SGEPL ENFRASTRUCTURE PVT LTD, RAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1), RAIPUR

ITA 65/RPR/2018

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1779 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 43B; 14A; 143(2)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 65/RPR/2018 Ǔनधा[रण वष[ / Assessment Year : 2012-13 SGEPL Infrastructure Pvt. Ltd. (Formerly known as Satish Goel Enterprises Pvt. Ltd.), Khamardih Raipur (C.G.) PAN : AAJCS6322H .......अपीलाथȸ / Appellant बनाम / V/s. Assistant Commissioner of Income Tax 3(1), Raipur (C.G) ......Ĥ×यथȸ / Respondent Assessee by : Shri Bikram Jain Revenue by : Shri G.N Singh स ु नवाई कȧ तारȣख / Date of Hearing : 31.05.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 02.06.2022 2 ITA No. 65/RPR/2018 A.Y.2012-13 आदेश / ORDER PER RATHOD KAMLESH JAYANTBHAI, AM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax, (Appeals)-1, Raipur, dated 28.02.2018, which in turn arises from the order passed by the assessing officer under Sec.143(3) of the Income tax Act, 1961 (in short 'the Act') dated 12.02.2015 for assessment year 2012-13. 2. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. On the facts and circumstances of the case, the Learned CIT(A) has erred in passing order without giving a last notice to the appellant before passing the order and passed the order ex-parte on 28.02.2018 by mentioning in order that notices issued in Jan-Feb, 2016 were non complied i.e. after two year. The order passed by the CIT(A) is against the principle of natural justice and unjustified, unwarranted, and uncalled for. 2. On the facts and in the circumstances of the case, the Learned CIT(A) has erred in sustaining the order of the AO where in the AO has erred in making disallowance of Rs. 21,99,136/- u/s 14A r.w.r 8D of the Income Tax Act, 1961. The disallowance made by the AO and confirmed by CIT(A) is unjustified, unwarranted, and uncalled for. 3. On the facts and in the circumstances of the case, the Learned CIT(A) has erred in sustaining the order of the AO where in the AO has erred in making disallowance of Rs. 16,800/- u/s 43B on account of professional tax. The disallowance made by the AO and confirmed by CIT(A) is unjustified, unwarranted, and uncalled for. 4. The assessee reserves the right to add, amend or alter any grounds of appeal at any time of hearing.” 3 ITA No. 65/RPR/2018 A.Y.2012-13 3. Tersely stated, the assessee company derives income from activities of a builder and assessee constructed and sold, flats, mainly in Nagpur (Maharashtra). The assessee has filed the return of income electronically on 17/09/2012 declaring total income at Rs. NIL. The case was selected for scrutiny under CASS and notice u/s 143(2) of the Income-tax Act, 1961 was issued on 06/08/2013. In addition to this, questionnaire in terms of section 142(1)(ii)/(iii) dated 28/07/2014 was also issued by the DCIT-1(2), Raipur. After change in jurisdiction over the case, a detailed questionnaire in terms of section 142(1)(ii)/(iii) dated 08/12/2014 was issued. In response to the statutory notices, Shri Bikram Jain, CA & AR attended the assessment proceedings from time to time and filed written submissions. The books of accounts were examined on test check basis with respect to bills, vouchers and other supporting documentary evidence by the assessing officer. The assessee was asked to furnish the comparative chart of gross profit and net profit ratio for the year under consideration and immediate two preceding years. In this regard, the assessee has explained that the profits are not comparable from immediate preceding year since during the year under consideration the assessee is having huge loss due to 4 ITA No. 65/RPR/2018 A.Y.2012-13 some dispute among the stack holder and litigation is sale of flats. The assessee has also explained the reason of huge loss,. In the course of verification and perusal of the balance sheet of the assessee company shows that an amount of Rs. 3.37,40,950/- is invested in shares of various companies. The assessee was asked to explain as to why corresponding expenditure should not be disallowed in view of the provision of section 14A r.w.r. 8D since the income from shares is exempt from tax. In response the assessee has submitted a detailed submission which the assessee has reproduced in his assessment order and finally derived a sum of Rs. 21,99,136/- as the amount disallowable as per provision of section 14A r.w.r. 8D. The ld. AO also added a sum of Rs. 16,800/- under section 43B being the amount not paid before the due date. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success. The relevant finding of the ld. CIT(A) in this regards is as under:- “2.2 Assessee has made investment of which income is exempt from tax. It is not assessee’s case that investment has been made out of own interest free funds. 5 ITA No. 65/RPR/2018 A.Y.2012-13 Assessee has not made out the case that investment had been made out of own funds. Unless there is correlation between own funds and investment a part of the expenses has to be ascertained as relating to exempt income and disallowed. Therefore, the addition made by the AO is sustained and appellant’s ground is dismissed. 3.1 The issue in ground (ii) is that the assessee debited professional tax of Rs. 16800/- to P & L account under the head Administrative & Selling Expenses. On verification, it is noticed that the company has paid professional tax amounting to Rs. 16800/- beyond the due date. So, the same is disallowable as per the provision of Sec. 43B. Accordingly the same is added to the total income.” 5. Au contraire, the Ld. DR supported the orders of the lower tax authority and the conviction of Ld. CIT(A) and also stated that the assessee has parked interest bearing fund in the shares of the company and the even the share capital and reserve and surplus of the assessee is not sufficient. He has also submitted that since the issue of the investment of own fund and borrowed fund is required to be verified there the matter be set-a-side to decide the amount to be added under section 14A r.w.r. 8D. 6. We have heard both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR in order to drive home his contentions. 7. Admittedly, as is apparent from the assessment order, the assessee company during the year under consideration had though 6 ITA No. 65/RPR/2018 A.Y.2012-13 made investment in exempt income yielding shares but had not received any exempt dividend income during the year under consideration. On the basis of the aforesaid facts, it was submitted by the Ld. Authorized Representative (for short ‘AR’) that now when the assessee company had not received any exempt dividend income during the year under consideration, therefore, no disallowance u/s.14A of the Act could have been validly made in its hands. Accordingly, on the basis of his aforesaid contentions, it was submitted by the Ld. AR that the disallowance u/s.14A r.w.r.8D made by the A.O could not be sustained and was liable to be vacated. 8. Before the assessee has raised three grounds and first ground being general in nature need not require adjudication. In respect of ground no. 2 after having given a thoughtful consideration to the contentions advanced by the Ld. Authorized Representative of both the parties, we find substantial force in the claim of the Ld. AR that now when the assessee company had admittedly not received any exempt income during the year under consideration, therefore, no disallowance u/s.14A of the Act was called for in its hand. Our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt. Ltd. (2018) 257 Taxmann 2 (SC) and also of the Hon’ble High Court of Delhi in the case of Cheminvest Limited Vs. CIT, (2015) 378 ITR 33 (Delhi). Backed by the aforesaid judicial pronouncements, it was submitted by the Ld. AR that as per the settled position of law no disallowance u/s.14A in absence of any 7 ITA No. 65/RPR/2018 A.Y.2012-13 exempt income could have been made in the hands of the assessee. In the backdrop of the facts involved in the case before us read with the aforesaid settled position of law we find substance in the claim of the Ld. AR that now when the assessee company had not received any exempt dividend income during the year under consideration, therefore, no disallowance u/s.14A of the Act was warranted in its case. We, thus, in terms of our aforesaid observations vacate the disallowance of Rs.21,99,136/- made by the assessing officer and thus the ground of appeal no. 2 is allowed. 9. As regards the ground no. 3 raised by the assessee for disallowance of Rs. 16,800/- neither the submission was made nor any arguments were uttered at the time of hearing. The ld. CIT(A) has already based on his finding dismissed this ground and the ld. AR has not placed anything contrary to record at the time of hearing we do not find any reason to deviate from the findings of the lower authorities and in terms of these fact the third ground raised by the assessee is dismissed. 10. In the result, the appeal of the assessee is parly allowed. Order pronounced in open court on 2 nd June, 2022. Sd/- Sd/- RAVISH SOOD RATHOD KAMLESH JAYANTBHAI JUDICIAL MEMBER ACCOUNTANT MEMBER 8 ITA No. 65/RPR/2018 A.Y.2012-13 रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 2 nd June, 2022 Ganesh Kumar आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 9 ITA No. 65/RPR/2018 A.Y.2012-13 Date 1 Draft dictated on 31.05.2022 Sr.PS/PS 2 Draft placed before author 31.05.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order