DCIT, New Delhi V. M/s. RDS Projects Ltd., Agra

ITA 6691/DEL/2013

• Counselvise Citation: 669120114 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RISPAL BEDI
• Assessee Lawyers: SUNIL AGARWAL
• Keywords: Earning of tax free income
• Section: 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D, NEW DELHI) BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO.6691 /DEL/2013 ASSESSMENT YEAR : 2010-11 DCIT, CIRCLE 15(1), VS. RDS PROJECTS LTD., NEW DELHI 44-A, MALL ROAD, AGRA GIR / PAN:AAACR4761J (APPELLANT) (RESPONDENT) APPELLANT BY : MS. RISPAL BEDI, SR. DR RESPONDENT BY : SHRI SUNIL AGARWAL, ADV. DATE OF HEARING : 18.11.2015 DATE OF PRONOUNCEMENT : 20.11.2015 ORDER PER KULDIP SINGH, JM: THE APPELLANT, DCIT, CIRCLE 15(1), NEW DELHI, BY F ILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 15.10.2013 PASSED BY LD. CIT(A) XVII, NEW DELHI QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUNDS INTER ALIA THAT: 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.54,79,882/ - MADE BY THE ASSESSING OFFICER AS A DISALLOWANCE U/S. 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.54,79,882/ - BY NOT ACCEPTING THE REASONS GIVEN BY THE ASSESSING OFFICER AT THE T IME OF MAKING DISALLOWANCE U/S. 14A OF THE ACT. ITA NO.6691/DEL/2013 2 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE: DURI NG THE PROCESSING OF RETURN OF INCOME FILED BY THE ASSESSEE COMPANY QUA THE AY 2010-2011, THE CASE WAS SUBJECTED TO SCRUTINY AND CONSEQUENTLY, NO TICES U/S 143(2) AND 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED AS THE ACT), WERE SERVED UPON THE ASSESSEE AND IN RESPONSE THERETO SH RI SHARAT CHANDRA, CA/AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS. TH E ASSESSEE COMPANY IS INTO THE BUSINESS OF CIVIL CONSTRUCTION AND SIMILAR OTHER CONTRACT WORKS AND DURING THE YEAR UNDER ASSESSMENT, THE TURNOVER OF T HE ASSESSEE COMPANY WAS RS.288.62 CRORES AS COMPARED TO RS.330 CRORES FOR T HE PRECEDING YEAR AND THERE IS AN INCREASE IN THE GROSS PROFIT AND NET P ROFIT DURING THE CURRENT YEAR AS COMPARED TO PRECEDING YEAR. DURING THE ASSESSME NT PROCEEDINGS, THE ASSESSEE WAS CALLED UPON TO FILE DETAILS WITH REGAR D TO DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF I. T. RULES. THE A SSESSEE COMPANY CLAIMED IN THE BALANCE SHEET AN INVESTMENT OF RS.14,88,12,0 00/- BY WAY OF SHARE CAPITAL IN VARIOUS COMPANIES. THE A.O. DID NOT ACC EPT THE SUBMISSIONS MADE BY THE ASSESSEE AS TO NON APPLICABILITY OF THE PROV ISIONS CONTAINED U/S 14A OF THE ACT AND PROCEEDED TO COMPUTE THE DISALLOWANCE AS PER RULE 8D AND CAME TO THE CONCLUSION THAT AN AMOUNT OF RS.54,79,8 82/- BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS PARTLY ALLOWED THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY LD. CIT(A) BEFORE THE TRIB UNAL BY WAY OF THE PRESENT APPEAL. 4. LD. D.R. CHALLENGING THE IMPUGNED ORDER, CONTEND ED THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.54,79,882/ - MADE BY THE A.O., AS ITA NO.6691/DEL/2013 3 DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D A ND RELIED UPON THE ORDER PASSED BY THE A.O. 5. ON THE OTHER HAND, LD. A.R. REPELLED THE ARGUMEN TS ADDRESSED BY LD. D.R. BY RELYING UPON THE ORDER DATED 31 ST OCT., 2014 PASSED BY HONBLE ITAT IN THE CASE OF RDS PROJECTS LTD. VS ADDL. CIT IN ITA NO.5486/DEL/2012 AND CONTENDED THAT THE MATTER IS COVERED ONE. LD. A.R. ALSO RELIED UPON THE JUDGEMENT OF HONBLE JURISDICT IONAL HIGH COURT CITED AS CIT VS HOLCIM INDIA PVT. LTD. IN ITA NO.486/2014 AN D 299/2014 DATED 05 TH SEPTEMBER 2014 . 6. THE A.O. INVOKED THE PROVISION CONTAINED U/S 14A OF THE ACT BY MAKING FOLLOWING OBSERVATIONS IN PARA 5.3 OF THE AS SESSMENT ORDER: 5.3 THE ASSESSEE'S SUBMISSIONS ARE CONSIDERED AS UNDER: (I) THE ASSESSEE HAS NOT SHOWN THAT THE ABOVE AMOU NT IS INVESTED FROM SURPLUS FUNDS, NO NEXUS HAS BEEN FILED BY THE ASSESSEE IN THIS REGARD. (II) THE ASSESSEE HAS OVERDRAFT ACCOUNT WITH BANKS FOR MOST OF THE YEAR. (III) THERE IS A COMMON POOL OF FUNDS, WHIC H HAVE BEEN USED BY THE ASSESSEE FOR ITS BUSINESS AS WELL AS I NVESTMENTS. (IV) THE FUNDS ARE FUNGIBLE AND THE FUNDS INVESTED IN INVESTMENTS DO NOT HAVE A CHARACTER OF SURPLUS FUNDS. (V) THERE ARE NO SEPARATE BOOKS OF ACCOUNTS OR B ANK STATEMENT MAINTAINED FOR INVESTMENTS. IN VIEW OF THE ABOVE, THE ASSESSEE'S SUBMISSIONS A RE NOT ACCEPTABLE. 7. A BARE PERUSAL OF THE REASONS RECORDED BY THE A. O. GO TO PROVE THAT HE HAS NOT DISPUTED THE CORRECTNESS OF THE CLAIM BY CA LLING UPON THE ASSESSEE TO PRODUCE THE RECORD RELIED UPON BY HIM RATHER PROCEE DED ON THE BASIS OF CONJECTURES AND SURMISES. MOREOVER, THE ASSESSEE W AS HAVING SUFFICIENT FUNDS AVAILABLE WITH HIM TO INVEST IN THE SHARE CAP ITAL, AS IS APPARENT FROM BALANCE SHEET, WHICH FACT HAS ALSO NOT BEEN DISPUTE D BY THE A.O. ASSESSEE ITA NO.6691/DEL/2013 4 HAS DULY DEMONSTRATED THAT SURPLUS FUNDS OUT OF WHI CH INVESTMENT IN SHARES HAS BEEN MADE AND NO INTEREST BEARING FUNDS HAVE BE EN USED TO PURCHASE THE INVESTMENT. CONDITIONS PRECEDENT FOR APPLICABILITY OF SECTION 14A IS, THERE SHOULD BE SOME INCOME ARISING OUT OF EXPENDITURE IN CURRED WHICH DID NOT FORM PART OF THE TOTAL INCOME. IN CASE, NO INCOME ACCRUED DURING THE RELEVANT YEAR, NO EXPENDITURE CAN BE DISALLOWED U/S 14A OF THE ACT. 8. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. & OTHERS VS CIT, 247 CTR 162 (DEL.) WHILE DECI DING THE IDENTICAL ISSUE, HELD AS UNDER: ...... THEREFORE, THE CONDITION PRECEDENT FOR THE ASSESSING OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE A SSESSING OFFICER MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRE CTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB-SE CTION (3) IS NOTHING BUT AN OFFSHOOT OF SUB-SECTION (2) OF SECTION 14A. SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT . . . . . . .. IT IS ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN BOTH C ASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE TH E AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT IN ACCO RDANCE WITH THE PRESCRIBED METHOD. THE PRESCRIBED METHOD BEING THE METHOD STIPULATED IN RULE 80 OF THE SAID RULES. WHILE REJE CTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPEN DITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME.' 9. LD. CIT(A) HAS RETURNED THE CATEGORICAL FINDING IN PARA 6.2 THAT THE REASONS RECORDED BY THE A.O. IN PARA 5.3 OF THE ASS ESSMENT ORDER ARE TOTALLY IRRELEVANT AS THERE WAS SUFFICIENT FUNDS AVAILABLE WITH THE ASSESSEE AND OTHER ITA NO.6691/DEL/2013 5 REASONS GIVEN BY THE A.O. ARE SUPERFICIAL IN NATURE AND WITHOUT ANY BASIS AS HAS BEEN FOUND FROM THE CHART FILED DURING APPELLAT E PROCEEDINGS. 10. CONCURRING WITH THE FINDINGS RETURNED BY HONBL E COORDINATE BENCH IN ASSESSEES OWN CASE (SUPRA) FOLLOWING THE JUDGEM ENT OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS HOLCIM INDIA LTD. (SUPRA) DECIDING THE IDENTICAL ISSUE, WE FIND NO ILLEGALITY OR PERVERSITY IN THE ORDER PASSED BY LD. CIT(A). CONSEQUENTLY, THE PRESENT AP PEAL OF REVENUE IS HEREBY DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOV., 2015. SD./- SD./- ( J. S. REDDY) (KULDIP SIN GH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 20.11. 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 19/11 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 19/11 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 20/11/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 20/11 SR. PS/PS 7 FILE SENT TO BENCH CLERK 26/11 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER