Kare Electronics & Development Private Limited , Bangalore V. The Assistant Commissioner of Income Tax Circle-11(5), Bangalore

ITA 799/BANG/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7191 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKAS K SURYAWAMSHI
• Assessee Lawyers: K R PRADEEP
• Keywords: Principle of natural justice
• Section: 143(3); 234B; 14A; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P BOAZ , ACCOUNTANT MEMBER ITA NO. 7 9 9 /B ANG /201 7 ASSESSMENT YEAR : 20 09 - 1 0 M/S. KARE ELECTRONICS & DEVELOPMENT PRIVATE LIMITED, FLAT NO.101, 1 ST FLOOR, EDEN PARK, NO.20, VITTAL MALLYA ROAD, BANGALORE 560 001. PAN: AABCK 7679 R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI. K. R. PRADEEP , CA RESPONDENT BY : SHRI . VIKAS K. SURYAWAMSHI , ADDL. CIT DATE OF HEARING : 18 . 12 .201 8 DATE OF PRONOUNCEMENT : 17 . 0 1.201 9 O R D E R PER JASON P BOAZ, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)- 12, BANGALORE DATED 16.02.2017, FOR ASSESSMENT YEAR 2009-10. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER: 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE MANUFACTURE OF ELECTRONIC COMPONENTS AND BUSINESS OF REAL ESTATE DEVELOPMENT, FILED ITS RETURN OF ITA NO. 799/BANG/2017 PAGE 2 OF 17 INCOME FOR ASSESSMENT YEAR 2009-10 ON 23.09.2009 DECLARING INCOME OF RS.97,37,680/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY FOR THIS ASSESSMENT YEAR. THE ASSESSMENT WAS CONCLUDED U/S 143(3) OF THE ACT VIDE ORDER DATED 27.11.2011 WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.1,30,09,090/-; IN VIEW OF DISALLOWANCE OF RS.32,71,403/- U/S 14A R.W.R. 8D. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-12, BANGALORE, WHICH WAS DISMISSED VIDE THE IMPUGNED ORDER DATED 16.02.2017. 3. THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF THE CIT(A)-12, BANGALORE, DATED 16.02.2017 FOR ASSESSMENT YEAR 2009-10 HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE ORDER OF THE AUTHORITIES BELOW IN SO FAR AS IT IS AGAINST THE APPELLANT IS AGAINST THE LAW, FACTS, CIRCUMSTANCES, NATURAL JUSTICE, WITHOUT JURISDICTION, BAD IN LAW AND ALL OTHER KNOWN PRINCIPLES OF LAW. 2. THE TOTAL INCOME COMPUTED AND TOTAL TAX COMPUTED IS HEREBY DISPUTED. 3. THE LEARNED AUTHORITIES BELOW ERRED IN MAKING DISALLOWANCE OF RS.23,22,916/-U/S 14A RWR 8D(2)(II) OF THE ACT. 4. THE LEARNED AUTHORITIES BELOW ERRED IN MAKING DISALLOWANCE OF RS.9,48,487/-U/S 14A RWR 8D(2)(III) OF THE ACT. 5. THE LEARNED CIT-APPEALS ERRED IN UPHOLDING THE DISALLOWANCE WITHOUT APPROPRIATELY CONSIDERING THE MATERIAL AVAILABLE ON RECORD. 6. THE APPELLANT DENIES THE LIABILITY FOR INTEREST U/S 234B OF THE ACT. FURTHER PRAYS THAT INTEREST IF ANY SHOULD BE LEVIED ONLY ON THE RETURNED INCOME. 7. NO OPPORTUNITY HAS BEEN GIVEN BEFORE LEVY OF INTEREST U/S 234B OF THE IT ACT. ITA NO. 799/BANG/2017 PAGE 3 OF 17 8. WITHOUT PREJUDICE TO THE APPELLANT'S RIGHT OF SEEKING WAIVER BEFORE APPROPRIATE AUTHORITY THE APPELLANT BEGS FOR CONSEQUENTIAL RELIEF IN THE LEVY OF INTEREST U/S. 234B OF THE ACT. 9. FOR THE ABOVE AND OTHER GROUNDS AND REASONS WHICH MAY BE SUBMITTED DURING THE COURSE OF HEARING OF THIS APPEAL, THE ASSESSEE REQUESTS THAT THE APPEAL BE ALLOWED AS PRAYED AND JUSTICE BE RENDERED. 4. GROUND NOS. 1, 2 AND 9 (SUPRA), BEING GENERAL IN NATURE AND NOT URGED BEFORE US, ARE DISMISSED AS INFRUCTUOUS. 5. GROUND NOS. 6 TO 8 CHARGING OF INTEREST U/S 234B OF THE ACT 5.1 IN THIS GROUND (SUPRA), THE ASSESSEE DENIES HIMSELF LIABLE TO BE CHARGED INTEREST U/S 234B OF THE ACT. THE CHARGING OF INTEREST IS CONSEQUENTIAL AND MANDATORY AND THE AO HAS NO DISCRETION IN THE MATTER. THIS PROPOSITION HAS BEEN UPHELD BY THE HONBLE APEX COURT IN THE CASE OF ANJUM H. GHASWALA (252 ITR 1) (SC) AND I, THEREFORE, UPHOLD THE ACTION OF THE AO IN CHARGING THE ASSESSEE THE AFORESAID INTEREST U/S 234B OF THE ACT. THE AO IS, HOWEVER, DIRECTED TO RE-COMPUTE THE INTEREST CHARGEABLE U/S 234B OF THE ACT, IF ANY, WHILE GIVING EFFECT OF THIS ORDER. 6. GROUND NO.3 DISALLOWANCE U/S 14A R.W.R. 8D(2)(II) OF THE IT RULES, 1962 6.1 IN THIS GROUND (SUPRA), THE ASSESSEE ASSAILS THE ACTION OF THE AUTHORITIES BELOW IN MAKING AND SUSTAINING THE DISALLOWANCE OF ITA NO. 799/BANG/2017 PAGE 4 OF 17 RS.23,22,916/- U/S 14A R.W.R. 8D(2)(II) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). ACCORDING TO THE LEARNED AR, THE AFORESAID DISALLOWANCE U/RULE 8D(2)(II) OF THE RULES WAS NOT CALLED FOR SINCE THE ASSESSEE AS PER ITS BALANCE SHEET AS ON 31.03.2009 (PLACED AT PAGE 9 OF PAPER BOOK) HAD ITS OWN NON-INTEREST BEARING FUNDS AMOUNTING TO APPROX. RS.42.59 CRORES; COMPRISING OF SHARE CAPITAL, SHARE APPLICATION MONEY, RESERVES AND SURPLUS AND UNSECURED LOANS FOR MAKING INVESTMENTS IN THE PERIOD UNDER CONSIDERATION AND FURTHER THAT THE INVESTMENTS AS PER BALANCE SHEET AS ON 31.03.2009 AT APPROX. RS.14.50 CRORES WAS LESS THAN THE ASSESSEES INVESTMENTS AS ON 31.03.2008 WHICH WAS APPROX. RS.23.43 CRORES. NOT ONLY THAT, IT IS SUBMITTED THAT ALL THESE DETAILS WERE PLACED BEFORE THE ASSESSING OFFICER (AO) AND ALSO BEFORE THE CIT(A) VIDE LETTER DATED 24.08.2016 AND 27.01.2017 BUT WERE REJECTED WITHOUT BEING FACTUALLY CONTROVERTED. IT IS CONTENDED THAT EVEN IF IT IS PRESUMED THAT INVESTMENT IN SHARES IS MADE OUT OF MIXED FUNDS, IT IS SETTLED LAW THAT EVEN IF MIXED FUNDS ARE AVAILABLE, IT SHOULD BE PRESUMED THAT THE INVESTMENT IN SHARES IS MADE OUT OF ITS OWN FUNDS; WHEREAS IN THE CASE ON HAND, THE ASSESSEE HAS SUFFICIENT OWN NON- INTEREST-BEARING FUNDS TO COVER INVESTMENT IN SHARES. IN SUPPORT OF THE ASSESSEES CONTENTIONS, THE LEARNED AR PLACED RELIANCE ON THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD., (313 ITR 340) AND ALSO CIT VS. HDFC BANK LTD., (ITA NO. 330 OF 2012) WHEREIN IT WAS HELD THAT, IF SHARE CAPITAL AND RESERVES ARE AVAILABLE ALONG WITH BORROWED CAPITAL, A PRESUMPTION CAN BE MADE THAT INVESTMENT IN