ACIT CIR 6(3)(2), MUMBAI V. KRYSTAL INTEGRATED SERVICES P.LTD, MUMBAI

ITA 7107/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0646 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 05-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CIRCUMSTANCES OF CASE
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 43B; 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 7107 /M/201 6 ASSESSMENT YEAR : 201 2 - 13 ACIT, CIR, 6(3)(2), R.NO. 522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. VS. M/S. KRYSTAL INTEGRATED SERVICES PVT. LTD. 15A/17, KRYSTAL HOUSE, DUNCAN CAUSEWAY ROAD, SION, MUMBAI - 400022. ./ ./ PAN/GIR NO. : AABCK 5816 C ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 22 . 1 1 .2017 DATE OF PRONOUNCEMENT : 09. 02 .2018 O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEA L AGAINST THE ORDER DATED 01.09.2016 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 12 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 201 2 - 1 3 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW. THE LD, MUMBAI WAS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSES ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEE'S CONTRIBUTION TOWARDS PP & ESIC, WHICH WETS PAID AFTER THE DUE DATE AS SPECIFIED IN EXPLANATION .0 SECTION 36(1 )(VA) OF THE 1. T. ACT, 1961'. ASSESSEE BY: SHRI A. K. GHOSH (AR) DEPARTMENT BY: MS. S. PADMAJA (DR) ITA. NO.7107/M/2016 A.Y. 2012 - 1 3 2 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE DELAYED PAYMEN T OF EMPLOYEES CONTRIBUTION TOWARDS PF & ESIC IS NOT ALLOWABLE U/S 43B, AS SECTION 43B COMES INTO PLAY ONLY WHEN A DEDUCTION IS OTHERWISE ALLOWABLE UNDER THE I. T. ACT, J 961', 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. C1T(A) ERRED IN RELY ING ON THE ORDER OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CIT OF M/S HINDUSTAN ORGANICS CHEMICAL LID , WHICH, HAS NOT BEEN ACCEPTED BY THE DEPARTMENT ON MERIT AND APPEAL HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT' - 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN JAW. THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.3,41,970/ - MADE U/S 14A R.W.R 8D OF THE I. T. RULES IGNORING THE FINDING GIVEN BY THE A O. DISALLOWANCE U/S 14A NOT ONLY INCLUDES INTEREST EXPENSES BUT ALSO ADMINISTRATIVE EXPENSES. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AQ BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MAY BE NECESSARY.' 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 . 09 .201 2 DECLARING TOTAL INCOME TO THE TUNE OF RS. 9,41,12,452 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 06.08.2013 AND SERVED UPON THE ASSESSEE. THEREAFTER, THE NOTICES U/S 142(1) OF THE I.T. ACT , 1961 DATED 14.07.2014 AND 08.09.2014 ALONG WITH QUESTIONNAIRE/ANNEXURE WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SECURITY SERVICES, LABOUR CONTRACTOR, BPO AND OPERATING PREPAID TAXI BOOTH (COUN TERS) . ON PERUSAL OF TAX AUDIT REPORT, IT WAS FOUND THAT THE ASSESSEE HAS DEFAULTED ON PAYMENT OF EMPLOYEE CONTRIBUTION TOWARDS ITA. NO.7107/M/2016 A.Y. 2012 - 1 3 3 PROVIDENT FUND AND ESIC ON OR BEFORE DUE DATE. THE BOTH AMOUNT OF LATE PAYMENT PPF AND ESIC WAS FOUND TO THE TUNE OF RS.10,43,77 ,885/ - . THEREFORE, THE SAME WAS NOT ALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE ALSO EARNED THE DIVIDEND INCOME ON EQUITY - SHARES TO THE TUNE OF RS.5,000/ - . THEREFORE, THE ASSESSING OFFICER APPLIED THE PROVISION OF U/S 14A R.W. RULE 8D OF THE ACT AND ASSESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME TO THE TUNE OF RS. 3,41,972/ - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.19,88,37,310/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE C LAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO S .1 TO 3 : - 5 . UNDER THESE ISSUES THE REVENUE HAS CHALLENGED THE DELETION OF THE DISALLOWANCE OF RS.9,45,49,826/ - U/S 36(1)(VA) OF THE I.T. ACT, 1961 FOR LATE PAYMENT OF EMPLOYER AND EMPLOYEE CONTRIBUTION TOWARDS PF & ESIC. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF THIS FACT THAT THE AMOUNT WAS PAID BEFORE THE DUE DATE OF FILING ITS RETURN. THE CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE LAW SETTLED IN CIT VS. HINDUSTAN ORGANICS CHEMICAL LTD. (2014) 48 TAXMANN.COM 421 BOMBAY, CIT VS. GHATGE PA TIL TRANSPORTS LTD. (2015) 53 TAXMANN.COM 141 (BOMBAY), CIT VS. ALOM EXTRUSIONS LTD. (2009) 185 TAXMANN.COM 416 (SC) AND CIT VS. VINAY CEMENT ITA. NO.7107/M/2016 A.Y. 2012 - 1 3 4 LTD. (2007) 213 CTR 268 (SC) . THE FINDING OF THE CIT(A) IS HEREBY MENTIONED BELOW FOR READY REFERENCE: - 7 . IT IS SEEN THAT THE AO HAS ERRED IN DISALLOWING RS.9,45,49,826/ - U/S 36(1)(VA) FOR LATE PAYMENT OF EMPLOYER AND EMPLOYEES CONTRIBUTION TO PROVIDENT FUND. HOWEVER, IT IS SEEN THAT THE AMOUNT IS ACTUALLY AN ALLOW ABLE DEDUCTION U/S 43B(B) OF THE I.T. ACT. IT IS SEEN THAT THE AMOUNT HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF ITS RETURN. RELIANCE IS PLACED ON HONBLE JURISDICTIONAL HIGH COURT DECISIONS IN THE CASES OF CIT VS. HINDUSTAN ORGANICS CHEMICAL LTD. AND CIT VS. GHATGE PATIL TRANSPORTS LTD. AND HONBLE APEX COURT DECISIONS IN THE CASES OF CIT VS. ALOM EXTRUSIONS LTD. AND CIT VS. VINAY CEMENT LTD. IN ALLOWING THESE GROUNDS OF APPEALS. 6. THE MAIN ARGUMENT OF THE LD. REPRESENTATIVE OF THE REVENUE IS THAT THE DECISION OF THE BOMBAY HIGH COURT TITLE AS CIT VS. HINDUSTAN ORGANICS CHEMICAL LTD. (2014) 48 TAXMANN.COM 421 BOMBAY IS UNDER CHALLENGED BEFORE SUPREME COURT, T HEREFORE, THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND PLACED RELIANCE UP ON THE LAW SETTLED BY GUJARAT HIGH COURT IN THE C ASE OF CIT VS. GUJARAT STATE TRANSPORT CORPORATION (366 ITR 170) . B UT THE CONTENTION RAISED BY THE LD. REPRESENTATIVE OF THE DEPARTMENT IS NOT TENABLE BECAUSE THE LAW RELIED BY THE CIT(A) DISCUSSED ABOVE IS BASED UPON THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (319 ITR 306). W HEN THE DECISION OF APEX COURT IS APPLICABLE THEN THE DECISION OF ANY OTHER COURT HAS TO NO USE. THEREFORE, IN THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED THE ORDER ON THIS ISSUE JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ITA. NO.7107/M/2016 A.Y. 2012 - 1 3 5 ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSE SSEE AGAINST THE REVENUE . ISSUE NO. 4 : - 7 . UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE OF RS.3,41,970/ - U/S 14A R.W. RULE 8D OF THE I.T. RULES. THE ASSESSEE RECEIVED THE DIVIDEND INCOME TO THE TUNE OF RS.5000/ - FROM THE INVESTM ENT MADE IN THE EARLIER YEARS. THE ASSESSEE ACQUIRED SHARES WORTH OF RS. 25,200/ - WHEREAS THE EXPENDITURE TO INCUR THE EXEMPT INCOME HAS BEEN ASSESSED TO THE TUNE OF RS. 25,200/ - . BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: 8 . IT IS SEEN THAT THE AO HAS ERRED IN DISALLOWING RS.3,41,970/ - U/S 14A. THE DIVIDEND OF RS.5,000/ - IS RECEIVED FROM INVESTMENTS MADE IN EARLIER YEARS AND NOT IN THIS ASSESSMENT YE AR. THE APPELLANT HAS ALSO NOT INCURRED ANY EXPENSES IN RELATION TO EARNING OF SUCH DIVIDEND. IT IS SEEN THAT THERE IS NO PROXIMATE CAUSE FOR DISALLOWANCE AS HELD BY HONBLE SUPREME COURT IN THE CASE OF WALFORT SHARE AND STOCK BROKER. IT IS ALSO SEEN THAT THE DISALLOWANCE MADE BY THE AO IS MORE THAN THE APPELLANT INVESTMENT IN EQUITY SHARES WHICH IS JUST RS.25,200/ - . IT IS OBVIOUS THAT THE EXPENSES INCURRED TO PURCHASE AND ACQUIRE ANY ASSET WILL NOT EXCEED THE COST OF PURCHASE OR ACQUISITION AT ANY GIVEN TI ME. THUS THE A.OS CONTENTION THAT THE APPELLANT HAS INCURRED EXPENSES OF RS.3,41,972/ - TO ACQUIRE SHARES WORTH RS. 25,200/ - IS NOT TENABLE. IT IS ALSO SEEN THAT THE AO HAS NOT GIVEN OPPORTUNITY OF HEARING TO THE APPELLANT BEFORE MAKING THIS ADDITION WHICH IS AGAINST THEPRINCIPLE LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF TIN BOX CO. VS. CIT 249 ITR 216 (SC). THUS IN THE LIGHT OF THE DISCUSSION HERE GROUND OF APPEAL NO. 3 IS ALLOWED. ITA. NO.7107/M/2016 A.Y. 2012 - 1 3 6 8 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE NO OPPORTUNITY OF BEING HEARD WAS GIVEN TO THE ASSESSEE COTRARY TO THE PRINCIPLE LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF TIN BOX CO. VS. CIT 249 ITR 216 (SC). THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THIS FACT THAT NO INVESTMENT WAS MADE IN THE PRESENT ASSESSMENT YEAR . NOTHING CAME INTO NOTICE ABOUT THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME . N O NEXUS OF ANY KIND WAS SHOWN WITH THE EXPENSES BY AO W ITH THE INVESTMENT TO INCUR THE EXEMPT INCOME . THE EXEMPT INCOME IS ONLY TO THE TUNE OF RS 5000/. T HE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, IN THE SAID CIRCUMSTANCES, WE NOWHERE FOUND ANY ILLEGALITY IN THE ORDER PASSED BY THE CIT(A) ON T HIS ISSUE. ACCORDINGLY, THIS ISSUE IS BEING DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE . 9 . IN THE RESULT , THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE D ISMISSED . ORDER P RONOUNCED IN THE OPEN COURT ON 09 .02 .2 018 SD/ - SD/ - ( R. C. SHARMA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 09 .0 2 . 2018 VIJAY ITA. NO.7107/M/2016 A.Y. 2012 - 1 3 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI