M/s Gemini Distilleries Pvt Ltd , Bangalore V. Income Tax Officer Ward-3(1)(2), Bangalore

ITA 829/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8950 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 16-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAKIR HUSSAIN S
• Assessee Lawyers: V SRINIVASAN
• Keywords: Opportunity of being heard; Earning of tax free income; Assessment record
• Section: 263; 63; 2; 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 82 9 / BANG/201 8 ASSESSMENT YEAR : 20 1 3 - 1 4 M/S. GEMINI DISTILLERIES PVT. LTD., #29/2, H M STAFFORD, VII CROSS, VASANTH NAGAR, BANGALORE 560 052. PAN: AABCG0792R VS. THE INCOME TAX OFFICER, WARD 3 [1] [2], BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI V. SRINIVASAN, ADVOCATE RE VENUE BY : SHRI SHAKIR HUSSAIN S, CIT (DR) DATE OF HEARING : 04 . 10 .2018 DATE OF PRONOUNCEMENT : 12 . 10 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER PASSED BY THE LD. PR.CIT, BANGALORE-3, BANGALORE DA TED 29.01.2018 U/S. 263 OF THE IT ACT FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER PASSED BY THE LEARNED PR. C.I.T. U/S 2 63 OF THE ACT, IN SO FAR AS IT IS AGAINST THE APPELLANT, IS OPPOSED TO L AW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED PR. C.I.T. FAILED TO APPRECIATE THAT THERE WAS NO ERROR MUCH LESS AN ERROR PREJUDICIAL TO THE INTEREST OF T HE REVENUE IN THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WARRA NTING REVISION U/S.263 OF THE ACT AND CONSEQUENTLY, THE ORDER PASS ED BY THE PR. C.I.T. IS OPPOSED TO LAW AND FACTS OF THE APPELLANT'S CASE AND REQUIRES TO BE CANCELLED. 3. THE LEARNED PR.CIT OUGHT TO HAVE APPRECIATED THA T THE ISSUES POINTED OUT BY HIM IN THE NOTICE ISSUED U/S. 263 OF THE ACT WAS ALREADY EXAMINED BY THE LEARNED A.O. IN THE ASSESSMENT PROC EEDINGS AND THAT THE FRESH DIRECTIONS ISSUED TO MAKE THE DISALLOWANC ES WERE BAD IN LAW ITA NO. 829/BANG/2018 PAGE 2 OF 4 AND CANNOT BE REGARDED AS ERROR PREJUDICIAL TO THE INTEREST ON REVENUE TO TAKE ACTION U/S. 263 OF THE ACT. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED PR.C IT IS NOT JUSTIFIED IN DIRECTING THE LEARNED A.O. TO MAKE A DISALLOWANC E OF RS. 419,545/- U/S 14A RWS 8D OF THE ACT AFTER HOLDING THAT THE AS SESSING OFFICER HAD NOT LOOKED INTO THE ASPECTS FOR CONSIDERING THE DIS ALLOWANCE AS NOTED IN THE IMPUGNED ORDER UNDER THE FACTS AND IN THE CI RCUMSTANCES OF THE APPELLANT'S CASE. 5. THE LEARNED PR.CIT IS NOT JUSTIFIED IN DIRECTING THE A.O. TO CONSIDER THE SAME DISALLOWANCE DIRECTED TO BE MADE U/S 14A F OR PURPOSES OF COMPUTING THE INCOME U/S. 115JB OF THE ACT FOR MAKI NG THE ADDITION CONTEMPLATED UNDER EXPLANATION [F] TO SECTION 115JB [2] OF THE ACT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANT'S CASE. 6. THE LEARNED PR.CIT IS NOT JUSTIFIED IN DIRECTING THE LEARNED A.O. TO MAKE A DISALLOWANCE OF THE DONATION OF RS. 1,00,000 /- DEBITED TO PROFIT AND LOSS ACCOUNT UNDER THE FACTS AND IN THE CIRCUMS TANCES OF THE APPELLANT'S CASE. 7. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLA NT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO OR DER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 3. IN THE COURSE OF HEARING BEFORE US, IT WAS SUBMI TTED BY LD. AR OF ASSESSEE THAT ASSESSEES MAIN GRIEVANCE IS REGARDING DIRECTION OF PR. CIT AS PER WHICH HE DIRECTED THE AO TO COMPULSORILY MAKE ADDITION OF RS . 4,19,545/- U/S. 14A OF IT ACT. HE SUBMITTED THAT IF THE DIRECTION IS MODIFIE D TO THE EFFECT THAT THE AO SHOULD DECIDE THIS ISSUE AFRESH AFTER PROVIDING ADE QUATE OPPORTUNITY TO THE ASSESSEE, THEN THE ASSESSEE HAS NO GRIEVANCE. HE F URTHER POINTED OUT THAT IN RESPECT OF THE SECOND ISSUE I.E. IN RESPECT OF DONA TION DEBITED TO P&L ACCOUNT, PR. CIT HAS RESTORED THE MATTER BACK TO AO AND THE AO IS DIRECTED TO EXAMINE THIS ISSUE AND PASS ORDER IN ACCORDANCE WITH THE LA W AFTER GIVING OPPORTUNITY OF BEING HEARD TO ASSESSEE. HE SUBMITTED THAT ON THIS ISSUE THE ASSESSEE HAS NO GRIEVANCE BUT FOR THE FIRST ISSUE ALSO, THE DIRECTI ONS OF PR. CIT SHOULD BE MODIFIED IN THE SAME LINE. THE LD. DR OF REVENUE A LTHOUGH SUPPORTED THE ORDER OF PR. CIT BUT HE DID NOT RAISE ANY SERIOUS OBJECTI ON AGAINST THIS REQUEST OF LD. AR OF ASSESSEE TO MODIFY THE DIRECTION OF PR.CIT TO AO IN RESPECT OF FIRST ISSUE. ITA NO. 829/BANG/2018 PAGE 3 OF 4 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT AS PER PARA 2 OF THE IMPUGNED ORDER PASSED BY PR. CIT, IT IS NOTED BY HI M THAT AS PER THE ASSESSMENT RECORDS, IT IS SEEN FROM THE FINANCIAL S TATEMENT THAT THE ASSESSEE HAS SHOWN TOTAL INVESTMENT OF RS. 8,12,27,374/- AS AT 31.03.2013 AND RS. 8,65,90,746/- AS AT 31.03.2012 AND AS PER THE PR. C IT, AS PER RULE 8D R.W.S. 14A OF IT ACT, AN AMOUNT OF RS. 4,19,545/- SHOULD H AVE BEEN DISALLOWED AND BROUGHT TO TAX AND SINCE THE AO HAS FAILED TO DISAL LOW THE SAME, IT HAS BEEN DIRECTED BY PR. CIT TO THE AO THAT HE SHOULD MAKE T HIS DISALLOWANCE OF RS. 4,19,545/-. IN THIS REGARD, WE ARE OF THE CONSIDER ED OPINION THAT IN ALL THE CASES, THE DISALLOWANCE TO THE EXTENT OF 0.5% OF TH E AVERAGE INVESTMENT IN SHARES IS NOT JUSTIFIED AND BEFORE MAKING SUCH DISA LLOWANCE, VARIOUS ASPECTS HAS TO BE EXAMINED. THE FIRST ASPECT TO BE EXAMINE D IS THIS AS TO WHETHER THERE WAS ACTUAL RECEIPT OF DIVIDEND IN THE PRESENT YEAR OR NOT BECAUSE IT HAS BEEN HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CHE MINVEST PVT. LTD. VS. CIT AS REPORTED IN (2015) 378 ITR 33 THAT IF THERE IS NO E XEMPT INCOME IN THE PRESENT YEAR, THERE CANNOT BE DISALLOWANCE U/S. 14A IN THE PRESENT YEAR. THERE IS NO FINDING OF PR. CIT IN THE IMPUGNED ORDER WHETHER TH E ASSESSEE WAS HAVING ANY EXEMPT INCOME IN THE PRESENT YEAR OR NOT. SIMILARL Y EVEN IF THE ASSESSEE IS HAVING EXEMPT INCOME AND DISALLOWANCE HAS TO BE MAD E, QUANTUM OF DISALLOWANCE IS TO BE DETERMINED AS PER LAW. THERE ARE SEVERAL JUDGEMENTS ON THIS ISSUE THAT IF AT ALL SOME DISALLOWANCE HAS TO BE MADE FOR MAKING INVESTMENTS IN SHARES OF VARIOUS COMPANIES THEN ONL Y THOSE INVESTMENTS SHOULD BE CONSIDERED FROM WHICH THE DIVIDEND WAS AC TUALLY RECEIVED IN THE PRESENT YEAR. ON THIS ASPECT ALSO, THERE IS NO FIN DING OF PR. CIT IN THE IMPUGNED ORDER. THERE IS ONE MORE ASPECT TO BE SEE N AS TO WHETHER THE DEDUCTION FOR ADMINISTRATIVE EXPENSES WAS CLAIMED B Y THE ASSESSEE IN THE P&L ACCOUNT IN THE PRESENT YEAR OUT OF WHICH THIS DISAL LOWANCE OF RS. 4,19,545/- CAN BE MADE BECAUSE IF IT IS FOUND THAT THE ADMINISTRAT IVE EXPENSES DEBITED IN P&L ACCOUNT IS LESS THAN THIS AMOUNT, THEN THE DISALLOW ANCE CANNOT EXCEED THE ACTUAL ADMINISTRATIVE EXPENSES DEBITED IN P&L ACCOU NT BECAUSE SECTION 14A TALKS OF DISALLOWANCE OUT OF EXPENSES CLAIMED BY TH E ASSESSEE AND THIS IS NOT A SECTION FOR MAKING ANY ADDITION EVEN IF THERE IS NO CLAIM BY THE ASSESSEE FOR ANY EXPENSES. HENCE WE FEEL IT PROPER TO MODIFY TH E DIRECTION OF PR. CIT. WE ITA NO. 829/BANG/2018 PAGE 4 OF 4 DO SO. WE DIRECT THE AO TO DECIDE THIS ISSUE OF DI SALLOWANCE U/S. 14A AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE AND HE SHOULD PASS A SPEAKING AND REASONED ORDER AS PER LAW. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE C APTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 12 TH OCTOBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.