Tanya Impex Pvt. Ltd., Delhi V. ITO, Ward- 25(1), New Delhi

ITA 6662/DEL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8922 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 17-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: EKTA VISHNOI
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 36 (1) (iii); 201; 143(2)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC : NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.N.CHARY, JUDICIAL MEMBER ITA NO. 6662/DEL/2018 (ASSESSMENT YEAR: 2014 - 15 ) TANYA IMPEX PVT. LTD, VISHAL KAUSHAL & CO. CAS, Z - 320, SHOP NO. 32, AM RAPALI COMMERCIAL COMPLEX, SECTOR - 12, NOIDA PAN: AACCT2494E VS. ITO, WARD - 25(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY: MS. EKTA VISHNOI, SR. DR DATE OF HEARING 15/10 / 201 9 DATE OF PRONOUNCEMENT 1 3 / 0 1 / 2 0 2 0 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 9, NEW DELHI DATED 30.05.2018. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - THE APPELLANT IS A CLOSELY HELD PRIVATE LIMITED COMPANY CARRYING ON THE BUSINESS OF BOOK BINDING JOB WORK. THE APPELLANT FILED ITS RETURN OF INCOME ON 26.09.2014 BY DECLARING THE TOTAL INCOME OF RS. 1,37,860.00 AND PAID THE TAX DUE. THE CASE WAS SELECTED ON LIMITED PARAMETERS FOR SCRUTINY AND SCRUTINY NOTICE WAS ISSUED U/S 143(2) OF THE INCOME TAX ACT. WHILE ASSESSING THE INCOME OF THE APPELLANT COMPANY, THE LD. ASSESSING OFFICER ASSESSED THE TOTAL INCOME OF THE ASSESSE E AS RS. 11,19,440.00 BY MAKING AN ADDITION OF RS. 9,81,579.00 ON ACCOUNT OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D AND INITIATED PENALTY PROCEEDINGS U/S 271(1) OF THE INCOME TAX ACT, 1961. THE LD. ASSESSING OFFICER PLACED RELIA NCE ON CBDT CIRCULAR NO. 5 OF 2014 DATED 11.02.2014. THE APPELLANT FILED THE APPEAL BEFORE CIT(A) - 9, NEW DELHI FOR DELETING THE ADDITION MADE BY THE LD. ASSESSING OFFICER AND PLA CED THE JUDGEMENTS OF VARIOUS HONBLE HIGH COURTS IN ITS FAVOUR. THE LD. CIT( A) - 9 RELIED ON THE JUDGEMENTS OF HONBLE HIGH COURTS AND ALLOWED THE RELIEF TO THE ASSESSE. PAGE | 2 FURTHER THE LD. CIT(A) - 9 MADE AN ADDITION OF RS. 9,30,408.00 ON ACCOUNT OF DISALLOWING OF FINANCE COST STATING THE REASON THAT THE FUNDS BORROWED WERE DEPLOYED FOR INVESTMENT PURPOSE. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT COMPANY MADE NON - CURRENT INVESTMENTS OF RS. 17,50,000.00. THE ENTIRE INVESTMENT WAS MADE OUT OF WORKING CAPITAL OF THE COMPANY AND NON - INTEREST BEARING LOANS. THE INTEREST, WHICH WAS AD DED TO THE INCOME OF THE APPELLANT, WAS FULLY REPAID IN THE SAME FINANCIAL YEAR AND WAS USED FOR THE BUSINESS PURPOSES ONLY WHICH RESULTED IN 200% GROWTH IN THE REVENUE AS WELL AS NET PROFIT OF THE APPELLANT. GROUNDS OF APPEAL ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - 9 ERRED IN MAKING THE ADDITION OF RS. 9,30,408.00 WITHOUT APPRECIATING THE FACT THAT THE REVENUE AND NET PROFIT OF THE APPELLANT INCREASED BY 200% BY DEPLOYING THE BORROWED FUNDS IN BUSINESS. RELIEF PRAYED A PRAYER IS HEREBY MADE FOR DELETION OF ADDITION MADE BY THE LD. CIT(A) - 9, NEW DELHI. 'THE APPELLANT PRAYS THAT THE ADDITION OF RS. 9,30,408.00 MADE IN RESPECT OF DISALLOWANCE OF FINANCE COSTS BE DELETED.' 3. BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF BINDING JOB WORK BY EMPLOYING LABOUR AT CUSTOMER SITE. IT FILED ITS RETURN OF INCOME ON 26/9/2014 DECLARING AN INCOME OF 1 37860. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ONLY LIMITE D PARAMETERS UNDER CAS S STATING THE REASON THAT LARGE INTEREST EXPENSES RELATABLE TO EXEMPT INCOME UNDER SECTION 14 A. AO NOTED THAT ASSESSEE HAS ANY EXPENDITURE OF 9 25460 TOWARDS INTEREST EXPENDITURE AND THEREFORE ASSESSEE WAS QUESTIONED ON A LIABILIT Y OF THESE SOME UNDER SECTION 14 A OF THE ACT. AO MADE AN ADDITION INVOKING THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES OF 9 81579. CONSEQUENTLY THE ASSESSMENT UNDER SECTION 143 (THREE) OF THE ACT WAS PASSED ON 14/12/2016 DETERMINING THE TOTAL INCO ME OF THE ASSESSEE AT RUPEES 1119440/ - 4. ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT A. HE DELETED THE DISALLOWANCE UNDER SECTION 14 A OF THE ACT FOR THE REASON THAT DURING THE YEAR THE ASSESSEE DID NOT RECEIVE ANY EXEMPT INCOME. HOWEVER HE ENHANCED T HE ASSESSMENT BY DISALLOWING THE INTEREST EXPENDITURE OF 9 30408/ AFTER GIVING OPPORTUNITY TO THE ASSESSEE OF HEARING. THEREFORE ASSESSEE IS IN APPEAL BEFORE US. PAGE | 3 5. DESPITE NOTICE, NONE APPEARED BEFORE US ON BEHALF OF ASSESSEE, THEREFORE, THE ISSUE IS DECI DED ON MERITS OF THE CASE AS PER INFORMATION AVAILABLE ON RECORD. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE WOMEN TO SUPPORTED THE ORDER OF THE LEARNED CIT A SUBMITTING THAT PROPER OPPORTUNITY OF HEARING IS GIVEN TO THE ASSESSEE BEFORE MAKING ENHANCEMENT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PRODUCE THE ORDERS OF THE LOWER AUTHORITIES. IN THE PRESENT CASE THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED PURPOSE OF EXAMINING DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 14 A OF THE ACT . IT WAS LIMITED SCRUTINY CASE. ONLY ASSESSING OFFICER WITH A PRIOR PERMISSION OF THE HIGHER OFFICERS WOULD HAVE CONVERTED THE LIMITED SCRUTINY CASE SCHEMES TO COMPLETE SCRUTINY CASE. HAD THIS BEEN DONE, THE AO WOULD HAVE BEEN AUTHORISED TO LOOK INTO ALL O THER ASPECTS OTHER THAN THE ASPECTS COVERED UNDER THE AFORESAID ELECTION OF THE CASE UNDER LIMITED SCRUTINY. THEREFORE UNLESS THAT PROCEDURE IS FOLLOWED, THE INCOME OF THE ASSESSEE CANNOT BE DISTURBED ON ALL OTHER COUNTS, SUCH OTHER THAN THE POINT WHICH WA S TAKEN UP FOR THE LIMITED SCRUTINY. IN FACT, ITS LIMITED SCRUTINY CONCEPT ADOPTED BY THE CENTRAL BOARD OF DIRECT TAXES HAS UNDERLYING ASSUMPTION THAT REVENUE WOULD NOT LIKE TO TEST OTHER ISSUES INVOLVED IN THE RETURN OF INCOME OF THE ASSESSEE , EXCEPT WHAT IS NOTIFIED. THUS UNLESS THE SCOPE OF LIMITED SCRUTINY IS EXPANDED BY RECOURSE TO THE PROCEDURE LAID DOWN, REVENUE CANNOT TOUCH UPON OTHER ISSUES. THIS APPLIES TO CIT (A) TOO. IN VIEW OF THIS REASONS, WE DO NOT FIND ANY MERIT IN THE ENHANCEMENT MADE BY THE LEARNED CIT A BY DISALLOWING THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE, WHILE DEL ETING IDENTICAL DISALLOWANCE UNDER SECTION 14 A OF ACT AND RESORTING TO MAKING THE SAME DISALLOWANCE UNDER SECTION 36 (1) (III) OF THE ACT. THUS ONLY GROUND OF APPEAL IS ALLOWED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 / 0 1 / 2 0 2 0 . - SD/ - - SD/ - ( K.N.CHARY ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 / 01/2020 A K KEOT COPY FORWARDED TO PAGE | 4 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI