Sh. Vijay Sachdev, New Delhi V. JCIT, New Delhi

ITA 5344/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2909 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 13-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Earning of tax free income; Retrospective amendment
• Section: 143(3); 14A; 154

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P.SAHU, ACCOUNTANT MEMBER ITA NO. 5344 & 5345/DEL/2016 (ASSESSMENT YEAR: 2009-10 & 2011-12) VIJAY SACHDEV, C/O-M/S. RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-I, NEW DELHI-110049. PAN-AANPS6109F VS JCIT, RANGE-32, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY DR. RAKESH GUPTA & SH. SOMIL AGGARWAL, ADV. RESPONDENT BY SH. KAUSHLENDRA TIWARI, SR.DR DATE OF HEARING 19.03.2018 DATE OF PRONOUNCEMENT 21.03.2018 ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER BOTH THESE APPEALS BY SAME ASSESSEE ARE DIRECTED AG AINST THE DIFFERENT ORDERS OF LD.CIT(A)-18, NEW DELHI DATED 01.08.2016 FOR AY 2009-10 & 2011-12. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE APPEAL S, THEREFORE, BOTH APPEALS ARE DISPOSED OF THROUGH THIS COMMON ORDER. BOTH THE PARTIES MAINLY ARGUED IN AY 2009-10. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE PURPOSE OF D ISPOSAL OF BOTH THE APPEALS, WE DECIDE THE APPEAL FOR AY 2009-10 AS UNDER:- ITA NO.5344 & 5345/DEL/2016 PAGE | 2 ITA NO.5344/DEL/2016 [A.Y.2009-10] 3. THE FACTS OF THE CASE ARE THAT THE AO PASSED THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) ON 20.10.2011 MAKING ADDITION OF RS.10,84,889/- [RS.1,76,583/- + RS.9,08 ,306/-] BY MAKING DISALLOWANCE U/S 14A OF THE ACT R.W. RULE 8D(2)(II) (III) OF THE ACT. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD.CIT(A). LD.CIT(A ) CONFIRMED THE ADDITION SUBJECT TO CERTAIN MODIFICATION/FINDING VIDE ORDER DATED 27.08.2013. THE ASSESSEE FILED APPLICATION U/S 154 OF THE ACT BEFOR E LD. CIT(A). LD.CIT(A) REPRODUCED THE RECTIFICATION APPLICATION DATED 16.1 1.2015 IN THE IMPUGNED ORDER IN WHICH THE ASSESSEE EXPLAINED THAT THE COMP UTATION OF DISALLOWANCE WAS MADE BY THE AO VIDE PARA 7(C) OF ASSESSMENT ORD ER IN WHICH DISALLOWANCE ATTRIBUTABLE TO RULE 8D(2)(III) I.E. 0.5% OF AVERAG E INVESTMENT WAS COMPUTED AT RS.9,08,306/- AND AVERAGE INVESTMENT WAS WORKED OUT BY TAKING THE FIGURE OF INVESTMENT AT RS.19.58 CRORES AND RS.16.74 CRORES. THE ASSESSEE FILED ONE LETTER DATED 05.09.2011 SHOWING THAT AVERAGE VALUE OF INVESTMENT COMES TO RS.1.46 CRORES ONLY AFTER THOSE SHARES ARE TO BE TA KEN INTO ACCOUNT ON WHICH TAX EXEMPT INCOME WAS EARNED. THE ASSESSEE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT DATED 24.03.2015 IN THE CA SE OF ACB INDIA LTD. VS ACIT [2015] IN ITA NO.615/2014 REPORTED IN 374 ITR 0108 (DEL.) IN WHICH IT WAS HELD THAT FOR COMPUTING AVERAGE INVESTMENT FOR THE PURPOSE OF RULE 8D(2)(III) ONLY THOSE INVESTMENTS WILL BE TAKEN INTO ACCOUNT W HICH HAVE YIELDED TAX EXEMPT INCOME. ACCORDINGLY, THE DISALLOWANCE UNDE R RULE 8D(2)(III) COULD BE RS.73,085/- AND ACCORDINGLY THE DISALLOWANCE WAS EX CESSIVE BY RS.8,35,221/-. IT WAS SUBMITTED THAT IT IS MISTAKE APPARENT ON REC ORD IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS SAURASHTRA KUTCH STOCK ITA NO.5344 & 5345/DEL/2016 PAGE | 3 EXCHANGE LTD. [2008] 305 ITR 0227 (SC) . IT WAS PRAYED THAT THE APPELLATE ORDER MAY BE RECTIFIED ACCORDINGLY. 