PARDEEP KHANNA, NEW DELHI V. ACIT, CIRCLE - 30(1), NEW DELHI

ITA 5253/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5133 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 06-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.5253/DEL/2018 ASSESSMENT YEAR: 2008-09 PARDEEP KHANNA, W-60, GREATER KAILASH-2, NEW DELHI. PAN: AAQPK0771J VS. ACIT, CIRCLE-30(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH MAHNA, ADVOCATE REVENUE BY : SHRI S.L. ANURAGI, SR. DR DATE OF HEARING : 08.05.2019 DATE OF PRONOUNCEMENT : 13.05.2019 ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29 TH JUNE, 2018 PASSED BY THE CIT(A)-10, NEW DELHI, RELATING TO ASS ESSMENT YEAR 2008-09. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, THEY ALL RELATE TO THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALL OWANCE OF RS.1,21,805/- BY THE ASSESSING OFFICER U/S 14A R.W. RULE 8D OF THE IT RU LES. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 28 TH SEPTEMBER, 2008 DECLARING THE TOTAL INCOME OF RS.26,76,240/-. THE ASSESSING OFFICER COMPLETED TH E ASSESSMENT U/S 143(3) OF THE ACT ON 9 TH DECEMBER, 2010 WHEREIN HE MADE AN ADDITION OF RS.1 ,21,805/- U/S 14A ITA NO.5253/DEL/2018 2 R.W. RULE 8D (2)(III) OF THE IT RULES. THE TRIBUNA L UPHELD THE ACTION OF THE CIT(A) AND ON FURTHER APPEAL BY THE ASSESSEE, THE HON'BLE HIGH COURT VIDE ITA NO.953/2015, ORDER DATED 11 TH AUGUST, 2016, RESTORED THE ISSUE TO THE FILE OF TH E ASSESSING OFFICER, INTER ALIA , WITH THE FOLLOWING OBSERVATIONS:- 7. IN THE PRESENT CASE, WE NOTICE THAT THE AO HAS NOT ANALYSED OBJECTIVELY IN TERMS OF THE DECISION IN SHAH. IT WAS FIRSTLY IN CUMBENT UPON HIM TO IN FACT EXAMINE THE ACCOUNTS CLOSELY AND DETERMINE IF AT AL L ANY EXPENDITURE COULD BE ASCRIBED TO THE TAX EXEMPT DIVIDEND/INTEREST EARNED BY THE ASSESSEE. IF INDEED THE TAX EXEMPTED INCOME WAS EARNED WITHOUT THE INTERFER ENCE OF ANY EMPLOYEE BUT RATHER THROUGH THE SOLICITATION AND ADVERTISEMENT O F THE BANK THE QUESTION OF ATTRIBUTING ANY EXPENDITURE CANNOT ARISE AT ALL. 8. IN THE CIRCUMSTANCES, THE IMPUGNED ORDER IS SET AS IDE. THE MATTER IS REMITTED TO THE AO FOR FRESH DETERMINATION IN ACCOR DANCE WITH THE JUDGMENT OF THIS COURT IN TAIKISHA ENGINEERING PRIVATE LIMITEDS CASE (SUPRA). 4. SUBSEQUENTLY, THE ASSESSING OFFICER REPEATED THE SAME ADDITION. THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICE R BY OBSERVING AS UNDER:- 5.3. THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSI ON AND JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT HAVE DU LY BEEN CONSIDERED. I HAVE ALSO GONE THROUGH THE ORDER OF THE HONBLE ITAT AND THE ORDER OF THE HONBLE HIGH COURT IN THIS CASE FOR THE YEAR UNDER CONSIDER ATION. I HAVE ALSO PERUSED THE ORDER OF THE ITAT, DELHI IN THE CASE OF THE APPELLA NT FOR A.Y. 2009-10 & A.Y 2010-11. IT IS SEEN THAT IN THE ASSESSMENT ORDER OF A.Y. 2009-10 & 2010-11 THE AO HAS NOT RECORDED HIS SATISFACTION IN RESPECT OF CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO E ARNING OF DIVIDEND INCOME. THEREFORE THE RATIO OF CIT V TAIKAISHA ENGINEERING INDIA LTD. 370 ITR 378 (DEL) WAS APPLICABLE. HOWEVER, IN THE MATTER UNDER CONSID ERATION, THE AO HAS RECORDED HIS SATISFACTION THAT THE CLAIM OF THE ASSESSEE THA T NO EXPENDITURE WAS INCURRED BY HIM IN RELATION TO EARNING OF DIVIDEND INCOME WAS I NCORRECT. HE HAS ALSO EXAMINED THE EXPENSES OF THE APPELLANT AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAS BEEN UTILIZING HIS ADMINISTRATIVE AND MANAGERIAL EXPENSES FOR EARNING OF DIVIDEND INCOME. AFTER GIVING THE ABOVE MENTIONED SPECIFIC FINDING, THE AO HAS INVOKED THE PROVISIONS OF SECTION 14A RE AD WITH RULE 8D(2)(III). THEREFORE, THE RATIO OF CIT V TAIKAISHA ENGINEERING INDIA LTD. 370 ITR 378 (DEL) IS NOT APPLICABLE IN THE PRESENT CASE. IT HAS ALSO BEEN MENTIONED IN THE ASSESSMENT ORDER THAT ADMINISTRATIVE AND MANAGERIAL EXPENSES R EMAIN INSEPARABLE FROM THE EXPENSES RELATING TO EARNING OF OTHER TAXABLE INCOM E. SINCE THE EXPENSES WERE ITA NO.5253/DEL/2018 3 COMMON, THE AO HAS THEN COMPUTED THE DISALLOWANCE O F RS.1,21,805/- AS PER THE PROVISIONS OF RULE 8D(2)(III). CONSIDERING THE ABOV E, I AM INCLINED TO L UPHOLD THE ADDITION OF RS. 1,21,805/-. ACCORDINGLY, THE AB OVE GROUNDS OF APPEAL ARE DISMISSED. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. I FIND THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT HAD MADE ADDITION OF RS.1,21,805/- U/S 14A R.W. RUL E 8D(2)(III) WHICH HAS BEEN UPHELD BY THE CIT(A). I FIND DESPITE THE DIRECTION OF THE HON'BLE HIGH COURT THAT IF THE TAX EXEMPTED INCOME WAS EARNED WITHOUT THE INTE RFERENCE OF ANY EMPLOYEE BUT RATHER THROUGH THE SOLICITATION AND ADVERTISEMENT O F THE BANK THE QUESTION OF ATTRIBUTING ANY EXPENDITURE CANNOT ARISE AT ALL, TH E ASSESSING OFFICER HAS PROCEEDED TO MAKE THE DISALLOWANCE ON THE BASIS OF RENT, ELECTRI CITY, HOUSE TAX, PRINTING & STATIONERY, TRAVELLING EXPENSES, ETC. WHICH, ACCORD ING TO HIM, HAVE BEEN USED FOR EARNING EXEMPT INCOME. I FIND, IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE SUBSEQUENT YEARS AND THE TRIBUNAL VIDE ITA NO.1250/DEL/2014, ORDER DATED 2 ND JUNE, 2016, FOR ASSESSMENT YEAR 2009-10 AND VIDE ITA NO.2956/DEL/2014, ORDER DATED 11 TH AUGUST, 2016, FOR ASSESSMENT YEAR 2010-11, HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) U/S 14A R.W. RULE 8D(2)(III). SINCE, IN THE INSTANT CASE, DESPITE DIRECTION OF THE HON'BLE HIGH COURT THE ASSESSING OFFICER DID NO T BOTHER TO FOLLOW THE DIRECTION IN LETTER AND SPIRIT AND CONSIDERING THE FACT THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR ITA NO.5253/DEL/2018 4 THE TWO SUCCEEDING YEARS HAS DELETED SUCH DISALLOWA NCE, THEREFORE, I AM OF THE CONSIDERED OPINION THAT NO DISALLOWANCE U/S 14A R.W . RULE 8D(2)(III) IS CALLED FOR IN THE INSTANT CASE. I, THEREFORE, SET ASIDE THE ORDE R OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.1,21 ,805/-. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 3.05.2019. SD/- (R.K. PANDA) ACCOUNTANT MEMBER DATED: 13 TH MAY, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI