Uday Punj (HUF), New Delhi V. ITO WARD - 32(2), New Delhi

ITA 643/DEL/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7916 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 03-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 143(2)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-I, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCE) ITA NO. 643/DEL/2020 A.Y. : 2016-17 UDAY PUNJ (HUF), CHIMES-55, SULTANPUR FARMS, NEW DELHI 110030 (PAN: AAAHU0518H) VS. ITO, WARD 32(2), NEW DELHI (APPELLANT) (RESPONDENT) ORDER PER H.S. SIDHU, JM: 01. THIS APPEAL IS FILED BY THE ASSESSEE - UDAY PUNJ (H UF) AGAINST THE ORDER OF THE LD. CIT(A)-11, NEW DELHI DA TED 15.01.2020 FOR THE ASSESSMENT YEAR 2016-17 WHEREIN THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE ITO, WARD 32(2), NEW DELHI PASSED U/S. 143(3) OF TH E I.T. ACT, 1961 ON 29.12.2018 MAKING THE ADDITION OF RS . ASSESSEE BY SH. RAHUL KHARE, ADVOCATE DEPARTMENT BY SH. MRITYUNJOY BARNWAL, SR. DR. 2 28,64,419/- U/S. 14A OF THE ACT READ WITH RULE 8D W AS DISMISSED AND THE ABOVE ADDITION WAS CONFIRMED. 02. THE ASSESSEE HAS CHALLENGED THE ORDER BY RAISING T HE FOLLOWING GROUND:- THE LD. AO ERRED IN FACT AND IN LAW IN MAKING AN ADDITION OF RS. 28,64,419/- WHICH IS NOT ONLY BAD IN LAW BUT ALSO AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 03. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A N INDIVIDUAL WHO FILED HIS RETURN OF INCOME ON 13.09.2 016 DECLARING TOTAL INCOME OF RS. 10,18,970/-. ASSESSEE H AS ALSO SHOWN SHORT TERM CAPITAL LOSS OF RS. 88,18,782/- WHICH WAS CARRIED FORWARD FOR SET OFF. THE CASE WA S SELECTED FOR LIMITED SCRUTINY UNDER CASS FOR VERIF ICATION OF FOLLOWING ITEMS:- I) WHETHER SALES TURNOVER / RECEIPTS HAS BEEN CORRECTLY OFFERED FOR TAX. 3 II) WHETHER THE INVESTMENT AND INCOME RELATING TO SECURITIES (DERIVATIVE) TRANSACTIONS ARE DULY DISCLOSED. 04. SUBSEQUENTLY, NOTICE U/S. 143(2) OF THE I.T. ACT WAS ISSUED ON 24.07.2017. 05. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A O OBSERVED THAT ASSESSEE HAS EARNED DIVIDEND INCOME O F RS. 14,04,831/- AND ASSESSEE WAS ASKED THAT WHY DISALLOWANCE U/S. 14A OF THE ACT SHOULD NOT BE MADE. THE ASSESSEE EXPLAINED VIDE LETTER DATED 18.12.2018 THAT ASSESSEE HAS DEBITED TOTAL EXPENDITURE IN PROF IT & LOSS ACCOUNT OF ONLY RS. 9,20,749/- OUT OF WHICH A S UM OF RS. 8,17,707/- IS INCOME TAX, SERVICE TAX, STAMP DU TY AND SECURITY TRANSACTION TAX (STT). THEREFORE, THE ASSESSEE HAS INCURRED AND CLAIMED THE EXPENDITURE O F RS. 1,03,042/- ONLY. OUT OF THIS EXPENDITURE, RS. 77,771/- ARE GENERAL EXPENDITURE AND RS. 25,271/- AR E DMAT CHARGES. ASSESSEE SUBMITTED THAT IT HAS NOT CLAIMED ANY EXPENDITURE WHICH HAS YIELDED THE EXEMP T INCOME. HE SUBMITTED THAT SECURITY TRANSACTION TAX HAS 4 NOT BEEN CLAIMED BY THE ASSESSEE AND ALREADY DISALLOWED. THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND NOTED THAT ASSESSEE HAS SHOWN CONSULTATION CHARGES