Nikita Jajodia, New Delhi V. ITO, Ward- 52(5), New Delhi

ITA 7674/DEL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5701 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 21-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: V K JAIN
• Keywords: Principle of natural justice
• Section: 143(3); 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 767 4 /DEL/201 7 A.Y. : 20 1 3 - 1 4 NIK ITA JAJODIA 108, ANSAL BHAWAN, 16, KG MARG, NEW DELHI 110 001 (PAN: AHLPJ7715M) VS. ITO, WARD 52(5), 15 TH FLOOR, BLCOK E-2, SPM MARG, CIVIC CENTRE, MINTO ROAD, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. V.K. JAIN, CA DEPARTMENT BY : MS. ASHIMA NEB, SR. DR. ORDER PER H.S. SIDHU : JM ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNED ORDER DATED 28.09.2017 PASSED BY THE LD. CIT(A)-18, NEW DEL HI RELEVANT TO ASSESSMENT YEAR 2013-14 ON THE FOLLOWING GROUNDS: - 1. THE ORDER PASSED BY THE LD. CIT(A) IS BAD IN LAW, WRONG ON FACTS AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2(A) THAT LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING THE FURTHER DISALLOWANCE OF RS. 1,37,282/- U/S. 14A READ WITH RULE 8D(2) OF THE I.T. RULES, 1962 WHICH IS OVER AND ABOVE THE EXPENSES OF RS. 5,714/- ALREADY DISALLOWED IN COMPUTATION OF INCOME UNDER RULE 8D(2)(II) AND 8D(III), WHICH NEEDS TO BE DELETED. (B) THAT LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT NO SUCH EXPENSES OF RS. 1,37,282/- UNDER RULE 8D2(II) HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT AND FURTHER DISALLOWANCE MADE TOWARDS DEEMED HYPOTHETICAL EXPENSES. 2 (C) THAT LD. CIT(A) HAS ERRED IN CONFIRMING FURTHER DISALLOWANCE EVEN ON VALUE OF FOREIGN INVESTMENTS, OF RS. 56,40,968/- THE INCOME ON WHICH IS FULLY TAXABLE AND THUS THE CALCULATION OF DISALLOWANCE OF RS. 1,37,282/- IS WRONG. (D) THAT LD. CIT(A) HAS REFERRED TO THE EXPENSES OF FUND MANAGER/PVT EQUITY FUND TO WHOM GENERALLY EXPENSES ARE PAID TOWARDS ANNUAL FEES AND ADMINISTRATIVE EXPENSES ON MERE SUSPICION AND SURMISE BECAUSE IN APPELLANT CASE, NO SUCH ENTITY WAS ENGAGED AND NO PAYMENT WAS MADE. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY OR FOREGO ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED E-RETURN ON 30.7.2013 DECLARING INCOME OF RS. 5,02,210/-. THE R ETURN OF THE ASSESSEE WAS PROCESSED U/S. 143(1) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) AND SUBSEQUENTLY SE LECTED FOR SCRUTINY UNDER CASS. STATUTORY NOTICE U/S. 143(2) OF TH E ACT WAS ISSUED ON 02.9.2014 AND SERVED UPON THE ASSESSEE. S UBSEQUENTLY, NOTICE U/S. 142(1) OF THE ACT WAS ISSUED ON 17.8.2015 . IN RESPONSE THERETO, THE A.R. OF THE ASSESSEE ATTENDED THE ASSESSMEN T PROCEEDINGS AND FILED THE REQUISITE DETAILS WHICH WE RE EXAMINED. AO OBSERVED THAT THE ASSESSEE HAS EARNED INCOME FROM BUS INESS OF FINANCING AND COMMISSION/ BROKERAGE AND DIVIDEND IN COME FROM INVESTMENT. THE ASSESSEE HAS EARNED TAX FREE DIVIDEN D OF RS. 1,85,155/- AND AGAINST THIS THE ASSESSEE HAS DISALLOW ED IN THE COMPUTATION TOTAL EXPENSES AMOUNTING TO RS. 5,714/-. T HE A.R. OF THE ASSESSEE WAS ASKED VIDE ORDER SHEET ENTRY DATED 29.12.2015 TO EXPLAIN AS TO WHY THE DISALLOWANCE U/S. 14A OF THE ACT AMOUNTING TO RS. 1,37,282/- MAY NOT BE ADDED TO THE IN COME OF THE ASSESSEE. IN RESPONSE TO THE SAME, THE VIDE HIS REPLY DATED 29.1.2016 HAS SUBMITTED THAT OUT OF THE TOTAL EXPENSES DEBITED TO 3 THE PROFIT AND LOSS ACCOUNT AMOUNTING TO RS. 6,312/- TH E ASSESSEE HAS DISALLOWED DEMAT CHARGES AMOUNTING TO RS. 5618 /- AND MISC. EXPENSES AMOUNTING TO RS. 96/-, THUS TOTALING TO RS. 571 4/- (RS. 5618 + 96) SUO-MOTTO WHILE FILING THE INCOME TAX RETUR N HAD CLAIMED ONLY EXPENSES AMOUNTING TO RS. 598/- IN THE I NCOME TAX RETURN. THUS, THE ASSESSEE HAS DISALLOWED ALL MAJOR EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT U/S. 14A R.W. R. 8D WHILE COMPUTING THE TAXABLE INCOME. BUT THE ASSESSEE HAS N OT ACCEPTED THE EXPENSES OF THE ASSESSEE AND BY APPLYING THE RULE 8D(2(III) READ WITH SECTION 14A OF THE ACT, THE EXPENDITURE IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME WAS RECALCULATED AND M ADE THE ADDITION OF RS. 1,37,282/- U/S. 14A R.W.R. 8D AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 6,39,490/- VIDE ORDER D ATED 29.1.2016 PASSED U/S. 143(3) OF THE ACT. AGGRIEVED WITH THE ASSESSMENT ORDER DATED 29.1.2016, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDE R DATED 28.9.2017 HAS DISMISSED THE APPEAL OF THE ASSESSEE. AGAINST THE IMPUGNED ORDER DATED 28.9.2017, ASSESSEE HAS FILED THE APPEAL BEFORE THE TRIBUNAL. 3. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT LD. CI T(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,37,28 2/- U/S. 14A READ WITH RULE 8D(2) OF THE I.T. RULES, 1962 WHICH IS OVER AND ABOVE THE EXPENSES OF RS. 5,714/- ALREADY DISALLOWED IN COMPU TATION OF INCOME UNDER RULE 8D(2)(II) AND 8D(III). HENCE, THE SAME MAY BE DELETED. IT WAS FURTHER SUBMITTED THAT NO SUCH EXPENSES OF RS. 1,37,282/- UNDER RULE 8D2(II) HAS BEEN DEBITED TO PR OFIT AND LOSS ACCOUNT AND FURTHER DISALLOWANCE MADE TOWARDS DEEMED HYPOTHETICAL EXPENSES AND EVEN ON VALUE OF FOREIGN IN VESTMENTS, OF RS. 56,40,968/- THE INCOME ON WHICH IS FULLY TAXA BLE AND THUS THE 4 CALCULATION OF DISALLOWANCE OF RS. 1,37,282/- IS WRO NG. IT WAS FURTHER SUBMITTED THAT AS PER CBDT NOTIFICATION NO. 43/2016/F. NO. 370142/7/2016 TPL DATED 02.6.2016 HAS ALSO CLARIFIE D THAT TOTAL EXPENDITURE DISALLOWED UNDER RULE 8D SHALL NOT EXCEE D THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. IN SUPPORT OF H IS CONTENTION, HE RELIED UPON THE FOLLOWING CASE LAWS:- - HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (2012) 347 ITR 272 (DELHI) - ITAT, DELHI C BENCH DECISION DATED 23.3.2012 I N THE CASE OF M/S GILLETTE GROUP INDIA PVT. LTD. (NOW KNOWN AS WELLA HAIRCOSMETICS INDIA PVT. LTD.) VS. ACIT PASSED IN ITA NO. 267/DEL/2012 (AY 2008-09) - ITAT, MUMBAI E BENCH DECISION DATED 02.3.2012 PASSED IN THE CASE OF SEARCH ENVRIO LTD. VS. ACIT PASSED IN ITA NO. 3464/MUM/2011 (AY 2007-08). 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND STATED THAT THEY HAVE PASSED THE WE LL REASONED ORDER, WHICH DOES NOT NEED ANY INTERFERENCE . 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS ESPECIALLY THE IMPUGNED ORDER AS WELL AS THE CASE LA WS CITED BY THE LD. COUNSEL OF THE ASSESSEE. I FIND CONSIDERABLE COGENCY IN THE CONTENTION OF THE LD COUNSEL OF THE ASSESSEE THAT LD . CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS. 1,37,282/- U/S. 1 4A READ WITH RULE 8D(2) OF THE I.T. RULES, 1962 WHICH IS OVER AND ABOVE THE EXPENSES OF RS. 5714/- ALREADY DISALLOWED IN COMPUT ATION OF INCOME UNDER RULE 8D(2)(II) AND 8D(III) AND THAT NO SUCH EXP ENSES OF RS. 1,37,282/- UNDER RULE 8D2(II) HAS BEEN DEBITED TO PR OFIT AND LOSS ACCOUNT AND FURTHER DISALLOWANCE MADE TOWARDS DEEMED HYPOTHETICAL EXPENSES AND EVEN ON VALUE OF FOREIGN IN VESTMENTS, OF RS. 56,40,968/- THE INCOME ON WHICH IS FULLY TAXABLE AND THUS THE 5 CALCULATION OF DISALLOWANCE OF RS. 1,37,282/- IS WRO NG. I FURTHER NOTE THAT THAT AS PER CBDT NOTIFICATION NO. 43/2016/F.NO. 370142/7/2016 TPL DATED 02.6.2016 IT HAS BEEN CLARIF IED THAT TOTAL EXPENDITURE DISALLOWED UNDER RULE 8D SHALL NOT EXCEE D THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. I, THEREFORE, AC CEPT THE ASSESSEES COUNSEL CONTENTION THAT THE DISALLOWANCE MAD E BY THE AO AND SUSTAINED BY THE LD. CIT(A) IN EXCESS OF TOTAL EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT WAS UNJUSTIFIED. ACCORDINGLY, I DELETE THE ADDITION IN DISPUTE AND ALLOW THE GROUND R AISED BY THE ASSESSEE. MY VIEW IS FORTIFIED BY THE ITAT, DELHI C BENCH DECISION DATED 23.3.2012 IN THE CASE OF M/S GILLETTE GROUP INDI A PVT. LTD. (NOW KNOWN AS WELLA HAIRCOSMETICS INDIA PVT. LTD.) V S. ACIT PASSED IN ITA NO. 267/DEL/2012 (AY 2008-09) WHEREIN, IT WA S HELD THAT DISALLOWANCE CANNOT EXCEED THE EXPENDITURE ACTUALL Y CLAIMED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 22/06/2018. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE: 22/06/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT ASSISTANT REGISTRAR, ITAT, DELHI BENCH ES