DCIT, Chandigarh V. M/s Times Finvest & Commerce Ltd., Chandigarh

ITA 542/CHANDI/2014

• Counselvise Citation: 54221514 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Search and seizure; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.542 /CHD/2014 (ASSESSMENT YEAR : 2009-10) THE D.C.I.T., VS. M/S TIMES FINVEST & COMMERCE LTD., CENTRAL CIRCLE II, SCO 98-99, SUB CITY CENTRE, CHANDIGARH. SECTOR 34, CHANDIGARH. PAN: AAACB0713G AND C.O.NO.31/CHD/2014 ARISING OUT OF ITA NO. 542/CHD/2014 (ASSESSMENT YEAR : 2009-10) M/S TIMES FINVEST & COMMERCE LTD., VS. THE D.C.I.T., SCO 98-99, SUB CITY CENTRE, CENTRAL CIRCLE II, SECTOR 34, CHANDIGARH. CHANDIGARH. PAN: AAACB0713G APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK GOYAL DEPARTMENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 29.10.2015 DATE OF PRONOUNCEMENT : 08.12.2015 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INC OME 2 TAX (APPEAL) (CENTRAL), GURGAON DATED 26.3.2014. THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE SAM E. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE RESIDENTIAL AND BUSINESS PREMISES OF MODERN GROUP OF CASES INCLUDIN G THE ASSESSEE IN QUESTION AS ON 17.3.2010. THE ASSESSEE HAD FILED ORIGINAL RETURN UNDER SECTION 139(1) OF THE INCOME TAX ACT, 1961 (IN SHOT THE ACT) AS ON 20.9.2009 D ECLARING TOTAL INCOME OF RS.1,91,950/-. DURING THE YEAR, TH E ASSESSEE HAD EARNED DIVIDEND OF RS.58,575/-, WHICH IS EXEMPT FROM THE TAX. THE ASSESSEE HAD DISALLOWED EXPENSES AGAINST THIS INCOME AMOUNTING TO RS.30,000 /-. WHEN ASKED BY THE ASSESSING OFFICER, THE ASSESSEE C OULD NOT PROVIDE THE MANNER OF COMPUTATION OF DISALLOWAN CE MADE BY IT. THEREFORE, THE ASSESSING OFFICER INVOK ED THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES AND M ADE A DISALLOWANCE OF RS.18,23,577/-. SINCE THE ASSESSEE HAD ALREADY DISALLOWED EXPENSES OF RS.30,000/-, THE ASS ESSING OFFICER MADE A NET DISALLOWANCE OF RS.18,61,925/-. 3. BEFORE THE LEARNED CIT (APPEALS), THE MAIN CONTENTION OF THE ASSESSEE WAS THAT THE ASSESSING O FFICER HAS NOT RECORDED ANY FINDING THAT HAVING REGARD TO THE ACCOUNT OF THE ASSESSEE HOW HE WAS NOT SATISFIED WI TH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN R ESPECT OF 3 EXPENDITURE COMPUTED BY THE ASSESSEE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . RELIANCE WAS PLACED IN THIS REGARD ON THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. DEEPAK MITTAL, (2013) 219 TAXMANN.COM 314 (P&H) . FURTHER, THE ASSESSEE SUBMITTED THAT NO DISALLOWANC E OF INTEREST CAN BE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT IN VIEW OF THE FACT THAT THE ASSESSEE HAD SUFFICIENT OWNED FUNDS TO BE INVESTED IN EARNIN G OF THE TAX-FREE INCOME. IN THIS REGARD, DETAILS WERE FILED TO SHOW THAT THE ASSESSEE HAD OWNED FUNDS TO THE TUNE OF RS.1,76,13,543/-, WHILE THE INVESTMENTS WERE ONLY T O THE EXTENT OF RS.1,36,16,770/-. FOR THIS PROPOSITION, RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD., 313 ITR 340 (BOM) AND ALSO OF THE HON'BLE JURISDICT IONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. WINSOME TEXTILE INDUSTRIES LTD. (2009), 319 ITR 204 (P&H) AND CIT VS. HERO CYCLES LTD., 323 ITR 518 (P&H). O N PERUSAL OF THESE SUBMISSIONS, THE LEARNED CIT (APPE ALS) FORMED A VIEW THAT THE ASSESSING OFFICER COULD NOT BRING OUT ANY EXPENSES ON RECORD WHICH COULD BE SAID TO H AVE BEEN INCURRED IN EARNING THE EXEMPT INCOME. SINCE NO COGENT REASON HAS BEEN ELABORATED BY THE ASSESSING OFFICER, THE LEARNED CIT (APPEALS) DELETED THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER. 4 4. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND ALSO THE JUDGMEN T OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. W ALFORT SHARES & STOCK BROKERS (P) LTD.(2010) 326 ITR 1(SC) FOR THE PROPOSITION THAT ONLY EXPENSES TO BE ALLOWED TO AN ASSESSEE SHOULD BE THOSE EXPENSES WHICH ARE INCURRE D FOR EARNING THE TAXABLE INCOME. 5. THE LEARNED COUNSEL FOR THE ASSESSEE AGAIN REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT (APPEALS). HIS SUBMISSIONS WERE TWO FOLD. AS RE GARDS THE INTEREST COMPONENTS, HE EXPLAINED THAT THE ASSE SSEE HAD ENOUGH OWN FUNDS FOR THE PURPOSE OF INVESTMENT, THEREFORE, NO INTEREST COMPONENTS CAN BE ATTRIBUTED TO EARNING THE TAX-FREE INCOME. AGAIN, RELIANCE WAS P LACED ON THE JUDGMENTS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THIS REGARD. AS REGARDS THE OTHER EXPENSES, THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE ASSESSEE SUO-MOTO HAS DELETED AN AMOUNT OF RS.30,000 AND THE ASSESSING OFFICER NOWHERE HAS REC ORDED HIS SATISFACTION AS TO WHY HE IS NOT SATISFIED WITH THE DISALLOWANCE SO MADE BY THE ASSESSING OFFICER. IN SUCH A SCENARIO, NO DISALLOWANCE OF EXPENSES CAN BE MADE. FURTHER, IT WAS ALSO PLEADED THAT THE TAX FREE EXEM PT INCOME BEING RS.58,575/-, A DISALLOWANCE OF RS.18,61,925/- IS NOT JUSTIFIED IN ANY CASE. 5 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THIS IS A FACT ON RECORD THAT THE ASSESSEE HAS EARN ED TAX- FREE INCOME IN THE FORM OF DIVIDEND AMOUNTING TO RS.58,575/- DURING THE YEAR. OUT OF WHICH, THE ASS ESSEE HAD DISALLOWED AN AMOUNT OF RS.30,000/- SUO-MOTTO B EING EXPENSES IN RELATION TO EARNING OF TAX-FREE INCOME. INVOKING THE PROVISIONS OF RULE 8D, DISALLOWANCE OF AN AMOUNT OF RS.18,61,925/- HAS BEEN MADE BY THE ASSES SING OFFICER. THOUGH THIS IS A FACT THAT THE ASSESSMENT YEAR UNDER CONSIDERATION BEING 2009-10 THE ASSESSING OFF ICER HAS THE POWER TO INVOKE RULE 8D FOR COMPUTATION OF DISALLOWANCE UNDER SECTION 14A OF THE ACT, HOWEVER, FROM THE PERUSAL OF THE RECORD, AS SHOWN TO US BY THE LE ARNED COUNSEL FOR THE ASSESSEE, WE OBSERVE THAT THE ASSES SEE HAD ENOUGH FUNDS TO MAKE INVESTMENT IN TAX-FREE INCOME LEADING TO INVESTMENT. FROM A CHART FILED BEFORE U S, IT WAS SHOWN TO US THAT THE ASSESSEE HAD OWNED FUNDS T O THE TUNE OF RS.1,76,84,041/- WHILE THE INVESTMENTS ARE TO THE TUNE OF RS.1,27,26,874/- AT THE END OF THE YEAR. T HIS WAS SHOWN TO US WITH A SUBMISSION THAT NO FRESH INVESTM ENTS ARE MADE DURING THE YEAR, IN FACT ALL INVESTMENTS A RE APPEARING FROM THE EARLIER YEARS. A PRESUMPTION CAN BE MADE THAT THE INVESTMENTS HAVE BEEN MADE OUT OF OWN FUNDS AND NOT OUT OF INTEREST BEARING LOANS. THERE FORE, NO 6 INTEREST AMOUNT CAN BE ATTRIBUTED TO EARNING OF TAX -FREE INCOME. THEREFORE, THE ASSESSING OFFICER WAS NOT J USTIFIED TO MAKE DISALLOWANCE ON ACCOUNT OF INTEREST FOR THE PURPOSE OF SECTION 14A OF THE ACT. AS REGARDS OTHE R EXPENSES, IT IS ALSO A FACT ON RECORD THAT THE ASSE SSEE ITSELF HAS DISALLOWED AN AMOUNT OF RS.30,000/- AND FROM THE PERUSAL OF THE ORDER OF THE ASSESSING OFFICER, NOWHERE IT HAS CONFERRED THAT THE ASSESSING OFFICER WAS SAT ISFIED AS TO WHY THE DISALLOWANCE MADE BY THE ASSESSEE WAS NOT CORRECT. SUCH SATISFACTION IS NOT INFERRED EITHER DIRECTLY OR INDIRECTLY FROM THE ORDER OF THE ASSESSING OFFIC ER. IN SUCH A SCENARIO, NO DISALLOWANCE OF ADMINISTRATIVE EXPENSES CAN BE MADE UNDER SECTION 14A OF THE ACT. RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSE SSEE IN THIS REGARD ON THE JUDGMENT OF THE HON'BLE JURISDIC TIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF DEEPAK MITTAL (SUPRA) IS NOT OUT OF PLACE. 7. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. 8. THE APPEAL OF THE DEPARTMENT IS DISMISSED. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SOUGHT PERMISSION OF THE TRIBUNAL TO WITHDRAW THE CROSS OBJECTION FILED AGAINST THE APPEAL OF THE REVENUE I N ITA NO.542/CHD/2014. 7 10. THE LEARNED D.R. DID NOT HAVE ANY OBJECTION TO THE WITHDRAWAL OF THE CROSS OBJECTION. 11. IN VIEW OF THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR ASSESSEE, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS WITHDRAWN. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.542/CHD/2014 IS DISMISSED AND CROSS OBJECTIONS F ILED BY THE ASSESSEE IN C.O.NO.31/CHD/2014 IS DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF DECEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 8 TH DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH