WALCHAND KAMDHENU COMMERCIALS PVT. LTD., MUMBAI V. ITO, 5(3)(4), MUMBAI

ITA 5636/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4270 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 05-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORA
• Assessee Lawyers: BASANTI B PATEL
• Keywords: Rule 8D; Set aside
• Section: 271(1)(c); 14A; 115JB

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 5636/MUM/2017 (ASSESSMENT YEAR 2012-13 ) WALCHAND KAMDHENU COMMERCIALS PVT. LTD., NEELA HOUSE, 2 ND FLOOR, M.L. DAHANUKAR MARG, MUMBAI-400026 . PAN: AAACK5045J VS. ITO-5(3)(4) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI BASANTI B. PATEL (AR) RESPONDENT BY : SHRI SATISH CHANDRA RAJORA (DR) DATE OF HEARING : 13.03.2019 DATE OF PRONOUNCEMEN T : 13.03.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-10, HEREINAFTER REFERRED AS LD CIT (A), MUMBAI DATED 21.06.2017 FOR ASSESSMENT YEAR 2012-13. THE A SSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW: ADDITION OF RS. 45,71,711/- UNDER SECTION 14A OF TH E ACT READ WITH RULE 8D OF THE RULES: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF RS.45,71,711/- UNDER SECTION 14A OF THE ACT R. W. R. 8D OF THE INC OME-TAX RULES, 1962 IGNORING THE FACTS THAT APPELLANT'S INTEREST FREE O WN FUNDS WERE MUCH MORE THAN THE INVESTMENTS MADE AND THE SAID FACT BEING O N RECORD BEFORE A.O. AND AS PER THE ACCOUNTS FILED BY THE APPELLANT. ITA NO. 5636 MUM 2017-WALCHAND KAMDHENU COMMER CIALS PVT. LTD. 2 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE INV ESTMENTS ARE MADE NOT FOR EARNING EXEMPT DIVIDEND INCOME, BUT FOR HOLDING CON TROLLING STAKE IN GROUP COMPANIES AND THAT NO PURCHASE/SALE TRANSACTION HAS BEEN UNDERTAKEN AND HENCE NO EXPENDITURE HAS BEEN INCURRED BY THE APPEL LANTS FOR HOLDING THESE GROUP COMPANY INVESTMENTS. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE BOR ROWED FUNDS WERE USED FOR THE APPELLANT'S OTHER BUSINESS OF LOAN FINANCE I.E. GIVING LOANS TO OTHERS, AND NOT FOR INVESTMENTS IN SHARES. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE SAID DISA LLOWANCE ON THE ALLEGED GROUND THAT ON ACCOUNT OF COMMON HOTCH POTCH OF THE FUNDS, THE ENTIRE CAPITAL WOULD HAVE GONE INTO INVESTMENT IN SHARES/M UTUAL FUNDS WITHOUT A PART OF THE SAME GOING TO THE OTHER BUSINESS. CIT(A ) HAS IGNORED THE POSITION AS PER THE AUDITED ACCOUNTS OF THE APPELLANT CLEARL Y DEMONSTRATING THE UTILIZATION OF OWN FUNDS FOR INVESTMENTS AND NO BOR ROWED FUNDS HAVE BEEN USED TO MAKE INVESTMENTS. 5. THE LD. CIT(A) ERRED IN CONFIRMING THE SAID DIS ALLOWANCE BY FAILING TO APPRECIATE THAT MOST OF THE INVESTMENTS ARE OLD INV ESTMENTS MADE IN THE EARLIER YEARS. 6. THE LD. CIT(A) ERRED IN PRESUMING THAT THE APPE LLANT HAS DEFINITELY INCURRED SOME EXPENDITURE IN RESPECT OF EXEMPT INCO ME AND FAILED TO APPRECIATE THAT NO EXPENDITURE WAS IN FACT INCURRED BY THE APPELLANT IN EARNING THE TAX FREE INCOME EXCEPT RS.1,01 ,985/- A S PER THE ACCOUNTS OF THE APPELLANT. THE DETAILS FURNISHED BY THE APPELLANT W HICH ARE AVAILABLE ON RECORD OF AO/CIT(A). 7. THE LD. CIT(A) FAILED TO APPRECIATE THAT SECTION 14A(3) WOULD APPLY ONLY IF THE AO HAVING REGARD TO THE ACCOUNTS OF THE APPE LLANT IS NOT SATISFIED WITH THE CLAIM OF THE APPELLANT AS TO THE ACTUAL EXPENSE S INCURRED (OF RS 101,985/- ) TO EARN TAX FREE INCOME AND THAT NO SUCH NON-SATI SFACTION HAS BEEN RECORDED BY AO WITH REGARD TO APPELLANT'S CLAIM. 8. THE AO ERRED IN FAILING TO APPRECIATE THAT FOR D ISALLOWING ANY EXPENDITURE UNDER SECTION 14A, A FINDING OF THE SAID EXPENDITUR E HAVING NEXUS WITH THE EARNING OF EXEMPTED INCOME IS NECESSARY, AND HENCE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D CANNOT BE MADE ON THE FACTS OF THE APPELLANT'S CASE. ITA NO. 5636 MUM 2017-WALCHAND KAMDHENU COMMER CIALS PVT. LTD. 3 9. THE AO ERRED IN CONFIRMING THE ADDITION OF RS.45 ,71,711/- BEING DISALLOWANCE UNDER SECTION 14A WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 10. THE AO FAILED TO APPRECIATE THAT IN COMPUTING B OOK PROFIT UNDER SECTION 115JB OF THE ACT ONLY EXPENDITURE ACTUALLY DEBITED TO THE PROFIT & LOSS ACCOUNT PREPARED AS PER PROVISIONS OF COMPANIES ACT , CAN BE CONSIDERED FOR DISALLOWANCE AND A NOTIONAL DISALLOWANCE CANNOT BE MADE AS CONTEMPLATED IN RULE 8D READ WITH SECTION 14A OF THE ACT. PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 11. THE LD. CIT(A) ERRED IN INITIATING PENALTY PRO CEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ALTHOUGH THERE IS NO DEFAULT O N THE PART OF THE APPELLANT. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE SOLITARY GROUND OF APPEAL RAISED BY ASSESSEE RELATES TO DISALLOWANCE UNDER SECTION 14A. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT GROUND OF APPEAL RAISED BY ASS ESSEE IS COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR ASSES SMENT YEAR 2011-12 IN ITA NO. 3795/MUM/2015, WHEREIN THE SIMILAR GROUN D WAS RESTORED TO THE FILE OF ASSESSING OFFICER. THE LD. AR OF THE AS SESSEE SUBMITS THAT THE ORDER FOR AY 2011-12 MAY BE FOLLOWED IN THE PRESENT APPEAL. 3. ON THE OTHER HAND THE LD DR FOR THE REVENUE AFTER G OING THROUGH THE ORDER OF TRIBUNAL FOR AY 2011-12 AGREES THAT THE AP PEAL MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE SUBMISSION OF PARTIES AND HA VE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE ORDER OF TRIBUN AL FOR ASSESSMENT YEAR 2011-12. WE HAVE NOTED THAT ON IDENTICAL GROUN DS OF APPEAL, THE CO- ITA NO. 5636 MUM 2017-WALCHAND KAMDHENU COMMER CIALS PVT. LTD. 4 ORDINATE BENCH OF TRIBUNAL RESTORED THE ISSUE TO TH E FILE OF ASSESSING OFFICER WITH THE FOLLOWING DIRECTION: 7. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTI ES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS TH E ORDERS PASSED BY LOWER AUTHORITIES. WE FIND THAT SIMILAR ISSUES WERE COVER ED BY THE COORDINATE BENCH'S DECISION IN THE CASE OF THE ASSESSEE FOR TH E AY 2010-11, WHEREIN THE TRIBUNAL WHILE RELYING UPON THE ORDER IN ASSESSEE'S OWN CASE FOR AY 2009-10 HAS PASSED THE ORDERS FOR RESTORING THE FILE TO THE AO. THE OPERATIVE PORTION OF THE ORDER OF TRIBUNAL ARE REPRODUCED BELOW:- '5. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT THIS ISSUE SHOULD BE RESTORED TO THE FILE OF THE ASSESSING OFF ICER FOR CONSIDERING THE SAME AFRESH, SINCE VARIOUS CONTENTIONS URGED BY THE ASSESSEE REQUIRE FRESH EXAMINATION. WE ALSO NOTICED THAT THE IDENTIC AL ISSUE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER BY THE COORDIN ATE BENCH OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR A. Y. 2009-10. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LEARNED CIT(A) ON THIS IS SUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH BY DULY CONSIDERING VARIOUS SUBMISSIONS THAT MAY BE PLACED BEFORE HIM BY THE ASSESSEE. HAVING PERUSED THE AFOREMENTIONED ORDERS OF THE COO RDINATE BENCH OF THE TRIBUNAL, WE SEE NO REASONS TO TAKE ANY OTHE R VIEW OF THE MATTER, THEN THE VIEW SO TAKEN BY THE COORDINATE BENCH AND WE AR E IN CONSIDERED AGREEMENT WITH THE SAME. ACCORDINGLY, CONSIDERING T HE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MAT TER BACK TO THE FILE OF AO WITH A DIRECTION TO VERIFY/EXAMINE THE SAME BY DULY CONSIDERING VARIOUS SUBMISSIONS THAT MAY BE PLACED BEFORE HIM BY THE AS SESSEE AND THEREAFTER PASS AFRESH ORDER OF ASSESSMENT. IT IS NEEDLESS HER E TO MENTION THAT BEFORE PASSING THE ORDER OF ASSESSMENT, THE AO SHALL PROVI DE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECIS ION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CO NSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPU TE, WHICH SHALL HE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE W ITH LAW. ITA NO. 5636 MUM 2017-WALCHAND KAMDHENU COMMER CIALS PVT. LTD. 5 5. CONSIDERING THE DECISION OF TRIBUNAL ON IDENTICAL G ROUNDS OF APPEAL FOR EARLIER YEAR, WHICH HAS BEEN RESTORED TO THE FILE O F ASSESSING OFFICER, THUS, RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL THE GROUNDS OF APPEAL FOR THE YEAR UNDER CONSIDERATION IS ALSO RESTORE TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13/03/2019. SD/- SD /- N.K. PRADHAN, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 13.03.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI