DCIT, New Delhi V. M/s. SPL Industries Ltd., New Delhi

ITA 6671/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2928 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: DIVESH
• Keywords: Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.6671/DEL/2014 ASSESSMENT YEAR: 2010-11 DY.CIT, CIRCLE-24(2), ROOM NO.163, CR BUILDING, NEW DELHI. V. M/S. SPL INDUSTRIES LTD. C-2/54, 5 TH FLOOR, RAJASTHAL; APARTMENTS, PITAM PURA, DELHI. TAN/PAN: AAACS 0343R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI KAUSHLENDRA TIWARI, SR.D.R. RESPONDENT BY: SHRI DIVESH, CA DATE OF HEARING: 12 03 2018 DATE OF PRONOUNCEMENT: 12 03 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 13.09.2014, PASSED BY LD. CIT (APPEALS)-II, NEW DELHI IN RELATION TO PENALTY PROCEEDINGS U/S.271(1)(C) FOR THE ASSESSMENT YEAR 2010-11. THE REVENUE IS AGGRIEVED BY DELETION OF PENALTY OF RS.11,44,394 /- MADE ON ACCOUNT OF DISALLOWANCE U/S.14A R.W. RULE 8D. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.9,233/- OUT OF INVESTMENT MAD E IN MUTUAL FUNDS AND SHARES OF THE COMPANIES. THE LEARN ED ASSESSING OFFICER AFTER INVOKING THE PROVISION OF R ULE 8D HAS WORKED OUT THE DISALLOWANCE AT RS.33,66,856/-. AGAI NST THE I.T.A. NO.6671/DEL/2014 2 SAID DISALLOWANCE, PENALTY HAS BEEN LEVIED BY THE A SSESSING OFFICER U/S.271(1)(C) ON THE GROUND THAT THE ASSESS EE HAS NOT FILED THE APPEAL BEFORE THE LD. CIT(A) AGAINST THE SAID ADDITION; AND LEVIED CHARGE OF CONCEALING THE INCOME BY FURNI SHING INACCURATE PARTICULARS OF INCOME. 3. BEFORE THE LD. CIT (A), THE ASSESSEE HAD SUB MITTED THAT; FIRSTLY , THE LD. CIT(A) IN ASSESSMENT YEAR 2009-10 HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWI NG THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT, (2011) 347 ITR 272; SECONDLY , NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE WHICH COULD BE SAID TO BE DIRECTLY RELATAB LE TO THE EARNING OF INCOME; THIRDLY , ASSESSEE HAD SURPLUS FUND TO MAKE THE INVESTMENT AND THE LOAN TAKEN FROM THE BANK WERE WORKING CAPITAL LOAN AND TERM LOAN FROM FINANCIAL INSTITUTIONS WHICH WERE MOSTLY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND TO FINANCE THE WORKING CAPITAL AGAINST HYPOTHECATION OF STOCK DEBTORS PLAN T AND MACHINERIES MOST OF THE INVESTMENT HAVE BEEN MADE I N THE EARLIER YEARS AND THERE IS NO NEXUS BETWEEN INT EREST EXPENDITURE AND THE INVESTMENT MADE IN SHARES; FOURTHLY , INVESTMENT HAVE BEEN MADE AT RS.4.94 CRORES WHEREAS GENERAL RESERVES OF THE ASSESSEE AS ON 31 ST I.T.A. NO.6671/DEL/2014 3 MARCH, 2010 STOOD AT RS.34,18,64,504/- AND THEREFOR E NO INTEREST COULD HAVE BEEN DISALLOWED; AND LASTLY , RELIANCE WAS PLACED ON CATENA OF DECISIONS WHICH HAVE BEEN HIGHLIGHTED AND DEALT WITH BY THE LD. CIT (A) IN HIS IMPUGNED ORDERS. 4. LD. CIT (A) AFTER CONSIDERING THE ENTIRE FACTS AND THE VARIOUS DECISIONS DELETED THE PENALTY AFTER DETAILE D DISCUSSION HELD THAT ASSESSEE HAD DISCLOSED ALL THE DETAILS AN D THERE IS NO CONCEALMENT OF INCOME BY THE ASSESSEE FOR FURNIS HING OF ANY INACCURATE PARTICULARS OF INCOME. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE MATERIAL REFERRED TO IN THE IMPUGNED ORDERS, WE FIND THAT FIRST OF ALL, AS STATED BY THE LEARNED COUNSEL THE DIVIDEND INCOME WAS ONLY RS.9,233/- WHICH ITSELF HAS BEEN DI SALLOWED BY THE ASSESSEE FOR THE PURPOSE OF SECTION 14A. LEA RNED ASSESSING OFFICER WITHOUT EXAMINING THE BOOKS OF AC COUNT AND NATURE OF EXPENDITURE DEBITED AND EXEMPT INCOME EAR NED, HAS PROCEED TO MECHANICALLY APPLY RULE 8D AND THEREBY M AKING A HUGE ADDITION OF RS.33,66,856/- OUT OF WHICH RS.30, 43,679/- IS ON ACCOUNT OF INTEREST EXPENDITURE ONLY. IT IS N OT IN DISPUTE THAT ASSESSEE NOT ONLY HAD HUGE SURPLUS FUNDS FOR M AKING THE INVESTMENT BUT ALSO THE ENTIRE LOAN TAKEN FROM THE BANKS HAVE SHOWN TO HAVE BEEN UTILIZED FOR THE WORKING CA PITAL AND FOR THE PURPOSE OF ASSESSEES BUSINESS. IN SUCH A S ITUATION, OSTENSIBLY NO DISALLOWANCE OF INTEREST CAN BE MADE. OTHERWISE ALSO WHEN A DIVIDEND INCOME ITSELF SHOWN IS MEAGER I.E., I.T.A. NO.6671/DEL/2014 4 RS.9,233/- AND THE SAME QUANTUM HAS BEEN DISALLOWED U/S.14A, THEN WHERE IS THE POINT IN RESORTING TO RU LE 8D AND THEREBY MAKING SUCH A HUGE DISPROPORTIONATE ADDITIO N. THUS, UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, PE NALTY LEVIED BY THE ASSESSING OFFICER IS NEITHER JUSTIFIAB LE IN LAW NOR ON FACTS. ACCORDINGLY, ORDER OF THE LD. CIT (A) DEL ETING THE PENALTY IS AFFIRMED AND THE GROUNDS RAISED BY THE R EVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12, MARCH, 20 18. SD/- SD/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH MARCH, 2018 PKK: