO SUCH ORDE R OF THE COMMISSIONER (APPEALS) OR THE ITAT AFTER HEARING THE ASSESSEE AN D GIVING A REASONABLE OPPORTUNITY OF BEING HEARD AS PER LAW. AGGRIEVED B Y THE ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE US. 21. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT, T HE LD. CIT(A) ERRED IN NOT REVERSING THE PENALTY ORDER PASSED BY THE AO HAVING REGARD TO THE FACTS THAT THE ASSESSEE HAS NOT FURNISHED INACCURATE PARTICULARS O F ITS INCOME. THE LD. A.R. FURTHER SUBMITTED THAT THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT WAS LEVIED WAS SET ASIDE BY THE ITAT AND IN THE REASSESSMENT PROCE EDINGS THE AO HAS NOT INITIATED PENALTY PROCEEDINGS AND THEREFORE NO PENA LTY CAN SURVIVE IN SUCH CASES. 22. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPOR TED THE ORDER OF THE LD. CIT(A). 23. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE AO LEVIED THE PENALTY UNDER SECTION 271(1)(C), FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN RESPECT OF ADDITIONS MADE TOWARDS DISALLO WANCE OF MISCELLANEOUS EXPENSES AND STAFF WELFARE EXPENSES AND FINANCE CHA RGES, EVEN THOUGH THE ASSESSEE HAS CHALLENGED THE ORDER OF THE AO BEFORE THE FIRST APPELLATE AUTHORITY. THE AO HAS TAKEN INTO ACCOUNT THE ORDER PASSED BY T HE FIRST APPELLATE AUTHORITY ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 14 BEFORE INITIATION OF PENALTY UNDER SECTION 271(1)(C ), HOWEVER, IGNORED THE FACT THAT THE ASSESSEE HAS PREFERRED FURTHER APPEAL BEFO RE THE ITAT. THE ITAT HAS SET ASIDE THE APPEAL FILED BY THE ASSESSEE TO THE A O, IN SO FAR AS ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF FINANCE CHARGES. THE AO HAS LEVIED PENALTY BEFORE THE ITAT HAS PASSED ITS ORDER. THE ITAT HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO RECONSIDER THE ISSUE IN THE LIGHT OF THE FACTS OF THE ASSESSEES CASE THAT DIVIDEND INCOME E ARNED BY THE ASSESSEE IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THIS FACT HAS NOT BEEN CONSIDERED BY THE LOWER AUTHORITIES BEFORE DISALLOW ING INTEREST EXPENSES. ONCE THE ADDITION ON WHICH PENALTY HAS BEEN LEVIED IS SE T ASIDE TO THE AO FOR FRESH CONSIDERATION, IT IS AS GOOD AS THERE IS NO ADDITIO N FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF AT ALL PENALTY CA N BE LEVIED, THE AO SHALL TAKE UP PENALTY PROCEEDINGS AFTER RECEIPT OF ORDER OF TH E ITAT, MODIFYING THE ASSESSMENT AS PER THE DIRECTIONS OF THE ITAT. IN T HIS CASE, THE AO HAS FINALIZED PENALTY PROCEEDINGS BEFORE THE ITAT HAS SET ASIDE T HE ISSUE TO THE FILE OF THE AO. THE LD. CIT(A) HAS TAKEN INTO ACCOUNT THE FACT THAT THIS CASE IS COVERED UNDER THE PROVISIONS OF SUB SECTION (1A) TO SECTION 275 OF THE INCOME TAX ACT, 1961 WHERE IT WAS CATEGORICALLY STATED THAT IN A CA SE WHERE THE RELEVANT ASSESSMENT OR THE ORDER IS THE SUBJECT MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A OR AN A PPEAL TO THE APPELLATE TRIBUNAL UNDER SECTION 253A OR AN APPEAL TO THE HIG H COURT UNDER SECTION 260A AND SO ON AND AN ORDER IMPOSING OR ENHANCING O R REDUCING OR CANCELLING PENALTY OR DROPPING THE PROCEEDINGS FOR THE IMPOSIT ION OF PENALTY IS PASSED BEFORE THE ORDER OF THE APPELLATE AUTHORITY IS RECE IVED BY THE COMMISSIONER, AN ORDER IMPOSING OR ENHANCING OR REDUCING OR CANCELLI NG PENALTY OR DROPPING THE PROCEEDINGS FOR THE IMPOSITION OF PENALTY MAY BE PA SSED ON THE BASIS OF ASSESSMENT AS REVISED BY GIVING EFFECT TO SUCH ORDE R OF THE APPELLATE AUTHORITIES. THE PROVISO PROVIDED FURTHER STATED T HAT NO ORDER OF IMPOSING OR ENHANCING OR REDUCING OR CANCELLING PENALTY OR DROP PING THE PROCEEDINGS FOR THE IMPOSITION OF PENALTY SHALL BE PASSED UNLESS TH E ASSESSEE HAS BEEN HEARD OR ITA NO.7539/M/2013 & ORS M/S. ASIA INVESTMENTS PRIVATE LIMITED 15 HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD AND AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE YEAR OF WHICH THE OR DER OF THE APPELLATE AUTHORITY HAS BEEN RECEIVED BY THE COMMISSIONER. I N THIS CASE, THE AO HAS LEVIED THE PENALTY WITHOUT WAITING FOR THE OUTCOME OF THE ORDERS OF THE APPELLATE AUTHORITIES. THEREFORE, WE ARE OF THE CO NSIDERED VIEW THAT THE ISSUE NEEDS TO BE REEXAMINED BY THE AO IN THE LIGHT OF PR OVISIONS OF SECTION 275(1A) OF THE ACT. HENCE, WE SET ASIDE THE ISSUE TO THE F ILE OF THE AO AND DIRECT HIM TO RECONSIDER THE ISSUE IN THE LIGHT OF OBSERVATIONS O F THE LD. CIT(A) AND ALSO AS PER THE PROVISIONS OF SECTION 275(1A) OF THE ACT. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.4779/M/2014 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.02.2018. SD/- SD/- (JOGINDER SINGH) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 23.02.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.