M/s. P.N. Paper Mills Private Limited, New Delhi V. ITO, New Delhi

ITA 5567/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3855 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 14A; 115JB; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5567/DEL/2014 AY: 2010-11 P.N. PAPER MILLS PRIVATE LIMITED, VS ITO, B-64, 1 ST FLOOR, WARD-14(1), VIVEK VIHAR, NEW DELHI. NEW DELHI. (PAN: AADCP5179K) (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY : SHRI ATIQ AHMAD, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) X VII, NEW DELHI FOR ASSESSMENT YEAR 201011 WHEREIN VIDE ORDER DATED 18 /07/2014, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS UPHELD THE DISALLOWANCE OF RS. 10,39,543/- MADE BY THE AO UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME IN THIS CASE WAS FILED DECLARING INCOME OF RS. 10,63,090/-. THE ASSE SSEE PAID TAX OF RS. 9,97,537/- UNDER SECTION 115JB ON THE BOOK PROFIT OF RS. 64,56 ,547/-. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF T HE ACT AT A TOTAL INCOME OF I.T.A. NO. 5567/DEL/2014 ASSESSMENT YEAR 2010-11 2 RS. 11,41,780/- AND TAX WAS CHARGED ON THE BOOK PRO FIT OF RS. 64,56,547/-. THEREAFTER, THE AO ISSUED A NOTICE UNDER SECTION 15 4 OF THE ACT AND THEREAFTER PASSED AN EX PARTE ORDER MAKING AN ADDITION IN THE BOOK PROFIT BY MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT AMOUNTING TO RS. 10,39,543/- RE- COMPUTING THE BOOK PROFIT AT RS. 74,96,090/-. 2.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE FIRST APPELLATE AUTHORITY CHALLENGING THE DISALLOWANCE ON THE GROUN D THAT THE NOTICE PROPOSING TO RECTIFY THE ORDER UNDER SECTION 154 OF THE ACT W AS NOT SERVED ON THE ASSESSEE. THE ASSESSEE ALSO CHALLENGED THE DISALLOWANCE ON TH E GROUND THAT THAT THE AO DID NOT HAVE THE POWER TO MAKE THE DISALLOWANCE UND ER SECTION 154 OF THE ACT AND RE-COMPUTE THE BOOK PROFIT UNDER SECTION 115JB. HOWEVER, THE LD. CIT (APPEALS) DISMISSED THE ASSESSEES APPEAL AND NOW T HE ASSESSEE IS BEFORE THE ITAT CHALLENGING THE DISALLOWANCE BY CHALLENGING TH E ASSUMPTION OF JURISDICTION BY THE AO U/S 154 OF THE ACT. 3. NONE WAS PRESENT FOR THE ASSESSEE. ENTRY IN THE ORDER SHEET SHOWS THAT THE CASE WAS EARLIER FIXED FOR HEARING ON 05/06/201 7 AND THE ASSESSEE WAS NOT REPRESENTED ON THAT DATE. THE CASE WAS ADJOURNED FO R 27 TH OF JULY 2017 AND NOTICE OF HEARING WAS SENT TO THE ASSESSEE THROUGH SPEED POST WHICH HAS BEEN RECEIVED UN-SERVED. THEREFORE, WE ARE PROCEEDING TO HEAR THE APPEAL EX- PARTE QUA THE ASSESSEE. I.T.A. NO. 5567/DEL/2014 ASSESSMENT YEAR 2010-11 3 4. THE LD. SENIOR DR SUBMITTED THAT THE AO WAS WITH IN HIS POWER TO MAKE A DISALLOWANCE UNDER SECTION 14A BY PASSING A RECTI FICATION ORDER UNDER SECTION 154 OF THE ACT AS THE DISALLOWANCE UNDER SECTION 14 A WAS MANDATED BY THE INCOME TAX ACT ITSELF. THE LD. SR. DR ALSO SUPPORTE D THE ORDER OF THE LD. CIT (APPEALS) AND SUBMITTED THAT THE SAME SHOULD BE UPH ELD. 5. WE HAVE HEARD THE SENIOR DR AND HAVE ALSO PERUSE D THE MATERIAL ON RECORD. IT IS UNDISPUTED THAT THE AO HAS ASSUMED JU RISDICTION UNDER SECTION 154 OF THE ACT FOR MAKING THE DISALLOWANCE UNDER SECTIO N 14A OF THE ACT TO THE BOOK PROFITS COMPUTED UNDER SECTION 115 JB OF THE ACT. T HE QUESTION AS TO WHETHER 14A DISALLOWANCE CAN BE MADE TO THE BOOK PROFITS OR NOT IS A DEBATABLE ISSUE AND IT OUR CONSIDERED OPINION THAT THE AO HAS GOT N O JURISDICTION TO MAKE SUCH AN ADDITION WHILE RESORTING TO THE PROVISION OF SECTION 154 OF THE ACT AS THE SCOPE OF SAID SECTION IS VERY LIMITED. ITAT MUMBAI BENCH HAS HELD IN THE CASE OF FERANI HOTELS PVT. LTD IN ITA NO.857/M/2013, VID E ORDER DATED 17.11.2014, THAT THE DISALLOWANCE COMPUTED UNDER SECTION 14A READ WITH RULE 8D IS TO BE ADDED WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB . ON THE OTHER HAND, ITAT DELHI BENCH IN THE CASE OF QUIPPO TELECOM INFR ASTRUCTURE VS. ACIT IN ITA NO.4931/DEL/2010, VIDE ORDER DATED 29.07.11 AND ITAT BANGALORE BENCH IN THE CASE OF JSW ENERGY LTD. VS. ACIT IN ITA NO.244/ BANG./2010, VIDE ORDER DATED 22.02.13, HAVE HELD THAT THE DISALLOWANCE MAD E UNDER SECTION 14A READ WITH RULE 8D IS NOT TO BE ADDED WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB . IT HAS BEEN HELD THAT THE ONLY ACTUAL EXPENDITURE DEBITED TO THE I.T.A. NO. 5567/DEL/2014 ASSESSMENT YEAR 2010-11 4 PROFIT & LOSS ACCOUNT IS TO BE TAKEN INTO CONSIDERA TION WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB . THIS SHOWS THAT THE ISSUE IS QUITE DEBATABLE AND UNDER SUCH CIRCUMSTANCES, IN OUR VIEW, IT WAS B EYOND THE POWERS OF THE AO, EXERCISABLE UNDER SECTION 154 TO MAKE AN ADDITION ON A DEBATABLE ISSUE AS THE ORIGINAL ASSESSMENT IN THIS CASE HAD BEEN COMPL ETED UNDER SECTION 143(3) OF THE ACT. MERELY BECAUSE ANOTHER VIEW IS POSSIBLE CA NNOT BE A GROUND TO RECTIFY THE ORDER UNDER SECTION 154 OF THE ACT AS THE SAME CANNOT BE SAID TO BE A MISTAKE APPARENT ON RECORD. ITAT MUMBAI BENCH HAS A LSO TAKEN A SIMILAR VIEW IN THE CASE OF BEEKAYLON SYNTHETICS PVT. LTD V. ACI T IN ITA NO. 7558/MUM/2013 WHICH WE RESPECTFULLY FOLLOW AND HOLD THAT THE AO H AD NO POWER TO MAKE A DISALLOWANCE U/S 14A OF THE ACT TO THE BOOK PROFITS COMPUTED U/S 115JB BY RESORTING TO SECTION 154 PROCEEDINGS. WE, ACCORDING LY, QUASH THE ORDER PASSED BY THE AO U/S 154 OF THE ACT. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE STA NDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER , 2017. SD/- SD/- (PRASHANT MAHARISHI) (S UDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDIC IAL MEMBER DT. 25/10/ 2017 GS I.T.A. NO. 5567/DEL/2014 ASSESSMENT YEAR 2010-11 5 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR