CAPRICORN LEASORS & DISTRIBUTORS P. LTD ( MERGED WITH SHEARSON INVESTMENT & TRADING CO. P. LTD), MUMBAI V. ACIT 1(1), MUMBAI

ITA 4905/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55604 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 14-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: AJIT SHETTY
• Keywords: Retrospective amendment
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH BEFORE SHRI D. MANMOHAN, VICE PRESIDENT & BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.4905/MUM/2010 A.Y 2005-06 CAPRICORN LEASORS & DISTRIBUTORS PVT. LTD., (MERGED WITH SHEARSON INVESTMENT & TRADING CO. PVT. LTD.), INDUSTRY HOUSE, 159 CHURCHGATE RECLAMATION, MUMBAI 400 020. PAN: AABCC 4308 H VS. ASST. COMMISSIONER OF I.T. 1(1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJIT SHETTY. RESPONDENT BY : SHRI D.S.SUNDER SINGH. SR. DR DATE OF HEARING: 02-11-2011 DATE OF PRONOUNCEMENT: 02-11-2011 O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS: 1. THE EARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE A.O. TO COMPUTE DISALLOWANCE U/S. 14 A AS PER THE DECISION OF SPECIAL BENCH AND IN ACCORDANCE WITH T HE DECISION OF THE HONBLE ITAT FOR A.Y. 2004-05. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT DELETING THE INTEREST CHARGES U/S. 234B OF THE INCOME TAX ACT, 1961 AND HAVING REGARD TO THE FACTS AND CIRCU MSTANCES OF THE CASE THE SAID INTEREST LEVIED IS BAD IN LAW AN D THE APPELLANT DENIES ITS LIABILITY FOR PAYMENT OF INTEREST U/S. 234B. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ADJUDICATING ON THE ISSUE OF VALIDITY OF INITI ATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 AND WITHOUT RECORDING ANY SATISFACTION AND REASONS AS TO HOW THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF INCOME OR AS TO HOW THE APPELLANT HAD CONCEALED THE PARTICULARS OF INCOME. 2. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING THE ASSESSMENT PROCEEDINGS AO FOUND THAT ASSESSEE H AS INCURRED ITA NO.4905 OF 2010 2 CERTAIN INTEREST EXPENSES AND THE BORROWED FUNDS HA VE BEEN INVESTED IN SHARES. THEREFORE, SEC.14A WAS INVOKED AND INTER EST WAS DISALLOWED. 3. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL AT MUMBAI IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. & ORS. (2008) 119 TTJ (MUM) (S .B) 289, DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCE IN TE RMS OF THE DECISION OF THE SPECIAL BENCH. 4. BEFORE US, LD. COUNSEL OF THE ASSESSEE FAIRLY AD MITTED THAT THE MATTER NEEDS TO GO BACK TO THE FILE OF THE AO FOR R ECOMPUTATION OF A REASONABLE DISALLOWANCE IN TERMS OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO.LTD. VS. DCIT [328 ITR 81]. HE FURTHER SUBMITTED THAT RULE 8 D IS NOT APPLICABLE FROM RETROSPECTIVE EFFECT. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE AO. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO.LTD. VS. DCIT [SUPRA] HAS HELD AS UNDER: HELD, THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH HAVE BEEN NOTIFIED W.E.F. 24TH MARCH, 2008 SHALL APPLY W ITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSM ENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSES SING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOU ND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONA BLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND C IRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE AS SESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. THE PROCE EDINGS FOR ASSESSMENT YEAR 2002-03 SHALL STAND REMANDED BACK T O THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL DETE RMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR ITA NO.4905 OF 2010 3 INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FRO M MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER S. 14A. THE ASSESSING OFFICER CA N ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. W HILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHALL PRO VIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THUS, IT IS CLEAR THAT RULE 8D IS APPLICABLE ONLY F ROM A.Y 2008-09 AND IS NOT APPLICABLE FOR A.YR. 2005-06 WHICH IS BEFORE US . THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MAT TER BACK TO THE FILE OF THE AO TO RECOMPUTE THE DISALLOWANCE U/S.14A IN THE LIGHT OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ & BOYCE MFG. CO.LTD. VS. DCIT [SUPRA]. 7. GROUND NO.2 IS REGARDING LEVY OF INTEREST U/S.23 4B WHICH IS OF CONSEQUENTIAL NATURE AND AO IS DIRECTED TO LEVY INT EREST IN ACCORDANCE WITH THE LAW. 8. GROUND NO.3 REGARDING LEVY OF PENALTY U/S.271(1) IS PREMATURE AND, THEREFORE, SAME IS DISMISSED AS INFR UCTUOUS. 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 2/11/2011. SD/- SD/- (D.MANMOHAN) (T.R.SOOD) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: 02/11/2011. P/-*