4. LD. CIT(A) AFTER CONSIDERING THE RECTIFICATION A PPLICATION U/S 154 OF THE ACT AND MATERIAL ON RECORD AND BY REPRODUCING THE F ACTS NOTED THAT THE LETTER OF THE ASSESSEE WAS FILED BEFORE LD. CIT(A) PRIOR TO P ASSING OF THE ORDER AND AFTER VERIFICATION ONLY IMPUGNED ORDER HAVE BEEN PASSED, THEREFORE, PRESENT APPLICATION WOULD AMOUNT TO REVIEW OF THE ORDER WHI CH POWER LD.CIT(A) DID NOT POSSESS. HE HAS NOTED CERTAIN DECISIONS THAT LD.CI T(A) HAS NO POWER TO REVIEW THE ORDERS PASSED ON MERITS. IT WAS ALSO NOTED THA T THE ISSUE RAISED BY THE ASSESSEE DEBATABLE AND NO RECTIFICATION OF LD.CIT(A )S ORDER IS LEGALLY OR FACTUALLY PERMISSIBLE. THE APPEAL OF THE ASSESSEE AGAINST THE RECTIFICATION APPLICATION U/S 154 WAS REJECTED. 5. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE LD.CIT(A) AND SUBMITTED THAT THE INVESTMENT THAT YI ELD TAX EXEMPT INCOME SHOULD BE TAKEN INTO CONSIDERATION INSTEAD OF TOTAL INVESTMENT CONSIDERED BY LD.CIT(A). IN SUPPORT OF HIS CONTENTION, HE HAS RE LIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ACB INDIA LTD. (SUPRA) IN WHICH IT WAS HELD THAT WHERE THE AO, INSTEAD OF ADOPTING AVERAGE VALUE OF INVESTMENT OF INCOME WHICH WAS NOT PART OF TOTAL INCOME I.E. VALU E OF TAX EXEMPT INVESTMENT, CHOSE TO FACTOR IN TOTAL INVESTMENT ITSELF AND CIT( A) EVEN THOUGH NOTICED EXACT VALUE OF INVESTMENT WHICH YIELDED TAXABLE INCOME, D ID NOT CORRECT ERROR BUT CHOSE TO APPLY HIS OWN EQUITY; THE FINDINGS OF ITAT AND T HE LOWER AUTHORITIES WERE RIGHTLY SET ASIDE. HE HAS SUBMITTED THAT NON-CONSIDERATION OF DECISI ON OF JURISDICTIONAL HIGH COURT IS A MISTAKE APPARENT FR OM THE RECORD. HE HAS SUBMITTED THAT LD.CIT(A) DID NOT FOLLOW THE DECISIO N OF HONBLE DELHI HIGH ITA NO.5344 & 5345/DEL/2016 PAGE | 4 COURT IN THE CASE OF ACB INDIA LTD. (SUPRA) WHICH WAS DELIVERED ON 24.03.2015 AFTER PASSING THE ORIGINAL APPELLATE ORDER PASSED O N 25.08.2013. HE HAS FURTHER SUBMITTED THAT THE DECISION OF THE JURISDIC TIONAL HIGH COURT HAVE BEEN DELIVERED AFTER PASSING OF THE IMPUGNED ORDER BY LD .CIT(A) SHOULD HAVE BEEN CONSIDERED BY LD. CIT(A) FOR RECTIFYING THE IMPUGNE D ORDER BECAUSE THE DECISION OF THE JURISDICTIONAL HIGH COURT IS APPLICABLE RETR OSPECTIVELY. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ACIT VS SAURASHTRA KUTCH STOCK EXCHANGE LTD.