Sh Ramesh Kumar Dudani, Mohali V. DCIT, Circle -6(1), Mohali

ITA 588/CHANDI/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2454 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 30-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROHIT MEHRA CIT
• Assessee Lawyers: B K NOHRIA
• Keywords: Business income; Business expenditure; Revised return; Rule 8D; Set aside
• Section: 14A; 139(5); 143(1); 143(2); 139(1); 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH .., ! '# #$ %, & '( BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, J M ITA NO. 588/CHD/2019 ASSESSMENT YEAR : 2013-14 SHRI RAMESH KUMAR DUDANI TECHNICAL PRODUCTS CORPN., PLOT NO. C-104, INDUSTRIAL AREA, PHASE-VII MOHALI- PUNJAB THE DCIT, CIRCLE - 6(1) SECTOR-68 MOHALI-PUNJAB PAN NO: ABBPD0633J APPELLANT RESPONDENT !' ASSESSEE BY : SHRI B.K. NOHRIA, CA & SHRI NALIN NO HRIA #!' REVENUE BY : SHRI ROHIT MEHRA, ADDL. CIT $ %! & DATE OF HEARING : 26/02/2020 '()*! & DATE OF PRONOUNCEMENT : 26/02/2020 ')/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 28/03/2019 OF THE LD. CIT(A)-2, CHANDIGARH. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A)-2 CHANDIGARH HAS ERRED IN TAW AND FACTS IN UPHO LDING THE CONTENTION OF THE LEARNED A 0 FOR REJECTION REVISION OF RETURN OF INCOME U/S 139(5) OF THE INCOME TAX ACT, 1961 WHEN THE ORIGINAL RETURN OF INCOME WAS FI LED U/S 139(1) OF THE ACT IN TIME AND REVISED IN TIME U/S 139(5) OF THE ACT DUE TO DI FFERENCES IN THE OPENING BALANCES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A)-2 CHANDIGARH HAS ERRED IN LAW AND FACTS WHILE H OLDING THAT THE A 0 HAD RECORDED OBJECTIVE SATISFACTION AS PER THE REQUIREM ENT OF SECTION 14A(2) OF THE INCOME TAX ACT, 1961. 2 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A)-2 CHANDIGARH HAS ERRED IN LAW WHILE HOLDING THA T THE CLAIM OF INTEREST AS BUSINESS EXPENDITURE TRIGGERS SECTION 14A AUTOMATIC ALLY WITHOUT ANY FINDINGS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A)-2 CHANDIGARH HAS ERRED IN LAW AND FACTS IN UPHO LDING THE CALCULATION OF DISALLOWANCE OF RS.17,23,232/- UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 BY THE LEARNED A 0 AS PER RULE 8D OF THE INCOME TAX RU LES, 1962. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A)-2 CHANDIGARH HAS ERRED IN LAW AND FACTS IN UPHO LDING THE CONTENTION OF THE LEARNED A 0 IN ADDING RS.1,91,396/- FOR BRANCH OFFI CE EXPENSES WITHOUT APPRECIATING THE REQUIREMENT OF THE BUSINESS ACT IVITY AND WITHOUT QUOTING THE SECTION OF THE INCOME TAX ACT, 1961 UNDER WHICH DIS ALLOWED. 6. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, AM END OR DELETE ONE OR MORE OF THE GROUNDS OF APPEAL BEFORE THE APPEAL IS DISPOSED OFF. 3. VIDE GROUND NO. 1 THE GRIEVANCE OF THE ASSESSEE RELATES TO THE REJECTION OF REVISION OF RETURN OF INCOME FILED UNDER SECTION 139(5) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). 4. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE FILED HIS RETURN OF INCOME ON 29/09/2013 DECLARING AN INCOME OF RS. 1,1 7,55,420/-, SUBSEQUENTLY, THE ASSESSEE REVISED THE SAID RETURN ON 29/11/2014 DECLARING TAXABLE INCOME OF RS. 1,17,59,030/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. LATER ON THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING THE N OTICE DT. 05/09/2014 UNDER SECTION 143(2) OF THE ACT. THEREAFTER THE ASSESSEE REVISED THE RETURN ON 29/11/2014 WHICH WAS NOT ACCEPTED BY THE A.O. WHO T REATED THE SAME AS AN AFTERTHOUGHT FOR THE REASON THAT THE NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ALREADY ISSUED. 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 'THE. APPELLANT HAS FILED HIS ORIGINAL RETURN OF IN COME FOR THE ASSESSMENT YEAR 2013- 14 ON 29.09.2013 AND REVISED THE RETURN OF INCOME O N 29.11.2014 AS IT HAS DISCOVERED WRONG STATEMENT IN THE AUDITED ACCOUNTS SIGNED ON 21.09.2013 DUE TO FACT THAT WRONG OPENING BALANCES WERE TAKEN IN T HE ORIGINALLY AUDITED ACCOUNTS. IN THE AUDITED ACCOUNTS FOR THE YEAR ENDI NG 31.03.2012 REVISED ON 21.09.2012 THE APPELLANT HAS SEPARATED THE PERSONAL INVESTMENTS FROM BUSINESS 3 ACTIVITY AS IT WAS NOT RELATED TO THE BUSINESS ACTI VITY. THE APPELLANT HAS THE RIGHT TO SEPARATE THE BUSINESS ACTIVITY FROM PERSONAL ACTIVI TY, BEING BOTH THE ACTIVITIES ARE INDEPENDENT OF EACH OTHER, AS THERE IS NO BAR IN AN Y OF THE PROVISIONS OF THE INCOME ACT, 1961. AS PER SECTION 139(5) OF THE ACT ONCE A REVISED RETURN IS FILED, THE ORIGINALLY FILED RETURN MUST BE TAKEN TO HAVE B EEN WITHDRAWN AND SUBSTITUTED BY THE REVISED RETURN. THE APPELLANT RELIES UPON TH E FOLLOWING CASES: DHAMPUR SUGAR MILLS LTD VS CFT 90 TTR 236 CFT VS PERIYAR DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD 266TTR 705 KEEPING IN VIEW OF THE ABOVE SUBMISSION IT IS RESPE CTFULLY PRAYED THAT THE REVISED RETURN OF INCOME BE DIRECTED TO BE CONSIDERED FOR A SSESSMENT.' 5.1 THE SAID SUBMISSION OF THE ASSESSEE WAS NOT ACC EPTED BY THE LD. CIT(A) BY OBSERVING AS UNDER: 9.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND PERUSED THE ASSESSMENT ORDER. THE FACTS REVEAL THAT THE ASS ESSEE REVISED THE RETURN ON RECEIPT OF SCRUTINY NOTICE FROM THE DEPARTMENT AFTE R THE CASE WAS PICKED UP CASS. THE BACKGROUND OF THE ASSESSEE'S CLAIMS IN TH E PAST HAVING BEEN NEGATIVED BY THE ITAT AND THE ASSESSEE'S OWN DISCLOSURE AND S UBSEQUENT DISALLOWANCE OF DEDUCTION U/S 14A OF THE ACT FOR AY S 2010-11 AND 2011-12 BOTH ARE RELEVANT. THE ACTION OF THE AO IN NOT CONSIDERIN G THE REVISED RETURN FALLS WITHIN THE RATIO PROPOUNDED BY THE SUPREME COURT IN THE CA SE OF GOETZE (INDIA) LTD. VS. CIT [2006] 156 TAXMAN 1 (SC). NOTWITHSTANDING THE A BOVE IT IS ALSO SETTLED THAT THE CONTENTS OF THE REVISED RETURN MAY BE ADJUDICATED U PON BY THE APPELLATE AUTHORITY. ARMED WITH THE MANDATE THE FACTS AS HAS BEEN NARRATED ABOVE DOESN'T ENTHUSE ONE TO ACCEPT WHAT IS BEING SOUGHT TO BE PRESSED BY THE ASSESSEE. THE FACT OF THE MATTER IS THAT THE ASSESS EE IS ATTEMPTING TO DEVIATE FROM A POSITION (WHERE DEDUCTIONS WERE DISALLOWED U/S 14 A) ALREADY AFFIRMED BY THE ITAT AND SELF-CONFESSEDLY ADOPTED BY THE ASSESSEE. THE SETTLED POSITION IS BEING ROCKED BY THE ASSESSEE BY CLAIMING WHAT WAS EARLIER DEPICTED AND CONSIDERED AS BUSINESS INVESTMENT TO THE PERSONAL INVESTMENT WITH OUT LEADING ANY EVIDENCE AS TO HOW IT WAS FINANCED AND THEREFORE NEEDS TO BE NE GATED. THIS GROUND OF APPEAL IS DISMISSED. 6. NOW THE ASSESSEE IS IN APPEAL. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME WAS REVISED BY THE ASSESSEE BEFORE FRAMING THE REGULAR ASSESSMENT AND WITHIN THE TIME AVAILABLE UNDER SECTION 139(5) OF THE ACT. THE REFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION TAKEN BY THE A.O . 8. IN HIS RIVAL SUBMISSIONS THE LD. SR. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. TO RESOLVE THIS C ONTROVERSY IT IS RELEVANT TO DISCUSS THE PROVISION CONTAINED IN SECTION 139(5) O F THE ACT FOR THE RELEVANT ASSESSMENT YEAR WHICH READ AS UNDER: IF ANY PERSON, HAVING FURNISHED A RETURN UNDER SUB -SECTION(1) OR SUB-SECTION(4), DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THERE IN, HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FR OM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASS ESSMENT, WHICHEVER IS EARLIER. [ FROM THE AFORESAID PROVISIONS IT IS CLEAR THAT THE RETURN OF INCOME FILED UNDER SUB SECTION 1 OR 4 OF SECTION 139 OF THE ACT MAY BE REVISED AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE R ELEVANT A.Y. OR BEFORE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER. IN THE PRESENT CASE THE LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE FOR THE REASON THAT THE RETURN OF INCOME WAS REVISED AFTER RECEIPT OF SCRUTINY NOTICE UNDER SECTION 143(2) OF THE ACT FROM THE DEPARTMENT, HOWEVER, THERE IS NO SUCH CONDITIONS IN SECTION 139(5) OF THE ACT. THE ONLY RESTRICTIONS IMPOSED IN SECTIO N 139(5) OF THE ACT FOR REVISING THE RETURN OF INCOME ARE THAT IT IS TO BE REVISED A T ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YE AR WHICH IN THE PRESENT CASE WAS ENDING ON 31/03/2015 OR BEFORE COMPLETION OF THE ASSESSMENT WHICH IN THIS CASE WAS NOT YET COMPLETED. THEREFORE, THE A.O. WAS REQUIRED TO ACCEPT THE REVISED RETURN OF INCOME FURNISHED BY THE ASSES SEE UNDER SECTION 139(5) OF THE ACT, AND THE LD. CIT(A) WAS NOT JUSTIFIED IN CO NFIRMING THE ACTION OF THE A.O. ACCORDINGLY, THIS GROUND OF APPEAL IS DECIDED IN FA VOUR OF THE ASSESSEE. 10. VIDE GROUND NO. 2 & 3 GRIEVANCE OF THE ASSESSEE RELATES TO THE OBJECTIVE SATISFACTION AS PER REQUIREMENT OF SECTION 14A(2) O F THE ACT. 11. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S PLEA WAS TAKEN BEFORE THE LD. CIT(A), HOWEVER, HE HAD NOT ADJUDICATED THE SAM E. HE REQUESTED TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATION. 5 12. LD. SR. DR DID NOT OBJECT FOR THE SAME. ACCORDI NGLY THIS ISSUE IS SET ASIDE TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATION. 13. AS REGARDS TO GROUND NO. 4 IT WAS STATED THAT T HIS ISSUE IS CO RELATED WITH GROUND NO. 2 & 3. THE ISSUE IN THE SAID GROUNDS, WE HAVE ALREADY SET ASIDE TO THE FILE OF THE LD. CIT(A). THEREFORE, THE LD. CIT(A) S HALL DECIDE THIS ISSUE RAISED BY THE ASSESSEE ALONGWITH GROUND NO. 2 & 3 OF THIS APPEAL. 14. VIDE GROUND NO. 5 THE GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF ADDITION OF RS. 1,91,396/- INCURRED B Y THE ASSESSEE FOR OFFICE EXPENSES. 15. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HA D DEBITED AN AMOUNT OF RS. 1,91,396/- IN HIS P&L ACCOUNT UNDER THE HEAD AD MINISTRATIVE EXPENSES ON ACCOUNT OF MUMBAI OFFICE. HE ASKED THE ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE. IN RESPONSE, THE ASSESSEE SUBMITTED AS UN DER: AS REGARDS MUMBAI OFFICE EXPENSES, IT IS SUBMITTED THA T MUMBAI IS MAIN HUB OF MONEY MARKET AND THE FOREIGNER NORMALLY OPER ATE FROM MUMBAI AND THE ASSESSEE IN ORDER TO OBTAIN EXPORT ORDER HA S TO MAINTAIN OFFICE IN MUMBAI. MOREOVER MAJORITY OF THE RAW MATERIAL USED IN THE EXPORT ORDERS IS STAINLESS STEEL WIRE SHEET AS WELL AS PLASTIC GRANU LES ARE IMPORTED THROUGH MUMBAI OFFICE FOR BETTER PRICES. HENCE THE EXPENSES HAVE BEEN RIGHTLY INCURRED AND IT IS PRAYED THAT NO ADDITION BE MADE.' 15.1 THE A.O. HOWEVER DID NOT FIND MERIT IN THE AFO RESAID SUBMISSION OF THE ASSESSEE BY OBSERVING THAT THE OFFICE OF THE ASSESS EE WAS SITUATED IN RESIDENTIAL AREA WHERE HIS DAUGHTER WAS RESIDING. 16. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 'AO HAS MADE THE ADDITION BY STATING THAT FROM THE I NFORMATION GATHERED BY THIS OFFICE, IT HAS COME TO THE NOTICE THAT THE OFFICE O F THE APPELLANT IS SITUATED IN A RESIDENTIAL AREA WHERE THE FAMILY (DAUGHTER) OF THE APPELLANT IS RESIDING. FURTHER 6 THE APPELLANT HAS FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE CONTENTION. THE A O HAS FAILED TO STATE THAT FROM WHERE THE LEAR NED A O HAS GATHERED THE INFORMATION STATED IN THE ASSESSMENT ORDER AND ONLY A CONCOCTED STORY WHICH IS TO BE OUTRIGHTLY REJECTED. FURTHER IT IS SUBMITTED THA T NO COGENT MATERIAL HAS BEEN CITED BY THE LEARNED A O THAT THE EXPENSES INCURRED BY THE APPELLANT OF MUMBAI OFFICE ARE NOT INCURRED BY THE APPELLANT AND THE AP PELLANT CANNOT RUN THE OFFICE IN A RESIDENTIAL AREA AND THERE IS A BAR IN RUNNING AN OFFICE FROM RESIDENCE OR RESIDENTIAL AREA. THE MUMBAI BEING A MAIN HUB OF MO NEY MARKET, FINANCIAL CAPITAL OF INDIA AND THE FOREIGNER NORMALLY OPERATE FROM MUMBAI AND THE APPELLANT IN ORDER TO OBTAIN EXPORT ORDER AS THE AP PELLANT IS EXPORTING 100% OF ITS MATERIAL IS MAINTAINING ITS OFFICE AT MUMBAI AND AL SO MAKE PURCHASES FROM THEIR WHICH ARE REQUIRED FOR MANUFACTURING THE PRODUCTS F OR EXPORTING. 16.1 HOWEVER THE LD. CIT(A) DID NOT FIND MERIT IN T HE SUBMISSIONS OF THE ASSESSEE BY OBSERVING AS UNDER: 10.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND PERUSED THE ASSESSMENT ORDER. THE ASSESSEE HASN'T DENIED, T HAT THE ADDRESS IS THAT OF A RESIDENTIAL PROPERTY WHERE THE ASSESSEE'S DAUGHTER IS RESIDING. IT HAS ALSO NOT ADDUCED EVIDENCE THAT THE SO CALLED RESIDENCE CLAIM ED TO DOUBLE UP AS OFFICE WAS ACTUALLY PUT TO USE FOR BUSINESS PURPOSES. THER E IS NO CORROBORATION THAT SALES & PURCHASES WERE EFFECTUATED FROM THE SAID PR EMISES. IT HAS ALSO NOT CANVASSED THE VIEW THAT THE DAUGHTER WAS AN ACTIVE PARTICIPANT IN THE BUSINESS ACTIVITIES. IN LIGHT OF THE ABOVE THERE ARE NO GROU NDS TO INTERFERE WITH THE AO'S ORDER. GROUND OF APPEAL NO. 4 IS ACCORDINGLY DISMIS SED. 17. NOW THE ASSESSEE IS IN APPEAL. 18. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RE IS NO BAR IN HAVING THE OFFICE IN THE RESIDENTIAL AREA AND THAT ALL THE EXP ENSES WERE INCURRED IN MUMBAI OFFICE FOR BUSINESS PURPOSES, THEREFORE, THE ADDITI ON MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 19. IN HIS RIVAL SUBMISSIONS THE LD. SR. DR SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT APPEARS THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE DENIED FOR TH E REASON THAT THE ADDRESS OF OFFICE WAS IN THE RESIDENTIAL AREA. HOWEVER, THE RE IS NO SUCH BAR TO RUN THE 7 BUSINESS FROM THE RESIDENTIAL AREA, TO CLAIM THE EX PENSES AGAINST THE BUSINESS INCOME IS THAT THE EXPENSES TO BE INCURRED FOR BUSI NESS PURPOSES. IN THE PRESENT CASE, THERE IS NO CLAIM THAT THE EXPENSES WERE RELA TED TO THE RENT OF THE BUILDING. THE ONLY CONTENTION WAS THAT THE EXPENSES WERE DIRECTLY RELATED TO THE BUSINESS OF THE ASSESSEE. HOWEVER THE A.O. HAS MENT IONED THAT THE ASSESSEE DID NOT FURNISH THE DOCUMENTARY EVIDENCE. WE THEREFORE DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE A.O. FOR F RESH CONSIDERATION, THE ASSESSEE MAY FURNISH THE RELEVANT DETAILS / DOCUMENTS IN SUP PORT OF HIS CLAIM. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ( ORDER PRONOUNCED IN THE OPEN COURT ON 26/02/2020 ) SD/- SD/- #$ % .., (SANJAY GARG ) ( N.K. SAI NI) & '(/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 26/02/2020 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; # ASSISTANT REGISTRAR