Tata Metaliks Limited, Kolkata V. CIT, KOLKATA-1, Kolkata

ITA 724/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4533 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 05-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2014
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH AGARWAL; RAVI KUMAR MITTA L
• Keywords: Earning of tax free income; Source of fund; Corroborative evidences
• Section: 143(3); 14A; 115JB; 263

Judgement Text

I.T.A. NO. 724/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISHWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 724 /KOL/ 2014 ASSESSMENT YEAR: 2010-2011 TATA METALIKS LIMITED,............................. ..........................APPELLANT TATA CENTRE, 10 TH FLOOR, 13, CHOWRINGHEE ROAD, KOLKATA-700 071 [PAN: AABCT 1389 B] -VS.- COMMISSIONER OF INCOME TAX,........................ ..................RESPONDENT KOLKATA-1, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI ASHISH AGARWAL, A.R. AND SHRI RAVI KUMAR MITTA L, A.R., FOR THE ASSESSEE SHRI SACHCHIDANANDA SRIVASTAVA, CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JULY 05, 2016 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 7 TH , 2016 O R D E R PER SHRI P.M. JAGTAP, A.M .: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX, KOLKATA-1, KOLKATA DATE D 03.03.2014 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PIG IRON. THE RETU RN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 30.09.2 010 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING SET OFF OF THE BROUG HT FORWARD LOSS OF RS.50,43,10,411/- AND BOOK PROFIT OF RS.25,82,81,68 4/- UNDER SECTION 115JB OF THE ACT. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3), THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICER AT RS.56,39,97,781/- AS AGAINST RS.50,43,10,411/- RETU RNED BY THE ASSESSEE AND AFTER ALLOWING THE SET OFF OF THE BROUGHT FORWA RD BUSINESS LOSS TO THAT I.T.A. NO. 724/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 2 OF 5 EXTENT, THE TOTAL INCOME WAS ASSESSED AT NIL. IN THE SAID ASSESSMENT, THE BOOK PROFIT OF THE ASSESSEE UNDER SECTION 115JB OF THE ACT WAS COMPUTED BY THE ASSESSING OFFICER AT RS.34,71,85,918/-. THE RECORDS OF THE ASSESSMENT THEREAFTER CAME TO BE EXAMINED BY THE LD . CIT AND ON SUCH EXAMINATION, HE NOTED THAT ALTHOUGH THE CLAIM OF TH E ASSESSEE FOR EXEMPTION UNDER SECTION 10(34) OF THE ACT WAS ALLOW ED BY THE ASSESSING OFFICER IN RESPECT OF DIVIDEND INCOME, THE DISALLOW ANCE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE SAID EXEMPT IN COME AS REQUIRED BY SECTION 14A OF THE ACT WAS NOT MADE BY HIM BY APPLY ING RULE 8D OF INCOME TAX RULES. ACCORDING TO HIM, THE ASSESSING O FFICER APPARENTLY HAD ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT THERE WAS NO DIRECT EXPENSES INCURRED FOR EARNING SUCH DIVIDEND INCOME WITHOUT APPLICATION OF MIND AND THERE WAS AN ERROR IN THE ORDER PASSED BY HIM UNDER SECTION 143(3) IN NOT INVOKING THE PROVISIONS OF SECTION 14 A READ WITH RULE 8D, WHICH WAS PREJUDICIAL TO THE INTEREST OF THE REVENU E. HE, THEREFORE, ISSUED A NOTICE UNDER SECTION 263, IN REPLY TO WHICH, IT W AS BROUGHT TO THE NOTICE OF THE LD. CIT BY THE ASSESSEE THAT THE ASSESSING O FFICER HAD EXAMINED THE ISSUE RELATING TO THE DISALLOWANCE UNDER SECTION 14 A DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS ALSO CONTENDED BY TH E ASSESSEE THAT EVEN ON THE FACTS AS INVOLVED IN THE CASE OF THE ASSESSE E, NO DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D WAS CALLED FOR. THE L D. CIT DID NOT FIND MERIT IN THIS CONTENTION OF THE ASSESSEE. ACCORDING TO HIM, THE RELEVANT FACTS OF THE CASE WERE NOT FULLY EXAMINED BY THE AS SESSING OFFICER WHILE DECIDING THE ISSUE RELATING TO THE DISALLOWANCE UND ER SECTION 14A READ WITH RULE 8D AND THE CASE OF THE ASSESSEE WAS ACCEP TED BY HIM WITHOUT MAKING THE NECESSARY ENQUIRIES AS WERE CALLED FOR I N THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITHOUT APPLICATION O F HIS MIND. ACCORDINGLY, AFTER DISCUSSING THE SCOPE OF REVISION UNDER SECTION 263 BY RELYING ON THE VARIOUS JUDICIAL PRONOUNCEMENTS, THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) WAS HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE BY TH E LD. CIT AND SETTING ASIDE THE SAME BY EXERCISING HIS POWERS UNDER SECTI ON 263, HE DIRECTED THE ASSESSING OFFICER TO EXAMINE THE APPLICABILITY OF SECTION 14A READ I.T.A. NO. 724/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 3 OF 5 WITH RULE 8D AFTER VERIFYING THE BOOKS OF ACCOUNT O F THE ASSESSEE AS WELL AS THE SUPPORTING EVIDENCE. AGGRIEVED BY THE ORDER OF THE LD. CIT PASSED UNDER SECTION 263, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, INVITED OUR ATTENTION TO THE COPY OF ORDER-SHEET ENTRY DATED 08.02.2013 R ECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS PLACED AT PAGE NO. 56 OF HIS PAPER BOOK TO POINT OUT THAT A S PECIFIC QUERY WAS RAISED BY THE ASSESSING OFFICER ON THE ISSUE OF DISALLOWAN CE UNDER SECTION 14A AND THE ASSESSEE IN THIS REGARD WAS CALLED UPON BY HIM TO FURNISH THE SOURCE OF FUNDS UTILIZED TO MAKE INVESTMENT IN SHAR ES AND UNITS OF MUTUAL FUNDS. HE CONTENDED THAT THE ISSUE RELATING TO THE DISALLOWANCE UNDER SECTION 14A THUS WAS EXAMINED BY THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND AFTER HAVING SATISFIE D WITH THE EXPLANATION OF THE ASSESSEE OF HAVING NOT INCURRED ANY EXPENDIT URE IN RELATION TO THE EARNING OF EXEMPT DIVIDEND INCOME, NO DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D WAS MADE BY HIM. RELYING, INTER A LIA, ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS.- GABRIEL INDIA LIMITED [203 ITR 108] AND IN THE CASE OF MALABAR INDUSTRIAL CO. LIMITED VS.- CIT [243 ITR 83], HE CONTENDED THAT THE POWER OF REVISI ON UNDER SECTION 263 CANNOT BE EXERCISED BY THE LD. CIT WHEN THE ASSESSI NG OFFICER HAS ALREADY EXAMINED THE CLAIM OF THE ASSESSEE BY CONDUCTING AN ENQUIRY DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HAS ADOPTED A POSSIBLE VIEW AS PER LAW. 4. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE I MPUGNED ORDER OF THE LD. CIT IN SUPPORT OF THE REVENUES CASE THAT THE I SSUE RELATING TO THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D HA VING NOT BEEN DECIDED BY THE ASSESSING OFFICER BY CONDUCTING THE NECESSARY ENQUIRY AND BY APPLYING HIS MIND TO THE FACTS OF THE CASE, THE ORDER PASSED BY HIM UNDER SECTION 143(3) ON THIS ISSUE WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE CALLING FOR REVISION UN DER SECTION 263. I.T.A. NO. 724/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 4 OF 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSER VED THAT THE FACT THAT THE ASSESSEE HAD CLAIMED EXEMPTION ON ACCOUNT OF DIVIDE ND INCOME OF RS.1,42,047/- WAS TAKEN NOTE OF BY THE ASSESSING OF FICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS IS EVIDENT FROM THE ORDER-SHEET ENTRY DATED 08.02.2003 AND IN THIS REGARD, THE EXPL ANATION OF THE ASSESSEE WAS ALSO CALLED FOR BY HIM REGARDING THE SOURCE OF FUNDS UTILIZED TO MAKE INVESTMENT IN THE SHARES AND UNITS OF MUTUAL FUNDS, WHICH GENERATED SUCH EXEMPT INCOME. THE ISSUE RELATING TO THE DISALLOWAN CE UNDER SECTION 14A READ WITH RULE 8D THUS WAS EXAMINED BY THE ASSESSIN G OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THIS POSITION IS ACCEPTED EVEN BY THE LD. CIT IN HIS IMPUGNED ORDER PASSED UNDER SECT ION 263, WHERE HE HAS CLEARLY MENTIONED IN PARAGRAPH NO. 2 THAT THE EXPLA NATION OF THE ASSESSEE OF HAVING NOT INCURRED ANY DIRECT EXPENSES FOR EARN ING EXEMPT DIVIDEND INCOME WAS ACCEPTED BY THE ASSESSING OFFICER. ALTHO UGH THE LD. CIT PROCEEDED FURTHER TO SAY THAT SUCH ACCEPTANCE BY TH E ASSESSING OFFICER WAS WITHOUT APPLICATION OF MIND, THE FACT THAT REMA INS TO BE SEEN IS THAT THE ISSUE RELATING TO THE DISALLOWANCE UNDER SECTIO N 14A READ WITH RULE 8D WAS EXAMINED BY THE ASSESSING OFFICER AND THE CL AIM OF THE ASSESSEE OF HAVING NOT INCURRED ANY DIRECT EXPENDITURE IN RELAT ION TO THE EARNING OF EXEMPT INCOME WAS ACCEPTED BY HIM BY TAKING A POSSI BLE VIEW. IN THE CASE OF GABRIEL INDIA LIMITED (SUPRA) CITED BY THE LD. C OUNSEL FOR THE ASSESSEE, THE HONBLE SUPREME COURT HAS HELD THAT ITOS CONCL USION CANNOT BE TERMED AS ERRONEOUS SIMPLY BECAUSE COMMISSIONER DOE S NOT AGREE WITH HIS CONCLUSION AND THE SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE ITO IS NOT PERMISSIBLE UNDER SECTIO N 263 OF THE ACT. IF THE FACTS OF THE PRESENT CASE ARE CONSIDERED IN THE LIG HT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GABRIEL INDIA LIMITED (SUPRA), WE ARE OF THE VIEW THAT THE ORDER OF THE A SSESSING OFFICER PASSED UNDER SECTION 143(3) BY ACCEPTING THE CLAIM OF THE ASSESSEE ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D COULD NOT BE HELD TO BE ERRONEOUS AND THE LD. CIT WAS NOT JUSTIFIED IN S ETTING ASIDE THE SAME BY I.T.A. NO. 724/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 5 OF 5 EXERCISING THE POWERS CONFERRED UPON HIM UNDER SECT ION 263. IN THAT VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER PASS ED BY THE LD. CIT UNDER SECTION 263 AND RESTORE THAT OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3). 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 7 TH , 2016. SD/- SD/- (S.S. VISHWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 7 TH DAY OF SEPTEMBER, 2016 ORDER PRONOUNCED BY SD/- SD/- (J.M.) (A.M.) S.S.V.R. W.A. COPIES TO : (1) TATA METALIKS LIMITED, TATA CENTRE, 10 TH FLOOR, 13, CHOWRINGHEE ROAD, KOLKATA-700 071 (2) COMMISSIONER OF INCOME TAX, KOLKATA-1, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX- , (4) THE DEPARTMENTAL REPRESENTATIVE (5) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.