OF RS. 10,137/- AND DMAT CHARGES OF RS. 25,271/- AND THEREFORE, IT HAS INCURRED EXPENDITURE FOR EARNING EXEMPT INCOME. THEREAFTER, T HE LD. AO APPLIED THE RULE 8D AND FOUND THAT ASSESSEE HIMSELF HAS DISALLOWED THE STT PAID OF RS. 86,735/-, AO CALCULATED DISALLOWANCE OF RS. 28,64,419/-. THIS DISALLOWANCE WAS MADE U/S 14A OF THE ACT AND ASSESSMENT ORDER WAS PASSED ON 29.12.2018 DETERMINING THE TOTAL INCOME OF THE ASSESSEE RS. 38,83,389/- AGAINST THE RETURNED INCOME OF RS. 10,18,970/-. 06. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A ), WHO CONFIRMED THE ABOVE DISALLOWANCE AND DISMISSED THE APPEAL OF THE ASSESSEE. THEREFORE, THE ASSESSEE IS AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) AND HAS PREFERRED THIS APPEAL. 07. LD. AR STATED THAT 5 (I) THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED SCRUTINY GIVING THE REASONS WHICH DID NOT INCLUDE DISALLOWANCE OF EXPENDITURE U/S. 14A OF THE ACT; (II) THE ASSESSEE HAS ONLY INCURRED TOTAL EXPENDITURE OF RS. 1,03,042/-, THEREFORE, THE DISALLOWANCE CANNOT EXCEED THE TOTAL EXPENDITURE AND (III) ASSESSEE HAS HIMSELF DISALLOWED THE STT AMOUNTING TO RS. 86,735/- AND THEREFORE, THE BALANCE EXPENDITURE CAN ONLY BE CONSIDERED FOR DISALLOWANCE. HE ALSO REFERRED TO PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. HE SUBMITTED THAT DISALLOWANCE DESERVE TO BE DELETED. 08. LD. DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE REASONS FOR LIMITED SCRUTINY INCLUDED FOR INVESTMENT AND INCOME RELATING TO SECURITIES ARE D ULY DISCLOSED OR NOT. THEREFORE, DISALLOWANCE U/S. 14A I S PART OF THE REASONS. EVEN OTHERWISE, HE SUBMITTED THAT 6 THERE IS NO INFIRMITY IN THE WORKING OF DISALLOWANC E MADE BY THE AO. 09. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IN TH E PRESENT CASE, THE CASE OF THE ASSESSEE WAS PICKED UP FOR LIMITED SCRUTINY FOR THE REASONS STATED ABOVE. THE REASONS DID NOT SPEAK ABOUT ANY DISALLOWANCE OF EXPENDITURE U/S. 14A OF THE ACT. IF THE AO WANTED T O GO BEYOND THE REASONS OF THE LIMITED SCRUTINY, THEN HE SHOULD HAVE INVOKED THE PROVISIONS OF COMPLETE SCRU TINY BY OBTAINING THE NECESSARY APPROVALS. IN THIS CASE, NO SUCH APPROVAL OR CONVERSION OF THE CASE FROM LIMIT ED SCRUTINY TO COMPLETE SCRUTINY WAS SHOWN. UNDISPUTED LY, CASE OF THE ASSESSEE WAS FOR LIMITED SCRUTINY AND T HE REASONS FOR PICKING UP OF THE CASE OF ASSESSEE UND ER LIMITED SCRUTINY DOES NOT INCLUDE THE DISALLOWANCE OF EXPENDITURE U/S. 14A OF THE ACT, HENCE, WE CANNOT UPHOLD THE DISALLOWANCE MADE BY THE AO AND CONFIRME D BY THE LD. CIT(A). IN THE RESULT, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 28,64,419/- MADE U/S. 14A OF THE ACT READ WITH RULE 7 8D. THE ORDERS OF THE LOWER AUTHORITIES ARE REVERSE D. THE SOLITARY GROUND OF THE APPEAL OF THE ASSESEE IS ALLOWED. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. THE DECISION IS PRONOUNCED ON 26.08.2020. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI