TECHPROCESS PAYMENT SERVICES LTD, MUMBAI V. DCIT 14(3)(1), MUMBAI

ITA 6733/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1290 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGHLD
• Assessee Lawyers: KRUPA R GANDHI LD
• Keywords: Rule 8D
• Section: 143(3); 14A

Judgement Text

ITA NOS.6733-35/MUM/2018 TECHPROCESS PAYMENT SERVICES LIMITED ASSESSMENT YEARS: 2012-13 TO 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.6733/MUM/2018 ( ! ' / ASSESSMENT YEAR : 2012-13 ) & ./ I.T.A. NO.6734/MUM/2018 ( ! ' / ASSESSMENT YEAR : 2013-14 ) & ./ I.T.A. NO.6735/MUM/2018 ( ! ' / ASSESSMENT YEAR : 2014-15 ) T ECHPR OCESS PAYMENT SERVICES LTD. MEHRA INDUSTRIAL ESTATE BDG. NO. 1, 2 ND FLOOR J.K.TEXTILE, LBS MARG VIKHROLI (W), MUMBAI 400 079 / VS. DCIT - 14(3)(1) MUMBAI ./ ./PAN/GIR NO. AABCB-5216-D ( &'( /APPELLANT ) : ( )'( / RESPONDENT ) ASSESSEE BY : MS. KRUPA R. GANDHI LD. AR REVENUE BY : SHRI AMIT PRATAP SINGH LD. DR / DATE OF HEARING : 12/12/2019 / DATE OF PRONOUNCEMENT : 17/12/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YE ARS [IN SHORT REFERRED TO AS AYS] 2012-13 TO 2014-15 CONTEST SE PARATE ORDERS OF ITA NOS.6733-35/MUM/2018 TECHPROCESS PAYMENT SERVICES LIMITED ASSESSMENT YEARS: 2012-13 TO 2014-15 2 LEARNED FIRST APPELLATE AUTHORITY, APPEAL NOS. CIT( A)22/IT/380/2015-16 DATED 19/02/2018 AY 2012-13, CIT(A)22/IT/10464/2016 -17 DATED 06/08/2018 FOR AY 2013-14, CIT(A)22/IT/10571/2016-1 7 DATED 19/02/2018 FOR AY 2014-15. THE SOLE ISSUE INVOLVED IN ALL THE 3 YEARS IS DISALLOWANCE U/S 14A. 1.2 THE APPEALS FOR AYS 2012-13 & 2014-15 HAS BEEN FILED WITH A DELAY OF 179 DAYS, THE CONDONATION OF WHICH HAS BEE N SOUGHT BY THE ASSESSEE ON THE STRENGTH OF CONDONATION PETITION DA TED 22/11/2018 WHICH IS SUPPORTED BY THE AFFIDAVIT OF MANAGER-ACCOUNTS & FINANCE OF THE ASSESSEE COMPANY. IT HAS BEEN SUBMITTED THAT LE ARNED FIRST APPELLATE AUTHORITY, RELYING UPON TRIBUNAL ORDER FOR AY 2010- 11, UPHELD DISALLOWANCE TO THE EXTENT OF RS.10 LACS. THE ASSES SEE DID NOT ACCEPT THE PART DISALLOWANCE BUT CONSIDERING THE SMALLNESS OF AMOUNT, TO BUY PEACE OF MIND AND THE COST OF LITIGATION, THE ASSES SEE DID NOT PREFER ANY FURTHER APPEAL. HOWEVER, SUBSEQUENTLY, THE TRIBUNAL DISPOSED-OFF ASSESSEES APPEAL FOR AYS 2008-09 & 2009-10 AND ALL OWED ASSESSEES APPEAL, WHICH LED THE ASSESSEE TO FILE APPEALS FOR THESE TWO YEARS BEFORE THE TRIBUNAL. THE LD. DR, ON THE OTHER HAND, SUBMIT TED THAT IT WAS CONSCIOUS DECISION ON THE PART OF THE ASSESSEE NOT TO PREFER ANY FURTHER APPEAL AND THEREFORE, THE ASSESSEE WAS UNABLE TO MA KE A CASE OF SUFFICIENT CAUSE WHICH WOULD WARRANT CONDONATION OF DELAY. HOWEVER, CONSIDERING THE FACT THAT THE ISSUE OF DISALLOWANCE U/S 14A WAS SUBJECT MATTER OF DISALLOWANCE FOR SEVERAL YEARS, THE BENCH FORMED AN OPINION THAT THE DELAY WAS TO BE CONDONED AND THE APPEAL WA S TO BE ADJUDICATED ON MERITS. WE ORDER SO. ITA NOS.6733-35/MUM/2018 TECHPROCESS PAYMENT SERVICES LIMITED ASSESSMENT YEARS: 2012-13 TO 2014-15 3 1.3 IN THE ABOVE BACKGROUND, WE HAVE ALREADY CONSID ERED THE RIVAL SUBMISSIONS ADVANCED BY BOTH THE PARTIES, PERUSED M ATERIAL PLACED ON RECORD AND DELIBERATED ON DECISIONS RENDERED BY TRI BUNAL IN ASSESSEES OWN CASE FOR DIFFERENT YEARS. THE LD. AR HAS RAISED A PRELIMINARY ISSUE TO SUBMIT THAT LD. AO DID NOT REJECT THE SUO-MOTO D ISALLOWANCE OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME AND DID NOT AR RIVE AT REQUISITE SATISFACTION AS ENVISAGED BY THE PROVISIONS OF SEC. 14A. THE SAID LAPSE, AS PER SUBMISSIONS OF LD. AR, WOULD OUST THE JURISD ICTION OF LD. AO IN INVOKING THE PROVISIONS OF SEC. 14A R.W.R. 8D TO MA KE FURTHER DISALLOWANCE. RELIANCE HAS BEEN PLACED ON THE DECIS ION OF THIS TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR AYS 2008-09 & 2 009-10, ITA NOS. 8547/MUM/2011 & OTHERS, COMMON ORDER DATED 12/10/20 18. THE SAID ORDER HAS BEEN FOLLOWED BY TRIBUNAL IN AY 2011-12, ITA NO.7026/MUM/2016 ORDER DATED 15/02/2019. THE COPIES OF THE ORDERS HAVE BEEN PLACED ON RECORD. 2. FACTS FROM CASE RECORDS FOR AY 2012-13 WOULD REV EAL THAT THE ASSESSEE WAS SADDLED WITH DISALLOWANCE U/S 14A FOR RS.16.57 LACS FOR YEAR UNDER CONSIDERATION IN AN ASSESSMENT FRAMED U/ S 143(3) ON 30/03/2015. THE DISALLOWANCE STEM FROM THE FACT THA T THE ASSESSEE HELD HUGE INVESTMENTS IN SHARES AND MUTUAL FUNDS FOR RS. 2072.37 LACS. THE ASSESSEE ALSO EARNED EXEMPT DIVIDEND INCOME OF RS.1 38.02 LACS FROM UNITS OF MUTUAL FUNDS, AGAINST WHICH THE ASSESSEE O FFERED SUO-MOTO DISALLOWANCE OF RS.2.21 LACS IN ITS COMPUTATION OF INCOME. THE SAID DISALLOWANCE WAS AGGREGATE OF 40% OF COST OF ONE EM PLOYEE AT JUNIOR MANAGEMENT LEVEL ON COST-TO-COMPANY BASIS AND 1% OF COST OF SALARY OF AUTHORIZED SIGNATORY . HOWEVER, NOT SATISFIED, LD. AO INVOKING THE ITA NOS.6733-35/MUM/2018 TECHPROCESS PAYMENT SERVICES LIMITED ASSESSMENT YEARS: 2012-13 TO 2014-15 4 PROVISIONS OF RULE 8D, COMPUTED EXPENSE DISALLOWANC E U/R 8D(2)(III) @0.5% OF AVERAGE INVESTMENTS WHICH RESULTED INTO DI SALLOWANCE OF RS.18.79 LACS. AFTER ADJUSTING SUO-MOTO DISALLOWANC