M/s. Rishi Hi- Tech Builders Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 6447/DEL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7439 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 03-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA SENIOR
• Assessee Lawyers: ADHIR KUMAR SAMAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6447/DEL./2012 (ASSESSMENT YEAR : 2009-10) M/S. RISHI HI-TECH BUILDERS PVT.LTD., VS. ITO, WZ 71, SANT NAGAR, WARD 15 (2), TILAK NAGAR, DELHI 110 018. (PAN : AAACR8387G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ADHIR KUMAR SAMAL, FCA REVENUE BY : SHRI F.R. MEENA, SENIOR DR DATE OF HEARING : 03.08.2016 DATE OF ORDER : 08.08.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. RISHI HI TECH BUILDERS PVT. LTD . (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 22.10.2012 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XVIII, NEW DELHI QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUND S INTER ALIA THAT :- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW WHILE CONF IRMING THE ACTION OF THE LD. ASSESSING OFFICER OF APPLYING RUL E 8D READ WITH ITA NO.6447/DEL./2012 2 SECTION 14A OF THE INCOME TAX ACT, 1961 WHERE NO EX EMPT INCOME HAS BEEN EARNED OR SHOWN BY THE ASSESSEE DUR ING THE ASSESSMENT YEAR 2009-10 AND AS SUCH THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) IS BAD IN LAW AND MAY PLEASE B E QUASHED. 2. THAT THE LD. CIT(A) HAS ERRED IN FACTS AND LAW W HILE CONFIRMING THE ADDITION OF RS.17,36,661/- MADE BY T HE LD. ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT, 19 61 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 WHERE NO EXEM PT INCOME HAS BEEN EARNED DURING THE YEAR UNDER CONSIDERATION . THUS, THE ADDITION SO CONFIRMED BY THE LD. CIT (A) IS BAD IN LAW AND MAY PLEASE BE DELETED. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMI NG THE ADDITION OF RS.17,36,661/- MADE BY THE LD. ASSESSIN G OFFICER U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D O F THE INCOME TAX RULES, 1962 WHERE THE LD. ASSESSING OFFICER HAS NOT RECORDED HIS DISSATISFACTION WITH THE CORRECTNESS OF THE CLA IM OF APPELLANT THAT NO EXPENDITURE HAS BEEN CLAIMED IN RELATION TO INCOME NOT FORMING PART OF TOTAL INCOME. THUS, THE ADDITION SO CONFIRMED BY THE LD. (IT (A) IS BAD IN LAW AND MAY PLEASE BE DEL ETED. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMI NG THE ADDITION OF RS.17,36,661/- MADE BY THE LD. ASSESSIN G OFFICER U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D O F THE INCOME TAX RULES, 1962 WHERE THE ALLEGED INVESTMENT OF RS. 3,04,00,000/- HAS NOT BEEN MADE OUT OF BORROWED OR INTEREST BEARI NG FUNDS. THUS, THE ADDITION SO CONFIRMED BY THE LD. CIT (A) IS BAD IN LAW AND MAY PLEASE BE DELETED. 5. THAT WE CRAVE TO ADD; DELETE, MODIFY OR WITHDRAW ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING. 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : ASSE SSEE IS INTO THE BUSINESS OF CONSTRUCTION OF BUILDING WHO HAS FILED RETURN DECLARING INCOME RS.12,09,888/- WHICH WAS SUBJECTED TO SCRUTI NY. FROM THE AUDITED BALANCE SHEET, IT IS NOTICED BY THE AO THAT ASSESSEE HAS SHOWN INVESTMENT OF RS.3,04,00,000/- AND IT WAS CAL LED UPON TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S 14A OF THE IN COME-TAX ACT, 1961 (FOR SHORT THE ACT) READ WITH RULE 8D OF THE INCOME-TAX ITA NO.6447/DEL./2012 3 RULES, 1962 (FOR SHORT THE RULES) BE NOT MADE, TO WHICH ASSESSEE FILED REPLY. FINDING THE REPLY FILED BY THE ASSESS EE NOT TENABLE, AO INVOKED THE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D AND CALCULATED THE EXPENDITURE FOR EARNING DIVIDEND INC OME AS UNDER :- (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME N IL. (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULA R INCOME OF RECEIPT AN AMOUNT : A X B/C A = INTEREST RS.20,14,787/- B = AVERAGE OF VALUE OF INVESTMENT RS.3,13,50,000/- C = AVERAGE OF THE TOTAL ASSETS RS.3,99,798,186/- RS.20,14,787 X RS.3,13,50,000 / RS.3,99,79,186/- = RS.15,79,911/- (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHI CH DOES NOT OR SHALL NOT FROM PART OF THE TOTAL INCOME . HALF OF AVERAGE VALUE OF INVESTMENT OF 0.5% * 3,13,50,000 = RS.1,56,750/-. THE AMOUNT OF RS.17,36,661/- IS DISALLOWED U/S 14A OF THE IT ACT. AO ASSESSED THE TOTAL INCOME AT RS.29,46,549/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS AFFIRMED THE ORDER BY DISMISSING THE APPEAL. FEELIN G AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.6447/DEL./2012 4 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE CONTENDED INTER ALIA THA T DURING THE YEAR UNDER ASSESSMENT, ASSESSEE HAS NEITHER RECEIVE D ANY EXEMPTED INCOME NOR CLAIMED ANY EXEMPTED INCOME IN RETURN OF INCOME AND AS SUCH, PROVISIONS CONTAINED U/S 14A READ WITH RUL E 8D ARE NOT APPLICABLE; THAT BEFORE INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D HAS NOT RECORDED HIS DIS-SATISFACTION WITH REASONS; THAT ALL THE TRANSACTIONS HAVE BEEN ROUTED THROUGH CC ACCOUNT OF THE ASSESSEE WHILE MAKING INVESTMENT OUT OF THE SUR PLUS FUNDS AND NOT OUT OF THE BORROWED FUND AND RELIED UPON THE JU DGMENT IN CASE CITED AS CHEMINVEST LIMITED 378 ITR 33 (DEL.) ;. HOWEVER, ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY LD. CIT (A). 6. IN THE BACKDROP OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND THE CONTENTIONS RAISED BY THE PARTIES OF THE AP PEAL, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS : - AS TO WHETHER AO/CIT (A) HAVE ERRED IN MAKING / CONFIRMING ADDITION OF RS.17,36,661/- BY INVOKING T HE PROVISIONS CONTAINED UNDER SECTION 14A READ WITH RU LE 8D? ITA NO.6447/DEL./2012 5 7. BEFORE INVOKING PROVISIONS CONTAINED UNDER RULE 8D(2)(III), THE AO HAS NOT RECORDED HIS DIS-SATISFACTION OF THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE NOR A O CAME TO THE CONCLUSIONS THAT, THE CLAIM OF THE ASSESSEE THAT N O EXPENDITURE HAS BEEN INCURRED IS INCORRECT. ASSESSEE HAS COME UP WITH CATEGORIC PLEA THAT NO EXEMPT INCOME HAS BEEN EARNED DURING T HE YEAR UNDER ASSESSMENT NOR THE ASSESSEE HAS INCURRED ANY EXPENS ES FOR MANAGING THE INVESTMENTS. FROM THE BOOKS OF ACCOUN T, AO HAS NOT IDENTIFIED ANY EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING ANY DIVIDEND INCOME BUT PROCEEDED TO INVOKE THE PROVISI ONS CONTAINED UNDER RULE 8D(2)(III) MERELY ON THE BASIS OF GUESSW ORK THAT TOO WITHOUT RECORDING HIS DIS-SATISFACTION AS TO HOW TH E CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. LI KEWISE, CIT (A) HAS ALSO PROCEEDED ON THE BASIS OF GUESSWORK IN SUS TAINING THE ADDITION. 8. HONBLE JURISDICTIONAL HIGH COURT IN JUDGMENT CI TED AS CHEMINVEST LTD . (SUPRA) WHILE EXAMINING THE IDENTICAL ISSUE HELD THAT SECTION 14A WILL NOT APPLY WHERE THERE IS NO E XEMPT INCOME RECEIVED OR RECEIVABLE DURING THE YEAR UNDER ASSESS MENT. 9. IN THE INSTANT CASE, AO HAS MERELY MADE AN ADDIT ION ON THE GROUND THAT INTEREST EXPENSES OF RS.20,14,787/- IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AN D TO MAINTAIN ITA NO.6447/DEL./2012 6 SUCH INVESTMENT, ADMINISTRATIVE EXPENSES ARE ATTRIB UTABLE TO THE SAME. HOWEVER, ASSESSEE HAS COME UP WITH SPECIFIC PLEA THAT INVESTMENT IN OTHER COMPANIES OF RS.3,04,00,000/- C OMPARED TO AMOUNT SHOWN UNDER SAME HEAD OF RS.3,23,00,000/- IN THE LAST YEAR AND A SUM OF RS.22,74,922.51 WAS SHOWN AS FINANCE C HARGES AND SAME WAS ACCEPTED BY THE DEPARTMENT BUT, IN THE YEA R UNDER ASSESSMENT, RS.20,14,787/- WAS SHOWN AS FINANCE CHA RGES ONLY. CIT (A) INSISTED UPON PRODUCING THE COPY OF BANK AC COUNT FROM WHICH THE ASSESSEE ALLEGED TO HAVE MADE THE INVESTM ENT BUT WHEN THE ASSESSEE HAS COME UP WITH CATEGORIC PLEA THAT H E HAS MADE THE INVESTMENT AFTER WITHDRAWAL FROM CC ACCOUNT THE COM PLETE DETAIL THEREOF WAS ALREADY WITH THE REVENUE AUTHORITIES, T HE CIT (A) WAS NOT EMPOWERED TO REJECT THE CONTENTION WITHOUT CALL ING REPORT FORM AO OR FROM THE BANK ITSELF OR WITHOUT VERIFYING THE FACTS THAT THE INVESTMENT HAS NOT BEEN MADE FORM SURPLUS FUNDS. R ATHER THE CIT (A) PROCEEDED ON THE PREMISE THAT, ANY INCOME WHETHER EXEMPT OR NOT, CAN ONLY BE EARNED AFTER INCURRING SOME EXPEND ITURE , WHICH IS PURELY A GUESSWORK ON THE BASIS OF SURMISES AND NOT PERMISSIBLE UNDER LAW. MORE SO, IN THE FACE OF THE FACT THAT AU DITED BALANCE SHEET AND BOOKS OF ACCOUNT HAVE NOT BEEN DISPUTED B Y THE REVENUE, THE GROUND TAKEN BY THE CIT (A) FOR AFFIRMING THE O RDER OF THE AO IS NOT SUSTAINABLE. ITA NO.6447/DEL./2012 7 10. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, ADDIT ION MADE BY AO TO THE TUNE OF RS.17,36,661/- AND AFFIRMED BY TH E LD. CIT (A) IS NOT SUSTAINABLE IN THE EYES OF LAW, HENCE HEREBY DE LETED. CONSEQUENTLY, APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 8 TH DAY OF AUGUST, 2016. SD/- SD/- (J.S. REDDY) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 8 TH DAY OF AUGUST, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.