Rajratan Global Wires Ltd. , Indore V. Assistant Commissioner of Income Tax Circle 4(1), Indore, Indore

ITA 589/Ind/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5455 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 28-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MITRA
• Assessee Lawyers: P D NAGAR
• Keywords: Revised return
• Section: 143(3); 14A; 139

Judgement Text

RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.589/IND/2017 ASSESSMENT YEAR: 2013-14 REVENUE BY S HRI P.K. MITRA, SR.DR ASSESSEE BY SHRI P.D. NAGAR ,C.A DATE OF HEARING 1 6 . 10 . 2018 DATE OF PRONOUNCEMENT 18 .10 .2018 O R D E R PER MANISH BORAD, AM. THIS APPEAL OF ASSESSEE PERTAINING TO A.Y. 2013-14 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, INDORE (IN SHORT CIT(A)), DATED 20.07.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HER EINAFTER CALLED AS THE ACT) FRAMED ON 09.10.2015 BY ACIT-4(1), IN DORE. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL; M/S. RAJRATAN GLOBAL WIRE LTD, 11/2 MEERA PATH, DHENU PARKET, INDORE VS. ACIT, CIRCLE - 4 INDORE ( APPELLANT ) (RESPONDENT ) PAN NO. A ABCE4530Q RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 2 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A OF THE ACT AT RS.11,26,876 /- INSTEAD OF REVISED CLAIM OF THE APPELLANT TO RESTRICT SUCH DISALLOWANC E AT RS.3,47,930/- ONLY. HE OUGHT TO HAVE APPRECIATED THAT LEGAL CLAI M CAN BE RAISED DURING ASSESSMENT AS WELL APPELLATE PROCEEDINGS FOR THE FI RST TIME HAVING A BEARING ON TAX LIABILITY OF THE ASSESSEE. SUCH POW ERS ARE INHERENT FOR DETERMINATION OF CORRECT INCOME AS HELD BY SUPREME COURT IN THE CASE OF M/S. NATIONAL THERMAL POWER COMPANY LTD VS. CIT (19 98) 229 ITR 383, PROVIDED SUCH OMISSION TO RAISE IT EARLIER WAS BONA FIDE AND NOT WILLFUL OR UNREASONABLE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN NOT APPRECIATING THE FACT THAT THE JUDGMENT IN THE CASE OF M/S. GOETZE INDIA LTD 284 ITR 323 (HON'BLE SUPREME COURT) WAS NOT APP LICABLE TO THE FACTS OF THE CASE AND DEDUCTION CLAIMED TO REDUCE THE DIS ALLOWANCE OFFERED FOR TAX U/S 14A OF THE ACT WHILE SUBMITTING THE RETURN WAS JUSTIFIED. CONFIRMATION OF DISALLOWANCE IS THEREFORE, UNJUSTIF IED, IMPROPER AND BAD IN LAW 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS RELATING TO ISSUES RAISED IN THIS APPEAL ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF STEEL WIRE LIKE TYRE BEED WIRES PC SR WIRES ETC. INCOME OF RS.9,59,39,870/- WAS DE CLARED IN THE E- RETURN FILED ON 2.11.2013. CASE SELECTED FOR SCRUT INY. NOTICES U/S 143(2) AND 143(1) OF THE ACT WERE DULY SERVED UPON THE ASSESSEE. NECESSARY DETAILS AS CALLED FOR WERE FILED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SUBMITTED ON BEHALF O F THE ASSESSEE RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 3 THAT AN EXCESSIVE DISALLOWANCE U/S 14A OF THE ACT H AS BEEN MADE AT RS.7,79,112/-. IT WAS CONTENDED THAT THERE WAS A MI STAKE IN WORKING OUT THE DISALLOWANCE U/S 14A OF THE ACT R. W.S. RULE 8D OF I.T RULES BY VIRTUE OF WHICH AN AMOUNT OF RS.11,27 ,042/- WAS DISALLOWED WHILE COMPUTING THE INCOME. THEREAFTER IT WAS REVEALED THAT AS THE ASSESSEE HAD TO INVEST RS.4 CRORES IN S BI PREMIER LIQUID MUTUAL FUND IN THE LAST WEEK OF THE FINANCIAL YEAR FOR JUST 7 DAYS INADVERTENTLY DISALLOWANCE U/S 14A OF THE ACT WAS CALCULATED FOR THE WHOLE YEAR BY ADDING THE ALLEGED INVESTMENT OF RS.4 CRORES AS A PART OF AVERAGE INVESTMENT. REVISED WORKING WAS FU RNISHED BEFORE THE ASSESSING AUTHORITY FOR CONSIDERING THE CORRECT CLAIM OF DISALLOWANCE U/S 14A OF THE ACT AND REDUCE THE DISA LLOWANCE TO RS.3,47,930/-. HOWEVER THIS CONTENTION OF THE ASSES SEE DID NOT FIND ANY FAVOUR FROM THE LD. A.O AND HE MAINTAINED THE D ISALLOWANCE U/S 14A AT RS.11,26,875/-. LD.A.O ALSO MADE AN AD DITION TOWARDS VALUATION OF CLOSING STOCK BY INVOKING THE PROVISIO NS OF SECTION 145A OF THE ACT AT RS.55,52,139/-. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD .CIT(A) ON BOTH THE ISSUES RELATING TO VALUATION OF CLOSING ST OCK AS WELL AS RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 4 DISALLOWANCE U/S 14A OF THE ACT AND PARTLY SUCCEEDE D AS LD.CIT(A) GAVE NO RELIEF TO THE GROUND RAISED AGAINST THE DIS ALLOWANCE U/S 14A OF THE ACT. LD.CIT(A) DISMISSED THE ASSESSEES DISA LLOWANCE U/S 14A OF THE ACT OBSERVING AS FOLLOWS; 5.2 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT. HOWEVER, THE FACTS REMAINS THAT THE ASS TT. COMMISSIONER OF INCOME TAX HAD REJECTED THE CLAIM ON THE GROUND THA T DISALLOWANCE WAS TO BE WORK OUT AS PER PROVISIONS OF RULE 8D AND DEV IATION THERE FROM CANNOT BE ACCEPTED BECAUSE IN THE COMPUTATION OF IN COME SUCH DISALLOWANCE WAS MADE AS PER RULE 8D ONLY. HE FOLL OWED THE JUDGMENT OF M/S. GOETZE INDIAN LTD 284 ITR 323 (SC) WHEREIN IT WAS HELD THAT APPELLANT CANNOT AMEND A RETURN FILED BY HIM FOR MA KING A CLAIM FOR DEDUCTION OTHER THAN BY FILING A REVISED RETURN. K EEPING IN MIND THE DECISION OF M/S. GOETZE INDIA LTD (SUPRA), THE CONT ENTION OF THE APPELLANT CANNOT BE ACCEPTED. ACCORDINGLY, THIS ADDITION IS CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL ON THE SOLE ISSUE OF DISALLOWANCE OF THE ADDITION MADE U/S 14A OF THE ACT. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS CLAIMED THAT THE C OMPANY HAD MADE INVESTMENT IN SBI PREMIER LIQUID MUTUAL FUND O F RS.4.00 CRORES ON 27.03.2013 WHICH WAS ENCASHED IMMEDIATELY AFTER THE CLOSE OF THE YEAR ON 04.04.2013 I.E. WITHIN 7 DAYS ONLY. SUCH RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 5 INVESTMENT WAS MADE BECAUSE THE LENDER BANK I.E. ST ATE BANK OF INDIA INSISTED FOR THE SAME. THUS, BORROWED FUNDS OF RS.4 CRORES REMAINED INVESTED IN MUTUAL FUND AT THE MOST FOR SE VEN DAYS ONLY. IT WAS CLAIMED THAT THERE BEING DIRECT NEXUS OF BOR ROWED FUND, INTEREST ON RS.4 CRORES AT RS.1,05,000/- ONLY SHOUL D HAVE BEEN DISALLOWED INSTEAD OF APPLYING THE FORMULA PRESCRIB ED UNDER RULE 8D. REVISED CALCULATION OF AMOUNT DISALLOWABLE U/S 14A OF THE ACT READ WITH RULE 8D WAS SUBMITTED BEFORE THE ASSESSIN G AUTHORITY WITH A REQUEST TO CONSIDER THE CLAIM AT THE STAGE OF ASSESSMENT PROCEEDINGS AND REDUCE THE DISALLOWANCE TO RS.3,47, 930/- ONLY INSTEAD OF RS.11,27,042/- OFFERED FOR TAX WITHOUT C ONSIDERING AFORESAID FACT. RELIANCE IS PLACED ON THE JUDGMENT IN THE CASE OF BHARATIYA RESERVE BANK NOTE MUDRAN (P) LTD VS. DCIT , LTU (2014)150 ITD 678 (BANGALORE) WHEREIN IT WAS HELD T HAT NO DISALLOWANCE OF INTEREST COULD BE MADE UNDER SECTIO N 14A WHERE INVESTMENT WAS MADE BY ASSESSEE ON LAST DAY OF RELE VANT YEAR. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AT T HE OUTSET, THE JUDGMENT IN THE CASE OF M/S. GOETZE INDIA LTD 284 I TR 323 (SC) WAS ON A LIMITED ISSUE OR REVISED CLAIM BY SUBMITTING A LETTER IN THE RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 6 NATURE OF RECTIFICATION. IN THAT CASE, ASSESSMENT PROCEEDINGS WERE NOT COMPLETED U/S 143(3) OF THE ACT BUT THE RETURN FILED ON 30.11.1995 U/S 139 OF THE ACT WAS SOUGHT TO BE REVI SED BY A LETTER DATED 12.01.1998 TO THE ASSESSING OFFICER BY CLAIMI NG DEDUCTION. THAT DURING ASSESSMENT AS WELL APPELLATE PROCEEDING S QUESTION CAN BE RAISED FOR THE FIRST TIME HAVING A BEARING ON TA X LIABILITY OF THE ASSESSEE. SUCH POWERS ARE INHERENT FOR DETERMINATI ON OF CORRECT INCOME AS HELD BY SUPREME COURT IN THE CASE OF M/S. NATIONAL THERMAL POWER COMPANY LTD VS. CIT (1998) 229 ITR 38 3. IT IS HUMBLY SUBMITTED THAT THE ASSESSEE IS ENTITLED TO R AISE THE ISSUE FOR THE FIRST TIME AT ANY STAGE IF THE OMISSION TO RAIS E IT EARLIER WAS BONA FIDE AND NOT WILLFUL OR UNREASONABLE. 8. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE SUPPO RTED THE ORDERS OF LOWER AUTHORITIES. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE GRIEVANCE OF THE ASSESSEE REL ATES TO THE DISALLOWANCE U/S 14A OF THE ACT. IN THE INCOME TAX RETURN ASSESSEE MADE SUO-MOTO DISALLOWANCE OF RS.11,27,042/- ON THE BASIS OF METHOD PROVIDED IN RULE 8D OF IT RULES. SUBSEQUENT LY DURING THE RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 7 ASSESSMENT PROCEEDINGS IT WAS SUBMITTED BEFORE THE ASSESSING AUTHORITY THAT THE AVERAGE INVESTMENTS APPEARING IN THE METHOD PROVIDED IN RULE 8D OF IT RULES, THE INVESTMENT MAD E IN SBI PREMIER LIQUID MUTUAL FUND AT RS.4 CRORES HAS ALSO BEEN IN CLUDED WHICH WAS ACTUALLY INVESTED FOR 7 DAYS AND THAT TOO AT TH E INSISTENCE OF THE BANKER I.E. STATE BANK OF INDIA. IT IS NOT DISPUTE D THAT THERE IS A NEXUS OF BORROWED FUND BEING APPLIED FOR INVESTMENT IN SBI PREMIER LIQUID MUTUAL FUND OF RS. 4 CRORES BUT THE INTEREST DISALLOWANCE SHOULD HAVE BEEN LIMITED ONLY FOR NUMBER OF DAYS FO R WHICH THE FUNDS WERE USED RATHER THAN BEING SPREAD FOR THE WH OLE YEAR PROPORTIONATELY. THERE IS NO DISPUTE AT THE END OF BOTH THE PARTIES THAT THE INVESTMENT MADE IN SBI PREMIER LIQUID MUTU AL FUND WAS MADE FOR ONLY 7 DAYS I.E. FROM 27.3.2013 TO 4.4.201 3 AND THAT TOO AT THE REQUEST OF THE ASSESSEES BANKER I.E. S.B.I. L D. COUNSEL FOR THE ASSESSEE HAS ALSO PROVIDED THE WORKING OF THE DISAL LOWANCE U/S 14A OF THE ACT AS PER THE TAX AUDIT REPORT AS WELL AS T HE REVISED CLAIM IN VIEW OF THE SHORT TERM INVESTMENT FOR 7 DAYS IN SBI PREMIER LIQUID MUTUAL FUND AND THE SAME IS REPRODUCED BELOW; RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 8 AMOUNT INADMISSIBLE U/S 14A READ WITH RULE 8D = A*B /C+0.5% OF AVG. INVESTMENT. PARTICULARS AS PER APPELLANT BASED ON TAX AUDIT REPORT REVISED CLAIM OF THE APPELLANT A ) INTEREST ON BORROWED FUND INTEREST PAID (NET) RS.5,97,16,375/ - RS.5,97,16,375/ - B) AVERAGE INVESTMENT RS.2,54,96,500/ - * RS. 54,96,500/ - C) AVERAGE ASSETS RS.1,52,34,82,589/ - RS.1,52,34,82,589/ - D)AMOUNT INADMISSIBLE 59716375X25496500 1523482589 =RS.9,99,393/- 59716375X2496500 1523482589 =RS.2,15,448/- E)ADD: 0.5% TOWARDS OTHER EXP OF AVERAGE INVESTMENT RS.1,27,482/ - RS.27,482/ - TOTAL RS.11,26,875/ - RS.2,42,930/ - ADD:INTEREST ON RS.4 CRORES INVESTED IN MUTUAL FUND ON 27.03.2013 - RS.1,05, 000/ - TOTAL RS.11,26,875/ - RS.3,47,930/ - *AT THE INSTANCE OF STATE BANK OF INDIA, THE LENDER BANK, THE COMPANY INVESTED AN AMOUNT OF RS.4 CRORES IN SBI PREMIER LI QUID MUTUAL FUND ON 27.03.2013 FOR SHORT DURATION, WHICH WAS ENCASHED O N 04.04.2013 I.E. WITHIN 7 DAYS ONLY. THEREFORE IT WAS CLAIMED THAT FOR CALCULATION OF AVERAGE INVESTMENT, RS.4 CRORES INVESTED ON 27.03.2 013 SHOULD NOT BE CONSIDERED AND INTEREST FOR 7 DAY ON RS.4 CRORES MA Y BE ADDED FOR THE PURPOSE OF DISALLOWANCE U/S 14A WHICH WORKS OUT TO RS.1,05,000/- 10. WE HAVE PERUSED THE ABOVE WORKING OF THE DISALL OWANCE U/S 14A OF THE ACT AND OBSERVE THAT AN APPARENT MISTAKE WAS POINTED OUT BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF BEFORE THE LD.A.O BY WAY OF PROVIDING THE RE VISED CALCULATION OF THE DISALLOWANCE U/S 14A R.W.S.8D OF THE IT RULE S. IT HAS BEEN RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 9 CONSISTENTLY HELD IN VARIOUS JUDGMENTS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IF ANY NEW CLAIM OR A REVIS ED CLAIM BY WAY OF FILING A REVISED COMPUTATION OF INCOME OR PLACIN G ANY MATERIAL FACTS ON RECORD, THEN THE ASSESSING OFFICER IS DUTY BOUND TO ASSESS THE CORRECT INCOME OF THE ASSESSEE ON THAT BASIS. WE PLACE RELIANCE ON THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE O F NATIONAL THERMAL POWER COMPANY LTD ( SUPRA ). THE CLAIM OF THE ASSESSEE CANNOT BE SET ASIDE MERELY BY TAKING THE BASIS THAT THE ASSESSEE HAS SUO-MOTO MADE DISALLOWANCE IN THE INCOME TAX R ETURN. WE HAVE PERUSED THE ABOVE WORKING GIVEN BY THE COUNSEL FOR THE ASSESSEE AND ARE OF THE CONSIDERED VIEW THAT THE S AME IS CORRECT AND INTEREST DISALLOWANCE ON THE ALLEGED INVESTMENT IN SBI PREMIER LIQUID MUTUAL FUND SHOULD HAVE BEEN SEPARATELY CALC ULATED AT RS.1,05,000/- RATHER THAN MAKING IT A PART OF AVERA GE INVESTMENT BECAUSE THE SPECIFIC DETAILS OF THE NEXUS OF INTERE ST BEARING FUNDS TO THE INVESTMENT IN THE ALLEGED MUTUAL FUND ARE AP PEARING ON RECORD. WE THEREFORE HOLD THAT THE DISALLOWANCE M ADE U/S 14A OF THE ACT R.W.S. 8D OF IT RULES SHOULD BE RESTRICTED TO RS.3,47,930/- ONLY. IN THE RESULT GROUND NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 10 11. AS FAR AS GROUND NO.2 IS CONCERNED WE ARE OF TH E VIEW THAT THE CASE OF M/S. GOETZE INDIA LTD 284 ITR 323 (SC) WILL NOT BE APPLICABLE IN THE FACTS OF THE ASSESSEE BECAUSE IN THE INSTANT APPEAL THE ISSUE IS NOT RELATED TO FILING OF REVISED RETUR N. RATHER IN THE INSTANT APPEAL THE ISSUE WAS RELATED ONLY TO THE CO RRECT CALCULATION OF DISALLOWANCE U/S 14A OF THE ACT. IT WAS DULY SU BMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S BUT NO WEIGHTAGE WAS GIVEN BY THE ASSESSING AUTHORITY TO S AID CALCULATION. THEREFORE GROUND NO.2 OF THE ASSESSEE IS ALSO ALLOW ED. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.10.201 8. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 18 OCTOBER, 2018 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER ASSTT.REGISTRAR,I.T.A.T., INDORE RAJRATAN GLOBAL WIRE LTD ITA NO.589/IND/2017 11