E OF RS.2.21 LACS AS OFFERED BY THE ASSESSEE, NET DISALLOWANCE THUS W ORKED OUT TO BE RS.16.57 LACS. 3. BEFORE LD. CIT(A), THE ASSESSEE , INTER-ALIA, SUBMITTED THAT LD. AO DID NOT RECORD OBJECTIVE AND JUDICIOUS SATISFACTION BEFORE PROCEEDING TO APPLY RULE 8D. HOWEVER, DISREGARDING THE SAME, LD. CIT(A), RELYING UPON TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 2010-11, ITA NO. 589/MUM/2015 ORDER DATED 14/09/2016, RESTRICTED THE DISALLOWANCE TO RS.10 LACS. AGGRIEVED, THE ASSESSEE IS UNDER APPEAL BEFORE US WITH FOLLOWING GROUNDS OF APPEAL: - I. THE HON'BLE C1T(A) ERRED IN UPHOLDING THE D ISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 ('THE ACT') MADE BY THE AO TO THE EXTENT OF RS. 10,00,000/- DESPITE HIS SPECIFIC FINDING THAT THE AO HAS NOT RECORDED HIS DISSATISFA CTION AS REGARDS THE SUO-MOTO DISALLOWANCE BEFORE INVOKING RULE 8D OF THE INCOME TAX RULES, 1962 ('THE RULES'). II. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT DISALLOWANCE U/S 14A OF THE ACT CAN EITHER BE MADE BASED AS PER THE WORKING MADE BY THE ASSESSEE OR AS PER THE PROVISIONS OF RULE 8D OF THE RULES AND NOT ON ANY A D-HOC BASIS. III. THE APPELLANT PRAYS THAT THE DISALLOWANCE U/S 14A OF THE ACT MADE BY THE AO AND TO THE EXTENT UPHELD BY THE CIT(A) BE DELETED. THE APP ELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR DELETE ANY/ALL OF THE ABOVE GROUND OF APPEAL. 4. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ASS ESSEE HAD OFFERED SUO-MOTO DISALLOWANCE IN ITS RETURN OF INCOME, THE BASIS OF WHICH WAS SUBMITTED TO LD.AO DURING ASSESSMENT PROCEEDINGS. H OWEVER, LD. AO DID NOT CONSIDER THE SAME AND REJECTED THE METHODOL OGY ADOPTED BY THE ASSESSEE TO ARRIVE AT THE SAID DISALLOWANCE, HAVING REGARDS TO THE ACCOUNTS OF THE ASSESSEE. IT WAS INCUMBENT ON THE P ART OF LD. AO TO ARRIVE AT JUDICIOUS AND OBJECTIVE SATISFACTION AS T O WHY THE DISALLOWANCE OFFERED / COMPUTED BY THE ASSESSEE WAS NOT ACCEPTAB LE. IN PARA-5 OF ITA NOS.6733-35/MUM/2018 TECHPROCESS PAYMENT SERVICES LIMITED ASSESSMENT YEARS: 2012-13 TO 2014-15 5 QUANTUM ASSESSMENT ORDER, LD. AO HAS MERELY RECORDE D A FACT OF NON- SATISFACTION WITHOUT ADDUCING COGENT REASONS / ELAB ORATIONS AS TO WHY THE METHODOLOGY ADOPTED BY THE ASSESSEE WAS NOT ACC EPTABLE. RELIANCE COULD BE PLACED ON THE RECENT DECISION OF HONBLE S UPREME COURT IN MAXOPP INVESTMENT LTD. V/S CIT (2018 402 ITR 640) WHEREIN IT HAS CATEGORICALLY BEEN HELD THAT RECORDING OF SATISFACT ION IS A PRE-REQUISITE BEFORE INVOKING DISALLOWANCE U/S 14A R.W.R. 8D. THE PERTINENT OBSERVATIONS OF HONBLE COURT WERE AS UNDER: - 41) HAVING REGARD TO THE LANGUAGE OF SECTION 14A(2) OF THE ACT, READ WITH RULE 8D OF THE RULES, WE ALSO MAKE IT CLEAR THAT BEFORE APPLYI NG THE THEORY OF APPORTIONMENT, THE AO NEEDS TO RECORD SATISFACTION THAT HAVING REG ARD TO THE KIND OF THE ASSESSEE, SUO MOTO DISALLOWANCE UNDER SECTION 14A WAS NOT COR RECT. IT WILL BE IN THOSE CASES WHERE THE ASSESSEE IN HIS RETURN HAS HIMSELF APPORT IONED BUT THE AO WAS NOT ACCEPTING THE SAID APPORTIONMENT. IN THAT EVENTUAL ITY, IT WILL HAVE TO RECORD ITS SATISFACTION TO THIS EFFECT. FURTHER, WHILE RECORD ING SUCH A SATISFACTION, NATURE OF LOAN TAKEN BY THE ASSESSEE FOR PURCHASING THE SHARES/MAK ING THE INVESTMENT IN SHARES IS TO BE EXAMINED BY THE AO. SIMILAR VIEW HAS BEEN TAKEN BE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2008-09 & 2009-10, ITA NOS. 8547/MUM/2011 & OTHERS, COMMON ORDER DATED 12/10/20 18, WHICH HAS BEEN FOLLOWED IN AY 2011-12. THEREFORE, RESPECTFULL Y FOLLOWING THE SAME, WE DELETE THE ADDITIONAL DISALLOWANCE OF RS.16.57 L ACS AS MADE BY LD. AO IN THE QUANTUM ASSESSMENT ORDER. THE APPEAL STAN DS ALLOWED. ITA NO.6734 & 6735 /MUM/2018, AYS 2013-14 & 2014-15 5. IN AY 2013-14, THE ASSESSEE HAS OFFERED SUO-MOTO DISALLOWANCE OF RS.5 LACS WHICH HAS BEEN REVISED TO RS.19.06 LACS B Y LD.AO IN QUANTUM ASSESSMENT ORDER DATED 29/01/2016, INVOKING RULE 8D. SIMILARLY, IN AY 2014-15, THE ASSESSEE HAS OFFERED SUO-MOTO DISALLOWANCE OF RS.5.28 LACS WHICH HAS BEEN REVISED TO RS.16.28 LACS ITA NOS.6733-35/MUM/2018 TECHPROCESS PAYMENT SERVICES LIMITED ASSESSMENT YEARS: 2012-13 TO 2014-15 6 BY LD.AO IN QUANTUM ASSESSMENT ORDER DATED 24/11/20 16, INVOKING RULE 8D. UPON PERUSAL OF QUANTUM ASSESSMENT ORDERS FOR B OTH THE YEARS, WE FIND THAT LD. AO HAS FAILED TO CONSIDER THE SUO-MOT O DISALLOWANCE OFFERED BY THE ASSESSEE AND WITHOUT REJECTING THE SAME, PRO CEEDED TO COMPUTE DISALLOWANCE AS PER RULE 8D. FACTS BEING PARI-MATER IA THE SAME, TAKING THE SAME VIEW, WE DELETE ADDITIONAL DISALLOWANCES M ADE FOR BOTH THESE YEARS. BOTH THESE APPEALS STAND ALLOWED. CONCLUSION 6. ALL THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 17 TH DECEMBER , 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17/12/2019 SR.PS, JAISY VARGHESE #$%&'(& / COPY OF THE ORDER FORWARDED TO : 1. &'( / THE APPELLANT 2. )'( / THE RESPONDENT 3. ../ ( & ) / THE CIT(A) 4. ../ / CIT CONCERNED 5. 01 * , .& , / DR, ITAT, MUMBAI 6. 12 3 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.