Khatu Shyamji Re-Rolling Pvt.Ltd, Nanded V. Pr. Commissioner of Income-tax -1, Aurangabad

ITA 801/PUN/2019

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The case involves Khatu Shyamji Re Rolling Private Limited, which appealed against the order of the Pr.Commissioner of Income Tax-1, Aurangabad, under section 263 of the Income Tax Act, 1961. The appeal was directed against the assessment order passed by the Assessing Officer under section 143(3), which was challenged for not adequately addressing certain financial discrepancies, including excess depreciation claimed and issues related to investments and asset sales. The Tribunal examined whether the Assessing Officer had conducted sufficient inquiries into these matters during the original assessment proceedings. The Tribunal found that while some issues were not adequately addressed, the disallowance under section 14A was incorrectly applied as there was no exempt income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134158 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 04-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 21-05-2019
• Other Referred Cases: CIT Vs. Max India Limited, Pr.CIT vs Kohinoor Project (P.) Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LOKESH SANCHETI
• Keywords: Revision of order; Depreciation; Earning of tax free income; Wrong claim
• Section: 263; 143(3); 14A; 115JB

Judgement Text

आयकर अपीलीय अिधकरण “ए” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.801/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year : 2014-15 Khatu Shyamji Re Rolling Private Limited, D-21, MIDC, Nanded – 431603. PAN: AACCK 6069 N V s The Pr.Commissioner of Income Tax-1, Aayakar Bhavan, Nr.Holy Cross English School, Cantonment, Aurangabad – 431002. Appellant/ Assessee Respondent /Revenue Assessee by Shri Lokesh Sancheti – AR Revenue by Shri Keyur Patel –CIT(DR) Date of hearing 05/12/2022 Date of pronouncement 22/02/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order under section 263 of ld.Pr.Commissioner of Income Tax-1, Aurangabad dated 18.03.2019 emanating from assessment order of Assessing officer dated 06.06.2016under section 143(3)of the I.T.Act, 1961 for the A.Y.2014-15. The Assessee has raised the following grounds of appeal: “A) The Ld. PCIT-(1) has failed to appreciate that the matter in question has been considered by the Ld. AO at the time of Scrutiny proceedings and erred in passing the order u/s 263, ITA No.801/PUN/2019 Khatu Shyamji Re-Rolling Pvt. Ltd. [A] 2 of the Income Tax Act, 1961 and opening the matter for revision. B) For that, your petitioner craves the right to put additional grounds at the time of appeal.” Brief facts of the case : 2. The Assessing Officer(AO), ld.ACIT, Nanded Circle had passed an assessment order under section 143(3) of the Act, on 06.06.2016 accepting the Return of Income(RoI) filed by the assessee. The AO has not discussed anything in the order except Gross Profit of the assessee. The ld.Pr.CIT, Aurangabad issued notice under section 263 of the Act to the assessee. After hearing the assessee, the ld.Pr.CIT, Aurangabad has passed an order under section 263 of the Income Tax Act, 1961 dated 18.03.2019 for A.Y. 2014-15. The ld.Pr.CIT held that the AO failed to make enquiries regarding excess depreciation of Rs.12 lakhs claimed by the assessee. The assessee has accepted this fact that erroneously the excess depreciation of Rs.12 lakhs was claimed. The ld.Pr.CIT has also held that as a result of wrong claim of depreciation, there is incorrect computation of profit under section 115JB of the Act. The ld.Pr.CIT also held that the AO failed to make enquiries regarding the investment of Rs.30 lakhs in equity shares of Prestige Estate Project Limited, loss on sale of fixed assets, reduction in share application money. Therefore, ld.Pr.CIT held that the AO has erred in not ITA No.801/PUN/2019 Khatu Shyamji Re-Rolling Pvt. Ltd. [A] 3 making enquiries and hence the Assessment Order was prejudicial to the interest of the Revenue. The ld.Pr.CIT directed the AO to pass assessment order after conducting proper enquiries and after giving opportunity to the assessee. 3. Aggrieved by the order of the ld.Pr.CIT assessee has filed appeal before this Tribunal. The ld.Authorised Representative(ld.AR) Submission : 4. The ld.AR submitted that the order is not prejudicial to the interest of the Revenue as AO had made necessary enquiries and then passed the assessment order. The ld.AR submitted that as far as question of investment of Rs.30 lakhs is concerned, the assessee has not earned any exempt income during the year. Therefore, there is no question of disallowance under 14A of the Act. The ld.AR also submitted that reduction in share application money was due to refund of share application by the assessee. The ld.AR filed a paper book. The ld.AR relied on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Max India Limited. The ld.Departmental Representative(ld.DR) Submissions : 5. The ld.DR relied on the order of the ld.Pr.CIT, Aurangabad. The ld.DR specifically stated that AO has not carried out any enquiry with reference to the issues mentioned by the ld.Pr.CIT in the order. ITA No.801/PUN/2019 Khatu Shyamji Re-Rolling Pvt. Ltd. [A] 4 The ld.DR took us through the paper book filed by the assessee which contains submissions made by the assessee before the AO during the original assessment proceedings, to demonstrate that no submission was made by the assessee on the impugned issues. The ld.DR also explained that assessee has not produced any notice issued by the AO, to demonstrate that AO had asked questions related to the impugned issues. Therefore, ld.DR stated that order passed by the AO was without carrying any enquiries, hence, it was erroneous. The ld.DR also stated that one issue has already been admitted by the assessee. Findings & Submissions : 6. We have heard both the parties and perused the records. On perusal of the assessment order dated 06.06.2016 passed under section 143(3) of the Act, it is observed that the AO has accepted returned income giving the reason that Gross Profit and Net Profit for the year under consideration is more than that of earlier year. Thus, in the cryptic order, the AO seems to have only looked at Net Profit and Gross Profit of the assessee. Apparently, on perusal of the assessment order, we are of the opinion that the AO has not carried out any enquiry regarding the impugned issues mentioned in the order under section 263 of the Act. The ld.AR has not brought to our notice any document to demonstrate that the AO had carried out ITA No.801/PUN/2019 Khatu Shyamji Re-Rolling Pvt. Ltd. [A] 5 enquiries regarding impugned issues. We have perused the submission made by the Assessee during the assessment proceedings which is on page no.34 to 39 of the paper book submitted by the assessee. On perusal of the submission of the assessee at page no.34 to 39 of paper book, it is observed that assessee has not answered or provided any information regarding the impugned issues. It is also an admitted fact by the assessee that inadvertently excess depreciation has been claimed, which is one of the impugned issues. Computation of taxability under section 115JB is affected by excess depreciation claim. Therefore, to the extent of Computation of Taxability under section 115JB and excess depreciation, there is no doubt that the assessment order is erroneous and prejudicial to the interest of the Revenue. As far as other issues are concerned, we have already mentioned that AO had not carried out any enquiry and assessee has also not made any submissions regarding the remaining issues mentioned in the order under section 263 of the Act. Therefore, we agree with the ld.Pr.CIT that order is erroneous and prejudicial to the interest of the Revenue with reference to the impugned issues mentioned in the order under section 263 of the Act by ld.Pr.CIT, except the issue of 14A disallowance. Accordingly, we uphold the order under section 263, except for the issue of disallowance under section 14A of the Act. The issue of disallowance under section 14A is discussed in subsequent para. ITA No.801/PUN/2019 Khatu Shyamji Re-Rolling Pvt. Ltd. [A] 6 14A Disallowance :- 7. The assessee has claimed before us that there is no exempt income and hence there is no question of disallowance under section 14A of the Act. The ld.Pr.CIT has observed in para 7.1 of the order that there is no exempt income. However, ld.Pr.CIT tried to distinguish the case laws, stated that invoking 14A requires proper investigation and deeper analysis which AO failed to do. Therefore, the ld.Pr.CIT concluded that proper investigation is required. Thus, it is an admitted fact that there was no exempt income during the year. We have perused the computation of income filed by the assessee and observed that there is no exempt income. It is a settled proposition of law that once there is no exempt income, there cannot be any disallowance under section 14A of the Act. 7.1 The Hon’ble jurisdictional High Court in the case of Pr.CIT vs Kohinoor Project (P.) Ltd [2020] 121 taxmann.com 177 (Bombay) has held as under : Quote, “ Section 14A of the Act deals with expenditure incurred in relation to income not includible in total income. As per sub-section (1) of section 14A, for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. In Cheminvest Ltd. (supra) Delhi High Court examined the expression "does not form part of the total income" as appearing in sub-section (1) of section 14A of the Act. Delhi ITA No.801/PUN/2019 Khatu Shyamji Re-Rolling Pvt. Ltd. [A] 7 High Court held that the said expression envisages that there should be an actual receipt of income which is not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. It was clarified that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. 9. This view has been followed in several decisions by this Court. In fact in Pr. CIT v. Man Infraprojects Ltd. [IT Appeal No. 259 of 2017, dated 9-4-2019], this Court followed the decision of the Delhi High Court in Cheminvest Ltd. (supra). It was further noted in MAN Infraprojects Ltd. that the decision of the Delhi High Court was challenged by the revenue before the Supreme Court by fling SLP but the SLP was dismissed. 10. In the light of the above, we hold that no substantial question of law arises from the order of the Tribunal. The appeal is devoid of merit and is accordingly, dismissed. ” Unquote. 8. In view of the above, the ld.Pr.CIT has erred in stating that 14A requires proper investigation, because as far as facts of this case are concerned, there is no exempt income and hence no disallowance under section 14A can be made. Therefore, to the extent of 14A issue, we are of the opinion that the order of ld.Pr.CIT under section 263 of the Act, is not sustainable. However, we have already clarified that the order under section 263 is sustained by us on all other issues mentioned in the order under section 263 of the Act. ITA No.801/PUN/2019 Khatu Shyamji Re-Rolling Pvt. Ltd. [A] 8 Accordingly, grounds of appeal raised by the assessee are partly allowed. 9. In the result, appeal of the assessee is Partly Allowed. Order pronounced in the open Court on 22 nd February, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 22 nd Feb, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकरअपीलीयअिधकरण, “ए” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.