Napean Trading and Investment Company Private Limited , Bangalore V. Commissioner of Income Tax (Appeals)-5 , Bangalore

ITA 493/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1087 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SIDDAPP A JI R N
• Assessee Lawyers: B K MANJUNATH
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 493/ BANG/201 7 ASSESSMENT YEAR : 2007 - 08 M/S. NAPEAN TRADING AND INVESTMENT COMPANY PVT. LTD., (SINCE MERGED WITH HASHAM INVESTMENT AND TRADING COMPANY PVT. LTD.) NEXT TO WIPRO CORPORATE OFFICE, DODDAKANNELLI, SARJAPUR ROAD, BANGALORE 560 035. PAN: AAACN2710M VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 5 (1) (2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI B.K. MANJUNATH, CA RESPONDENT BY : SHRI SIDDAPPAJI R.N, ADDL. CIT (DR) DATE OF HEARING : 06 .0 9 .2018 DATE OF PRONOUNCEMENT : 14 .0 9 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A)-5, BANGALORE DATED 23.12.2016 FOR ASSESS MENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEEARE AS UNDER. 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) [' THE CIT(A)'] ERRED IN LAW AND ON FACTS IN UPHOLDING THE IMPUGNED ORDER PASSED BY THE LEARNED ASSESSING OFFICER ['THE AO'] U/S 143(3) OF THE INCOME-TAX ACT, 1961 ['THE ACT']. 1.1 THAT THE ORDER PASSED BY THE CIT(A) IS BAD IN L AW AS IT SMACKS OF NON-APPLICATION OF MIND INSOFAR AS THE CIT(A) READI LY DEFERRED TO THE ORDER PASSED BY THE AO QUA THE EXISTENCE OF AN ISSU E UPON WHICH THE VALIDITY OF THE EXERCISE OF THE POWER OF THE AO U/S 148 IS PREDICATED WHEN NO SUCH ISSUE EXISTED IN LAW AT ANY POINT OF T IME. 1.2 THAT THE CIT(A) FAILED TO APPRECIATE THAT THE I MPUGNED ORDER ITA NO.493/BANG/2017 PAGE 2 OF 4 PASSED BY THE AO DESERVES TO BE CANCELLED INSOFAR A S THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE IMPUGNED ORDER IS WI THOUT JURISDICTION. 1.3 THAT THE CIT(A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE DISALLOWANCE OF RS.33,18,548/- MADE BY THE AO U/S 1 4A OF THE ACT READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 WHE N THE APPELLANT HAD ITSELF DISALLOWED THE ENTIRE EXPENDITURE DEBITE D TO THE PROFIT & LOSS ACCOUNT AND THERE WAS NO SCOPE FOR ANY FURTHER DISALLOWANCE WHATSOEVER. 1.4 THAT THE CIT(A) FAILED TO APPRECIATE THAT THE P ROVISIONS OF RULE 8D SINCE EXPLICITLY INSERTED W.E.F. 24-3-2008 VIDE IT (FIFTH AMDT.) RULES, 2008 ARE NOT APPLICABLE RETROSPECTIVELY AND HENCE D O NOT APPLY TO THE ASSESSMENT YEAR IN QUESTION. 1.5 THAT THE CIT(A) ERRED IN MECHANICALLY UPHOLDING THE IMPUGNED ORDER WITHOUT VERIFYING THE REASON FOR INFLATING TH E AMOUNT OF RETURNED INCOME TO RS.46,13,800/- IN THE IMPUGNED ORDER AS A GAINST THE ACTUAL AMOUNT OF RS.23,06,899/- RETURNED IN THE COMPUTATIO N OF INCOME. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HE ARING. 3. THE LD. AR OF ASSESSEE SUBMITTED THAT ON PAGE NO . 27 OF PAPER BOOK IS THE COMPUTATION OF INCOME FILED BY THE ASSESSEE ALONG W ITH THE RETURN OF INCOME AND AS PER THE SAME, THE ASSESSEE HAS MADE SUO MOTO DISALLOWANCE OF RS. 1,97,123/-. THEREAFTER HE DRAWN OUR ATTENTION TO P AGE NO. 34 OF PAPER BOOK WHICH CONTAINS THE PROFIT & LOSS ACCOUNT FOR THE PR ESENT YEAR AND POINTED OUT THAT AS PER THE P&L ACCOUNT OF THE ASSESSEE FOR THE PRESENT YEAR, THE ASSESSEE HAS DEBITED ONLY THIS MUCH AMOUNT OF RS. 1,97,123/- AS EXPENSES WHICH IS SUO MOTO DISALLOWED BY THE ASSESSEE IN THE COMPUTATION OF INCOME AVAILABLE ON PAGE NO. 27 OF PAPER BOOK. THEREAFTER HE SUBMITTED THAT WHEN THE TOTAL EXPENSES DEBITED BY THE ASSESSEE IN THE P&L ACCOUNT HAS BEEN DISALLOWED BY ASSESSEE ITSELF IN THE COMPUTATION OF INCOME, NO FU RTHER DISALLOWANCE CAN BE MADE U/S. 14A OF IT ACT. THEREAFTER HE SUBMITTED T HAT AS PER GROUND NO. 1.5 OF THE APPEAL RAISED BY THE ASSESSEE BEFORE THE TRIBUN AL, THIS IS THE GRIEVANCE OF THE ASSESSEE THAT AS PER THE COMPUTATION OF INCOME FILED BY THE ASSESSEE COPY AVAILABLE ON PAGE NO. 27 OF PAPER BOOK, TOTAL INCOM E COMPUTED BY ASSESSEE IS RS. 23,06,900/- BUT AS PER THE PAGE NO. 2 ASSESSMEN T, THE AO HAS STARTED WITH THE FIGURE OF RS. 46,13,800/- AS INCOME RETURNED WH ICH IS INCORRECT. AT THIS JUNCTURE, THIS WAS THE QUERY OF THE BENCH THAT AS T O WHETHER ANY APPLICATION FOR ITA NO.493/BANG/2017 PAGE 3 OF 4 RECTIFICATION WAS MADE BY ASSESSEE BEFORE THE AO U/ S. 154 AND WHETHER ANY SUCH GROUND WAS RAISED BY ASSESSEE BEFORE CIT (A). IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT NO RECTIFICATION APPLICA TION WAS MADE BY THE ASSESSEE BEFORE THE AO U/S. 154 AND BEFORE CIT (A) ALSO, NO SUCH SPECIFIC GROUND WAS RAISED BUT IN THE INTEREST OF JUSTICE, T HIS ASPECT OF THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION AFTER VERIFYING THE FACTS. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITI ES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGAR DING THE FIRST ISSUE I.E. REGARDING DISALLOWANCE OF RS. 33,18,548/- MADE BY T HE AO U/S. 14A AND CONFIRMED BY CIT(A), WE FIND FORCE IN THE SUBMISSIO NS OF LD. AR OF ASSESSEE BECAUSE SECTION 14A IS A SECTION FOR DISALLOWANCE O F THE EXPENSES CLAIMED BY THE ASSESSEE IF IT IS FOUND THAT SUCH EXPENSES ARE IN RESPECT OF EARNING OF EXEMPT INCOME. BUT THIS SECTION DOES NOT ENVISAGE ADDITION. IN OUR CONSIDERED OPINION, DISALLOWANCE U/S. 14A CAN BE MAXIMUM TO TH E EXTENT OF EXPENSES CLAIM BY THE ASSESSEE IN THE P&L ACCOUNT OR COMPUTA TION OF INCOME BUT IN THE PRESENT CASE, THE ENTIRE EXPENSES DEBITED BY ASSESS EE IN THE P&L ACCOUNT HAS BEEN SUO MOTO DISALLOWED BY ASSESSEE IN THE COMPUTA TION OF INCOME FILED BY ASSESSEE ALONG WITH RETURN OF INCOME COPY OF WHICH IS AVAILABLE ON PAGE NO. 27 OF PAPER BOOK. UNDER THESE FACTS NO FURTHER DISALL OWANCE IS CALLED FOR U/S. 14A. HENCE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESS EE. 5. REGARDING THE SECOND ISSUE RAISED BY THE ASSESSE E AS PER GROUND NO. 1.5 OF APPEAL, WE FIND THAT AS PER THE COMPUTATION OF INCO ME AVAILABLE ON PAGE NO. 27 OF PAPER BOOK, THE TAXABLE INCOME COMPUTED BY ASSES SEE IS RS. 23,06,900/- AND AS PER COPY OF RETURN E FILED BY THE ASSESSEE O N 20.09.2007 AS AVAILABLE ON PAGE NO. 26 OF PAPER BOOK ALSO, THE INCOME REPORTED BY THE ASSESSEE IS OF RS. 23,06,899/-. BUT AS PER THE ASSESSMENT ORDER, THE AO SAYS ON PAGE NO. 1 OF ASSESSMENT ORDER THAT ASSESSEE COMPANY HAS FILED RE TURN OF INCOME FOR THE PRESENT YEAR ON 13.09.2007 BY ADMITTING AN INCOME O F RS. 46,13,800/- BUT AS PER THE COPY OF RETURN OF INCOME MADE AVAILABLE BY THE ASSESSEE ON PAGE NO. 26 OF PAPER BOOK, IT IS SEEN THAT THE SAID RETURN W AS E-FILED ON 20.09.2007 DECLARING AN INCOME OF RS. 23,06,900/- AND THIS AMO UNT IS JUST HALF OF THE ITA NO.493/BANG/2017 PAGE 4 OF 4 AMOUNT OF THE RETURNED INCOME TAKEN BY THE AO IN TH E ASSESSMENT ORDER. UNDER THESE FACTS, WE FEEL IT PROPER THAT IN THE IN TEREST OF JUSTICE, THE MATTER SHOULD GO BACK TO THE FILE OF AO FOR FRESH DECISION AFTER EXAMINING THE FACTUAL ASPECT AS TO WHETHER THE INCOME RETURNED BY ASSESSE E IS RS. 23,06,900/- OR RS. 46,13,800/- AFTER PROVIDING ADEQUATE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE IN THIS REGARD. WE HOLD SO IN THE INTERES T OF JUSTICE, ALTHOUGH NO SUCH SPECIFIC GROUND WAS RAISED BY ASSESSEE BEFORE LD. C IT(A) BECAUSE IN OUR CONSIDERED OPINION, AS PER THE FACTS OF PRESENT CAS E DISCUSSED ABOVE, IF THERE IS ANY MISTAKE IN THE FIGURE OF RETURNED INCOME TAKEN BY A.O. IN THE ASSESSMENT ORDER THEN SUCH MISTAKE IS RECTIFIABLE U/S. 154 AND SINCE THE IMPUGNED ASSESSMENT ORDER WAS PASSED BY THE AO ON 30.03.2015 , THE PERIOD OF FOUR YEARS UP TO WHICH THE RECTIFICATION CAN BE MADE U/S . 154 HAD NOT YET EXPIRED AND SINCE THE TRIBUNAL IS FINAL FACT FINDING AUTHOR ITY, WE FEEL IT PROPER THAT IF THERE IS ANY POSSIBILITY OF A MISTAKE ON FACTUAL ASPECT, THE TRIBUNAL SHOULD NOT IGNORE IT. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DA TE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (N.V. VASUDEVAN) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 14 TH SEPTEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.