(SUPRA) IN WHICH IT WAS HELD THAT A JUDICIAL DECISION ACTS RETROSPECTIVELY. ACCORDI NG TO BLACKSTONIAN THEORY, IT IS NOT THE FUNCTION OF THE COURT TO PRON OUNCE A NEW RULE BUT TO MAINTAIN AND EXPOUND THE OLD ONE. IN OTHER WORDS , JUDGES DO NOT MAKE LAW, THEY ONLY DISCOVER OR FIND THE CORRECT LAW. THE LA W HAS ALWAYS BEEN THE SAME. IF A SUBSEQUENT DECISION ALTERS THE EARLIER ONE, IT (T HE LATER DECISION) DOES NOT MAKE NEW LAW. IT ONLY DISCOVERS THE CORRECT PRINCIPLE O F LAW WHICH HAS TO BE APPLIED RETROSPECTIVELY. TO PUT IT DIFFERENTLY, EVEN WHERE AN EARLIER DECISION OF THE COURT OPERATED FOR QUITE SOME TIME, THE DECISION RENDERED LATER ON WOULD HAVE RETROSPECTIVE EFFECT CLARIFYING THE LEGAL POSITION WHICH WAS EARLIER NOT CORRECTLY UNDERSTOOD. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASS ESSEE NEVER WANTED FOR REVIEW OF THE ORDER OF LD. CIT(A). THE ASSESSEE MADE A REQUEST FOR RECTIFICATION IN THE ORDER OF LD.CIT(A) WHICH IS AP PARENT FROM RECORD IN CALCULATING THE DISALLOWANCE U/S 14A R.W. RULE 8D(2 )(III) OF THE ACT. HE HAS SUBMITTED THAT LD. CIT(A) SHOULD DECIDE THE ISSUE I N ACCORDANCE WITH THE JUDGEMENT OF HONBLE DELHI HIGH COURT. ON THE OTHE R HAND, LD. DR RELIED UPON THE IMPUGNED ORDER. ITA NO.5344 & 5345/DEL/2016 PAGE | 5 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND IN T HE LIGHT OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF ACB INDIA LTD. (SUPRA) AND IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF ACIT VS SAURASHTRA KUTCH STOCK EXCHANGE LTD.(SUPRA), WE ARE OF THE VIEW THAT THERE APPEARS MISTAKE APPARENT ON THE RECORD OF LD.CIT(A) IN CALC ULATING THE DISALLOWANCE U/S 14A R.W. RULE 8D(2)(III) OF THE ACT. IT WOULD NOT AMOUNT TO REVIEW OF THE ORDER OF LD. CIT(A). IT IS WELL SETTLED LAW THAT NON-CONSID ERATION OF DECISION OF JURISDICTIONAL HIGH COURT IS MISTAKE APPARENT FROM RECORD. LD. COUNSEL FOR THE ASSESSEE, THEREFORE, RIGHTLY CONTENDED THAT LD.CIT( A) DID NOT FOLLOW THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT AND SHAL L HAVE TO RECTIFY THE MISTAKE IN HIS ORDER IN CALCULATING THE DISALLOWANC E U/S 14A R.W. RULE 8D(2)(III) OF THE ACT. IN VIEW OF THE ABOVE DISCUS SION AND IN THE LIGHT OF THE ABOVE DECISIONS, THE ORDER OF LD.CIT(A) IS SET ASID E AND MATTER IN ISSUE IS RESTORED TO THE FILE OF LD.CIT(A)-18, NEW DELHI WIT H DIRECTION TO RE-DECIDE THE APPEAL OF THE ASSESSEE IN THE LIGHT OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF ACB INDIA LTD. (SUPRA). LD.CIT(A) SHALL RE-DECIDE THE APPEAL AFTER GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ITA NO.5345/DEL/2016 [A.Y.2011-12] 7.1. THE ISSUE IS ALSO SAME IN AY 2011-12 IN ITA NO .5345/DEL/2016. FOLLOWING THE REASONS FOR DECISION IN AY 2009-10 (S UPRA), THE ORDER OF LD.CIT(A) IS SET ASIDE AND THE MATTER IN ISSUE IS RESTORED TO THE FILE OF LD.CIT(A)-18, NEW DELHI WITH SIMILAR DIRECTION TO PASS AN ORDER AFRES H AS IS DIRECTED IN AY 2009- 10. THEREFORE, ITA NO.5345/DEL/2016 IS ALSO ALLOWE D FOR STATISTICAL PURPOSES. ITA NO.5344 & 5345/DEL/2016 PAGE | 6 8. IN THE FINAL RESULT, BOTH APPEALS FILED BY THE A SSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21.03.2018. SD/- SD/- (L.P.SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:- 21 ST MARCH, 2018 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI