M/s. Bharti Teletech Ltd., New Delhi V. DCIT, New Delhi

ITA 6173/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91238 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. GEORGE GEORGE K , JM ITA NO. 6173/DEL/2012 : ASSTT . YEAR : 2007-08 BHARTI TELETECH LTD. (NOW KNOWN AS BEETEL TELETECH LTD.) B-74, OKHLA INDUSTRIAL AREA, PH-II NEW DELHI VS DCIT CIRCLE- 2(1) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AABCB3989M APPELLANT BY : SH. ANIL BHALLA, CA RESPONDENT BY : SH. AMIT JAIN, SR. DR DATE OF HEARING : 09.06.2015 DATE OF PRONOUNCEMENT :25.06.2015 ORDER PER N.K. SAINI, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 11.09.2012 OF LD. CIT(A)- V, NEW DELHI. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APP EAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING AND IN FURTH ER ENHANCING THE DISALLOWANCE U/S 14A MADE BY THE LEARNED ASSESSING OFFICER FROM RS. 13,45,558/- TO RS. 19,12,355/- AND THEREBY MAKING A FURTHER DISALLOWANCE OF RS. 5,66,797/- ON ESTIMATE BASIS (I N ADDITION TO RS. ITA NO.6173/DEL/2012 2 2,87,645/- SURRENDERED BY APPELLANT COMPANY IN THE RETURN OF INCOME) BEING EXPENDITURE INCURRED IN RELATION TO EXEMPT IN COME U/S 10(34) BY WRONGLY INVOKING THE PROVISIONS OF SEC. 14A OF INCO ME TAX ACT, 1961 AND THEREBY NOT FOLLOWING THE DECISION OF THE JURIS DICTIONAL HIGH COURT IN THE CASE OF MAX OPP INVESTMENT LTD. VS. CI T 203 TAXMAN 364(DEL.). 1.1. THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED BOTH ON FACTS AND IN LAW IN ENHANCING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER U/S 14A FROM RS. 13,45,55 8/- UNDER RULE 8D TO RS. 19,12,355/- ON ESTIMATE BASIS WITHOUT PROVID ING THE APPELLANT COMPANY A REASONABLE OPPORTUNITY OF SHOWING CAUSE A GAINST SUCH ENHANCEMENT IN TERMS OF SUB SECTION (2) OF SECTION 251 OF INCOME TAX ACT, 1961. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END THE GROUND OF APPEAL AT A LATER STAGE. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMING/ENHANCING OF THE DISALLOWANCE U/S 14A OF THE IT ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE FILED RETURN OF INCOME ON 29.10.2007 DECLARING A TOTAL INCOME OF RS . 63,14,39,130/-, LATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF HEARING THE AO NOTICED THAT THE ASSESSEE HAD SHOWN DIVIDEND INCOME OF RS. 67,98,910/- WHICH HAD BEEN CLAIMED EXEMPT U/ S 10(34) OF THE IT ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THE ASSESSEE ITSELF HAD ADDED AN AMOUNT OF RS. 2,87,645/- IN ITS COMPUT ATION OF INCOME U/S 14A OF THE ACT. THE AO WAS NOT SATISFIED WITH T HE DISALLOWANCE WORKED OUT BY THE ASSESSEE AND MADE THE DISALLOWANC E OF RS. 13,45,558/- BY INVOKING THE PROVISIONS OF SECTION 1 4A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. ITA NO.6173/DEL/2012 3 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A) WHO ENHANCED THE DISALLOWANCE TO RS. 19,12,355/- BY OBSERVING THAT THE TOTAL EXPENDITURE ATTRIBUTABLE TO THE EARNING O F EXEMPT INCOME WAS WORKED OUT AT RS. 22 LACS AND THE ASSESSEE HAD SHOW N IT AT RS. 2,87,645. THE LD. CIT(A) MADE THE DISALLOWANCE AT R S. 19,12,355/- (RS. 22,00,000- RS. 2, 87,645) WHILE WORKING OUT TH E AFORESAID FIGURE OF RS. 22,00,000/-. THE LD. CIT(A) ESTIMATED THE PE RSONNEL AND ADMINISTRATIVE EXPENSES AT RS. 4,80,000/- I.E. @ RS. 40,000/- PER MONTH. HE ALSO ESTIMATED THE DIRECTORS CONTRIBUTIO NS IN EARNING OF EXEMPT INCOME @ 5% OF THE TOTAL RECEIPTS RECEIVED B Y THE DIRECTORS I.E. RS. 17,20,000/- BEING 5% OF RS. 3.44 CRORES. NOW THE ASSESSEE IS IN APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE AO WHILE MAKING THE DISALLOWANCE INVOKED THE PROVISIONS OF S ECTION 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES, 1962 AND THE LD. CIT(A) ESTIMATED THE EXPENDITURE ATTRIBUTABLE TO THE EARNI NG OF DIVIDEND WITHOUT ANY BASIS. HE FURTHER, SUBMITTED THAT THE P ROVIONS OF RULE 8D ARE APPLICABLE FOR THE ASSESSMENT YEAR 2008-09 AND NOT FOR THE YEAR UNDER CONSIDERATION I.E. THE A.Y. 2007-08. THEREFO RE, THE AO WRONGLY INVOKED THOSE PROVISIONS AND THE LD. CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE DISALLOWANCE ON ESTIMATE BASIS. HE RE QUESTED FOR REMAND OF THE ISSUE TO THE FILE OF THE AO. IN HIS R IVAL SUBMISSIONS, THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE LD. CIT( A). ITA NO.6173/DEL/2012 4 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH TH E PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE LD. C IT(A) ENHANCED THE DISALLOWANCE ON ESTIMATE BASIS AND WITHOUT GIVING A NY NOTICE OF ENHANCEMENT TO THE ASSESSEE. IT IS ALSO NOTICED THA T THE AO WHILE WORKING OUT THE DISALLOWANCE INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES, 1962. THE SAID RULE IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION AND WAS WRONGLY APPLIED BY THE AO. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS SET ASIDE THE IMPUGNED ORDER AND REMAND THE ISSUE B ACK TO THE FILE OF THE AO TO BE ADJUDICATED AFRESH INACCORDANCE WITH L AW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE COURT ON 25/06/2015) . SD/- SD/- (GEORGE GEORGE K) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 /06/2015 *B.RUKHAIYAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NO.6173/DEL/2012 5 DATE INITIAL 1. DRAFT DICTATED ON 24/06/2015 PS 2. DRAFT PLACED BEFORE AUTHOR 24/06/2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.