SHREE GLOBAL TRADEFIN LTD, MUMBAI V. DCIT CEN CIR 5(1), MUMBAI

ITA 6319/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1015 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARIDR
• Assessee Lawyers: D V LAKHANI
• Keywords: Principle of natural justice; Procedural lapse
• Section: 14A

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL GBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./6319/MUM/2016 , /ASSESSMENT YEAR: 2012-13 SHREE GLOBAL TRADEFIN LTD. 35, ASHOK CHAMBERS, BORACH STREET DEVJI RETANSEY MARG, MASJID BUNDER MUMBAI-400 009. PAN:AAACB 2975 J VS. DCIT-CENTRAL CIRCLE-5(1) 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAM TIWARI-DR ASSESSEE BY: SHRI D.V. LAKHANI / DATE OF HEARING: 06/11/2017 / DATE OF PRONOUNCEMENT: 03/01/2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 29/07/2016, OF CIT(A)-5 3, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUS INESS OF TRADING OF IRON AND STEEL AND VARIOUS INVESTMENT ACTIVITIES,FILED ITS RETURN OF I NCOME ON 27/09/2012,DECLARING TOTAL INCOME AT RS.NIL.THE ASSESSING OFFICER (AO)COMPLETED THE A SSESSMENT U/S.143(3)OF THE ACT, DETERMI -NING THE TOTAL INCOME OF THE ASSESSEE AT RS.60.74 LAKHS. 2. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD SHOWN DIVIDEND INCOME OF RS.30.22 LAKHS,THAT IT HAD EARNED LONG TE RM CAPITAL GAIN (LTCG) OF RS.3,00, 85,985/-,THAT THE ASSESSEE HAD MADE A SUO MOTO DIS ALLOWANCE OF RS.30.12 LAKHS.AFTER CONSIDERING THE OPENING AND CLOSING INVESTMENTS,HE DISALLOWED 0.5% OF THE AVERAGE INVEST - MENT I.E. RS.2.40 CRORES AS PER THE PROVISIONS OF S ECTION 14A R.W.R.8D OF THE INCOME TAX RULES (RULES)1962.TAKING INTO CONSIDERATION DISALLOWANCE OF RS.31.12 LAKHS MADE BY THE ASSESSEE ITSELF,THE AO ADDED SUM OF RS.2.08 CRORES TO ITS IN COME. 2.1. AGGRIEVED BY THE ORDER OF THE AO HE PREFERRED AN AP PEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE ELABORATE SUBMISSIONS.AFTE R CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT THE ASSESSEE HAD OPENING INVESTMENT OF R S.444.97 CRORES, THAT THE CLOSING INVESTMENT WAS OF RS.723.55 CRORES,THAT IT HAD MADE FRESH INVESTMENT OF RS.278.58 CRORES DURING THE YEAR UNDER CONSIDERATION,THAT THE AO HAD NOT PROPERLY EXAMINED THE WORKING OF DISALLOWANCE,THAT HE HAD ALSO NOT EXPRESSED ANY OPI NION ABOUT THE CORRECTNESS OF ASSESSEES I.T.A./6319/MUM/2016, /A Y: 2012-13- SHREE GLOBAL T RADEFIN LTD. 2 CLAIM THAT SUCH A LAPSE WAS A PROCEDURAL LAPSE, THA T THE POWER OF FAA IS CO-TERMINUS WITH THE POWER OF THE AO, THAT THE ASSESSEE HAD ADOPTED AN ADHOC AND ARBITRARY APPROACH FOR MAKING DISALLOWANCE,THAT INVESTMENT OF ASSESSEE HAD INCRE ASED DURING THE YEAR UNDER CONSIDERATION, THAT THE ASSESSEE HAD DEBITED RS.25.32 CRORES.FINAL LY, HE RESTORED THE MATTER TO THE FILE OF THE AO FOR VERIFYING AND ASCERTAINING THE QUANTUM OF FI NANCIAL COST AND OTHER EXPENSES TO BE APPORTIONED/DISALLOWED TOWARDS EARNING OF EXEMPT IN COME.HE FURTHER HELD THAT AO WAS FREE TO MAKE DISALLOWANCE OF ANY FINANCIAL EXPENSES U/R 8D (2) (II) OR U/R.8D (2)(III) OF THE RULES,IF HE WOULD FIND THAT FINANCIAL COST AND EXPENSES WERE INCURRED AND SAME WERE NOT ATTRIBUTABLE TO TRADING ACTIVITY. 2.2. DURING THE COURSE OF HEARING BEFORE US,THE AR STAT ED THAT THE FAA HAD NO POWER TO SET ASIDE THE MATTER TO THE FILE OF THE AO,THAT HE HAD ENHANCED THE DISALLOWANCE, THAT WHILE GIVING EFFECT TO THE ORDER OF THE FAA, THE AO HAD ACCEPTED THE INCOME RETURNED BY THE ASSESSEE,THAT HE DID NOT MAKE ANY FURTHER ADDITION,THAT THE DISAL LOWANCE SHOULD BE RESTRICTED TO RS.31.12 LAKHS.THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT WHILE GIVING EFFECT TO THE ORDER OF THE FAA THE AO HAD ACCEPTED THE STAND TAKEN BY THE ASSESSEE,THAT THE FAA HAD SET ASIDE THE ISSUE TO TH E FILE OF THE AO.IN OUR OPINION,SETTING ASIDE THE MATTER BY THE FAA IS NOT PERMITTED BY THE PROVI SIONS OF THE ACT.CONSIDERING BOTH THE FACTORS,MENTIONED ABOVE,WE DECIDE THE FIRST EFFECTI VE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 3. SECOND EFFECTIVE GROUND OF APPEAL IS ABOUT DIRECTIO N GIVEN BY THE FAA TO ADD THE DISALLOW -ANCE,MADE U/S. 14A OF THE ACT,WHILE COMPUTING THE BOOK PROFIT U/S.115JB OF THE ACT. 3.1. BEFORE US,THE AR CONTENDED THAT THE ASSESSEE HAD NO T RAISED ANY ISSUE BEFORE HIM REGARDING COMPUTATION OF INCOME AS PER MAT PROVISIO NS, THAT THE FAA ON HIS OWN GAVE THE DIRECTION TO THE AO,THAT HE HAD NOT ISSUED A NOTICE U/S. 251(2) OF THE ACT BEFORE ENHANCING THE INCOME OF THE ASSESSEE.THE DR STATED THAT THE MATTE R SHOULD BE TAKEN/DECIDED ON MERITS. 3.2. WE FIND THAT THE AO HAD,WHILE COMPUTING THE INCOME OF THE ASSESSEE,HAD NOT MADE ANY DISALLOWANCE UNDER MAT,THAT THE FAA WITHOUT INFORM ING THE ASSESSEE HAD ENHANCED THE INCOME OF THE ASSESSEE,AS HE HAD DIRECTED THE AO TO ADD THE 14A DISALLOWANCE FOR MAT PURPOSES.IN OUR OPINION,THE ORDER OF THE FAA IS NOT A VALID ORDER,AS HE DID NOT FOLLOW THE PRINCIPLES OF NATURAL JUSTICE.WE HAVE TAKEN NOTE OF THE ORDER PASSED BY THE AO TO GIVE EFFECT I.T.A./6319/MUM/2016, /A Y: 2012-13- SHREE GLOBAL T RADEFIN LTD. 3 TO THE ORDER OF THE FAA.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE,WE DECIDE SECOND EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY, 2018. 03 , 2018 SD/- SD/- ( (( ( /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :03.01.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.