Ivory Holding Ltd, New Delhi V. ITO, Ward-12(4), New Delhi

ITA 5256/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3984 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 14-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: ASHUTOSH JAIN
• Keywords: Earning of tax free income; Additional evidence
• Section: 14A; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO. 5256 /DEL/201 7 [A.Y. 20 1 2 - 1 3 ] IVORY HOLDINGS LTD VS. THE INCOME - TAX OFFICER 222 - 223 ASHIRWAD WARD 1 2 (4 ), D - 1 , GREEN PARK, NEW DELHI NEW DELHI PAN : A A ACI 2879 N [ ASSESSEE ] [RESPONDENT] DATE OF HEARING : 2 6 . 1 2 .2017 DATE OF PRONOUNCEMENT : 11 . 01 .201 8 ASSESSEE BY : SHRI ASHUTOSH JAIN , CA REVENUE BY : MS. ASHIMA NEB, SR. DR ORDER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 18 , NEW DELHI DATED 2 1 .0 6 .201 7 FOR A.Y. 20 1 2 - 1 3 . 2 . THE ASSESS EE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS 'THE AO')IN MAKING AN ADDITION OF RS. 10,00,000 IN TER MS OF SECTION 68 OF T HE INCOME TAX AC T ALLEGING THAT THE SAID AMOUNT REPRESENTS UNEXPLAINED CASH CR EDITS IN THE HANDS 2 ITA NO. 5256 /DEL/201 7 OF THE APPELLANT. 1.1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT HAS FAILED TO DISCHARGE THE ONUS CAST IN TERMS OF THAT SECTION WITHOUT TAKING COGNIZANCE OF THE DETAILS SUBMITTED BY THE APPELLANT. 1.2. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT EXERCISED DOMINANT POSITION ON M/S. GEMINI PORTFOLIO PVT. LTD. WITHOUT APPRECIATING TH AT THE SAID ENTITY WAS NOT RELATED TO THE APPELLANT IN TERMS OF SECTION 40A(2) OF THE ACT. 2. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT BY THE AO UP TO RS.800, BEING THE AMOUNT OF DIVIDE ND INCOME EARNED BY THE APPELLANT DURING THE RELEVANT ASSESSMENT YEAR. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE RECEIVED AN AMOUNT OF RS. 50 LAKHS FROM M/S GEMINI PORTFOLIOS [P] LTD. THE ASSESSEE WAS GIVEN VARIOUS OPPORTUNITIES TO SUBMIT CONFIRMATION, COPY OF AUDITED BALANCE SHEET , COPY OF ITR AND BANK STATEMENT . THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) TO H D F C BANK FOR PROCURING STATEMENT OF M/S GEMINI PORTFOLIO PVT. LTD. WHICH WAS SUBMITTED. IT WAS FOUND THAT ON 25.1.2012, RS. 9 LAKHS CASH WAS DEPOSITED AND ON 3 ITA NO. 5256 /DEL/201 7 27.1.2012, RS. 8 LAKHS WAS DEPOSITED BY M/S GEMINI PORTFOLIO PVT. LTD BEFORE ISSUING A CHEQUE OF RS. 10 LAKHS DATED 30.1.2012 TO THE ASSESSEE COMPANY. THE ASSESSEE SUBMITTED REPLY WHICH WAS FOUND TO BE NOT SATISFACT ORY. ACCORDINGLY, THE ASSESSING OFFICER MADE ADDITION U/S 68 OF THE ACT WHICH WAS CONFIRMED BY THE LD. CIT(A). 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE SUBMITTED ADDITIONAL EVIDENCE BEFORE THE LD . CIT(A) WHICH WAS ADMITTED. IN FACT, THE ISSUE BEFORE ME IS AS TO WHETHER CASH DEPOSITED BY M/S GEMINI PORTFOLIO PVT. LTD AMOUNTING TO RS. 17 LAKHS AND ISSUANCE OF CHEQUE OF RS. 10 LAKHS TO THE ASSESSEE IS UNEXPLAINED OR NOT. THE ASSESSING OFFICER MADE AN ADDITION OF RS. 10 LAKHS U/S 68 OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY SINCE CASH WAS DEPOSITED BY M/S GEMINI PORTFOLIO PVT. LTD IN ITS BANK ACCOUNT. IT IS A MATTER OF RECORD AT PAGES 36 AND 37 THAT M/S GEMINI PORTFOLIO PVT. LTD HAS WITHDRAWN CASH ON DIFFERENT DATES FROM BANK ACCOUNT AS UNDER: 15.12.2011 RS. 1,00,000/ - 02 - 01 - 2012 RS. 3,00,000/ - 0 3 - 01 - 2012 RS. 5 , 5 0,000/ - 14 - 01 - 2012 RS. 2,00,000/ - 17 - 01 - 2012 RS. 5,00,000/ - RS. 16,50,000/ - 4 ITA NO. 5256 /DEL/201 7 5. AGAINST THE SAID WITHDRAWAL, CASH MENTIONED HEREINABOVE HAS BEEN DEPOSITED, WHICH HAS BEEN EXPLAINED BY THE ASSESSEE. THE RELEVANT CERTIFICATE FROM M/S GEMINI PORTFOLIO PVT. LTD. AND THE EXPLANATION GIVEN BY THE ASSESSEE IS ON RECORD AT PAPER BOOK PAGES 36 AND 37. THE ASSESSING OFFICER HAS NO CASE TO ESTABLISH THAT THE SAID AMOUNT OF CHEQUE RECEIVED BY THE ASSESSEE IS AGAINST THE CASH PAID BY THE ASSESSEE COMPANY AND ACCORDINGLY, NO ADDITION CAN BE MADE ON THIS COUNT AND THE ADDITION SO MADE IS DIRECTED TO BE DELETED. THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS REVERSED. ACCORDINGLY, GROUND NOS. 1 TO 1.2 ARE ALLOWED. 6. BRIEF FACTS PERTAINING TO GROUND NO. 2 ARE THAT D URING THE Y EAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS. 800/ - CLAIMED AS EXEMPT. THE ASSESSING OFFICER OBSERVE D THAT INVOCATION OF SECTION 14 A IS AUTOMATIC AS SOON AS DIVIDEND INCOME IS EARNED. IN VIEW OF THE DECISIONS OF CIT VS UNITED GEN ERAL TRUST LTD REPORTED IN 200 ITR 88 (SC) AND SPECIAL BENCH DECISION IN THE CASE OF CHEM INVEST LTD AND THE CBDT C IRCULAR NO. 5 OF 2014, THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE UNDER RULE 8D(2)(III) AT RS. 61,535/. THE LD. CIT(A) RESTRICTED THE A BOVE ADDITION TO RS. 800/ - FOR THE REASONS MENTIONED IN HIS ORDER. 5 ITA NO. 5256 /DEL/201 7 7 . I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE A.O AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. IT WAS ARGUED BY T HE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS HOLDING SHARES AS A STRATEGIC INVESTMENT ASSOCIATED CONCERN. THE DISALLOWANCE, IN FACT, SHOULD NOT EXCEED THE EXEMPT INCOME AND ACCORDINGLY, I FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHICH FO R THE SAKE OF CONVENIENCE, IS REPRODUCED HEREINBELOW: I HAVE CAREFULLY CONSIDERED THE MATTER. IN JOINT INVESTMENTS (P.) LTD. VS CIT 372 ITR 694(DEL), IT WAS HELD THAT THE DISALLOWANCE COULD NOT EXCEED THE EXEMPT INCOME, WHERE THEY OBSERVED, THUS: BY NO STRETCH OF IMAGINATION CAN S. 14A OR R. 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALLOWANCE IS INDICATED IN S. 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE 'INCURRED BY THE ASSESS EE IN RELATION TO THE TAX EXEMPT INCOME'. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE. SIMILAR DECISION HAS BEEN HELD IN M/S DAGA GLOBAL CHEMICALS P LTD ITA NO.5592/MUM/20I2.AND M/S GLOBAL CAPITAL LTD. VS ACIT I.T.A.NO.6586/DEL/20I3. 6 ITA NO. 5256 /DEL/201 7 THE APPELLANT HAS RELIED ON SOME CASE LAWS WHICH RELATE TO DISALLOWANCE U/R 8D(2)(II)AND THEREFORE NOT GERMANE TO OUR CASE. EVEN OTHERWISE IN VIEW OF THE DECISION FROM JURISDICTIONAL HC AND SUBMISSION OF THE AR DURING HEARING, THERE IS NO NEED TO LOOK INTO SUCH DECISIONS. IN VIEW OF THE ABO VE LEGAL POSITION AND THE SUBMISSION OF THE APPELLANT DURING THE HEARING THAT THE RESTRICTION BE LIMITED TO RS.8OO/ - I.E. THE DIVIDEND INCOME EARNED DURING THE YEAR, THE DISALLOWANCE IS DIRECTED TO BE RESTRICTED TO RS.800/ - . 8. IN VIEW OF THE ABOVE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) IS CONFIRMED ON THIS ISSUE. GROUND NO. 2 IS DISMISSED. 9. IN THE RESULT, T HE APPEAL OF THE ASSESSEE IN ITA NO. 5256 /DEL/201 7 IS PARTLY ALLOWED . THE ORDER IS PRO NOUNCED IN THE OPEN COURT ON 11 . 01 .201 8 . SD/ - [B.P. JAIN] ACCOUNTANT MEMBER DATED: 11 TH JANUARY, 2018 VL/ 7 ITA NO. 5256 /DEL/201 7 CO PY FORWARDED TO: 1 . ASSESSEE 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI