M/s. PVR Pictures Ltd., New Delhi V. DCIT, New Delhi

ITA 5719/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3850 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 05-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 22-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 14A

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. 5719/DEL/2014 AY: 2010-11 M/S PVR PICTURES LTD., VS DCIT, 61, BASANT LOK, CIRCLE-14(1), VASANT VIHAR, NEW DELHI. NEW DELHI. (PAN: AACCP3746K) (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 (APPEA LS) XVII, NEW DELHI FOR ASSESSMENT YEAR 2010 11 WHEREIN VID E ORDER DATED 17/07/2014, THE LD. COMMISSIONER OF INCOME TAX (APP EALS) HAS CONFIRMED THE DISALLOWANCE OF RS. 17,74,373/- MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED TH E ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED DECLARING A LOSS OF RS. 14,07,27,600/- WHICH WAS SU BSEQUENTLY REVISED ITA NO. 5719.DEL/2014 ASSESSMENT YEAR 2010-11 2 BY THE ASSESSEE TO A LOSS OF RS. 12,72,15,668/-. TH E CASE WAS SELECTED FOR SCRUTINY AND THE ONLY DISALLOWANCE MADE BY THE AO W AS OF RS. 17,74,373/- UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. THE ASSESSMENT WAS COMPLETE D AT A LOSS OF RS. 12,54,41,295/-. 2.1 THE BACKGROUND LEADING TO THE DISALLOWANCE UNDE R SECTION 14A OF THE ACT WAS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE COMPANY HAD NOT DISAL LOWED THE AMOUNT OF RS. 17,74,373/- U/S 14A IN ITS COMPUTATI ON OF INCOME. THIS WAS THE AMOUNT OF EXPENDITURE ATTRIBUTABLE TO EXEMP T INCOME AS MENTIONED IN PARA 17 (1) OF THE TAX AUDIT REPORT. T HE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THIS AMOUNT SHOULD NO T BE DISALLOWED. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE AO THAT THE AMOUNT INVESTED IN THE MUTUAL FUNDS AS ON 01/04/2009 AND A LSO ON 31/03/2010 WAS IN GROWTH FUNDS WHICH WERE NOT ELIGIBLE FOR GEN ERATING TAX-FREE INCOME. THE ASSESSEE SUBMITTED BEFORE THE AO THAT T HE STATUTORY AUDITORS OF THE COMPANY HAD INCORRECTLY SHOWN THE D ETAILS OF MUTUAL FUNDS UNDER DAILY DIVIDEND PLAN INSTEAD OF GROWTH F UNDS. THE ASSESSEE ALSO FURNISHED PHOTOS COPIES OF THE STATEM ENTS OF THE MUTUAL ITA NO. 5719.DEL/2014 ASSESSMENT YEAR 2010-11 3 FUNDS AS AN EVIDENCE TO PROVE THAT THE INVESTMENT W AS IN GROWTH FUNDS AND NOT IN DAILY DIVIDEND FUNDS. THE ASSESSEE ALSO INFORMED THE AO THAT THE ASSESSEE HAD TAKEN UP THE MATTER WITH T HE STATUTORY AUDITORS AND HAD BROUGHT TO THEIR NOTICE THE INCORR ECT DETAILS GIVEN IN THE SCHEDULE OF INVESTMENT WHICH WAS FORMING PART O F THE BALANCE SHEET OF THE COMPANY. A COPY OF THE SAID LETTER WAS ALSO SUBMITTED BEFORE THE AO. THE AO WAS ALSO INFORMED THAT THE ST ATUTORY AUDITORS HAVE THEREAFTER CORRECTED THE DETAILS GIVEN IN THE ANNUAL ACCOUNTS OF THE COMPANY AND HAD CONFIRMED IT THROUGH A LETTER D ATED 28/01/2013. A COPY OF THIS LETTER WAS ALSO SUBMITTED BEFORE THE AO. A CERTIFICATE FROM THE TAX AUDITORS DATED 28 TH OF JANUARY 2013 WAS ALSO SUBMITTED WHEREIN THE TAX AUDITORS HAD CERTIFIED THAT THE DIS ALLOWANCE OF RS. 1 7,74,373/- IN FORM 3CD OF THE TAX AUDIT REPORT SHO ULD BE READ AS NIL. 2.2 THE AO ALSO WROTE TO THE STATUTORY AUDITORS TO CLARIFY THE SITUATION WHO VIDE THEIR LETTER DATED 19/02/2013 CO NFIRMED THE AVERMENTS MADE BY THE ASSESSEE BEFORE THE AO. 2.3 HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION O F THE ASSESSEE AND PROCEEDED TO DISALLOW AN AMOUNT OF RS. 17,74,37 3/- UNDER SECTION 14A OF THE ACT BY HOLDING THAT THE ASSESSEE COMPANY HAD NOT REFLECTED ITA NO. 5719.DEL/2014 ASSESSMENT YEAR 2010-11 4 TRUE PARTICULARS OF INCOME AND THAT THE CLARIFICATI ON GIVEN BY THE ASSESSEE VIDE ITS REPLY DATED 18/02/2013 WAS NOT RE LIABLE AND CONVINCING. THE AO FURTHER NOTED THAT THE CERTIFICA TE OF THE STATUTORY AUDITORS WAS ISSUED AT THE BEHEST OF THE ASSESSEE A ND THEREFORE THE SAME WAS NOT RELIABLE. 2.4 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE LD. FIRST APPELLATE AUTHORITY WHO ALSO CONFIRMED THE DISALLOW ANCE. NOW THE ASSESSEE HAS APPROACHED THE ITAT AND HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE BY THE LD. CIT (AP PEALS). 3. NONE WAS PRESENT FOR THE ASSESSEE. THE ENTRY IN THE ORDER SHEET SHOWS THAT THE CASE WAS EARLIER FIXED FOR HEARING O N 05/06/2017 AND WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE ON THA T DATE. THEREFORE, WE DEEM IT FIT TO PROCEED WITH THE HEARING OF THE C ASE EX PARTE THE ASSESSEE. 4. THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE READ OUT EXTENSIVELY FROM THE ASSESSMENT ORDER AS WELL AS TH E ORDER OF THE LD. CIT (APPEALS) AND SUBMITTED THAT DURING THE YEAR UN DER CONSIDERATION THE ASSESSEE HAD EARNED DIVIDEND INCO ME AMOUNTING TO ITA NO. 5719.DEL/2014 ASSESSMENT YEAR 2010-11 5 RS. 2,15,20,908/- AND, THEREFORE, THE ASSESSEES CL AIM THAT NO EXPENDITURE WAS INCURRED IN EARNING THE DIVIDEND IN COME WAS UNBELIEVABLE. IT WAS ALSO SUBMITTED THAT THE STATUT ORY AUDITORS HAD NOT GIVEN A WORKING AS TO HOW NIL AMOUNT WAS ARRI VED AT FOR THE PURPOSE OF DISALLOWANCE UNDER SECTION 14A OF THE AC T. IT WAS ALSO SUBMITTED THAT RULE 8D REQUIRES THAT DISALLOWANCE H AS TO BE MADE COMPULSORILY. IT WAS SUBMITTED THAT THE AO HAD CORR ECTLY DECIDED THE ISSUE AND THE SAME SHOULD BE UPHELD. 5. WE HAVE HEARD THE LD. SENIOR DEPARTMENTAL REPRES ENTATIVE AND HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. THE FACTS ARE NOT IN DISPUTE. THE AO PROCEEDED TO DISALLOW THE AM OUNT OF RS. 17,74,373/- BASED ON THE FIGURE, WHICH AS PER THE C LAIM OF THE ASSESSEE, WAS INCORRECTLY MENTIONED BY THE AUDITORS IN THE TA X AUDIT REPORT. THE ASSESSEE, SUBSEQUENTLY, FILED CERTIFICATE FROM THE STATUTORY AUDITORS STATING THAT THE SAID AMOUNT HAD BEEN INCO RRECTLY MENTIONED AND THE CORRECT AMOUNT WAS NIL. HOWEVER, THE AO W AS OF THE VIEW THAT THE CERTIFICATE OF THE AUDITOR HAD BEEN ISSUED AT THE BEHEST OF THE ASSESSEE. THE AO ALSO NOTED THAT NO WORKING/BASIS O F CALCULATION OF DISALLOWANCE AT NIL WAS SUBMITTED BY THE ASSESSEE . HOWEVER, WHILE ITA NO. 5719.DEL/2014 ASSESSMENT YEAR 2010-11 6 MAKING THE DISALLOWANCE, THE AO PICKED UP THE FIGUR E WHICH WAS MENTIONED IN THE TAX AUDIT REPORT AND DID NOT CARRY OUT AN INDEPENDENT EXAMINATION/VERIFICATION REGARDING THE ASSESSEES CLAIM THAT NO EXPENDITURE HAD BEEN INCURRED. SUCH A COURS E OF ACTION DOES NOT CONFORM TO THE MANDATE GIVEN TO THE AO WHILE CA LCULATING THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A OF THE AC T. THE LD. CIT (APPEALS), WHILE DISMISSING THE ASSESSEES APPEAL, ONLY MENTIONED THAT THE ASSESSEE HAD EARNED DIVIDEND OF RS. 2,15,2 0,908/- DURING THE YEAR AND THE EARNING OF DIVIDEND WOULD REQUIRE CERT AIN EXPENDITURE LIKE EXPENDITURE ON SALARY, ADMINISTRATIVE EXPENSES ETC. THE LD. CIT (APPEALS) ALSO DID NOT EXAMINE THE CLAIM OF THE ASS ESSEE REGARDING NO EXPENDITURE HAVING BEEN INCURRED FOR THE PURPOSE OF EARNING DIVIDEND. THEREFORE, IN LIGHT OF THE CIRCUMSTANCES, IT IS OUR CONSIDERED OPINION THAT INTEREST OF JUSTICE WOULD BE SERVED IF THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR RE-EXAMINING THE ISSUE DE NOVO . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF THE AO FOR CALCULATING THE DISALLOWA NCE UNDER SECTION 14A OF THE ACT, IF THE CIRCUMSTANCES SO WARRANT, KE EPING IN MIND THE ITA NO. 5719.DEL/2014 ASSESSMENT YEAR 2010-11 7 PROVISIONS OF THE ACT AND THE SETTLED JUDICIAL PREC EDENTS AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS C ASE. 6. IN THE FINAL RESULT THE APPEAL OF THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2017. SD/- SD/- (PRASHANT MAHARISHI) (S UDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 25 TH OCTOBER , 2017 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR