STERLING MOTORS, MUMBAI V. ASST CIT CIR 12(1), MUMBAI

ITA 8586/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9166 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 19-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: A M PATEL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.8586/MUM/2011(A.Y. 2007-08) STERLING MOTORS, C/O. TAJ PRINTING WORKS, 46/A, CAWASJI PATEL STREET, FORT, MUMBAI - 400 001. PAN:AACFS 5451L (APPELLANT) VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIR. 12(1), AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020. (RESPONDENT) APPELLANT BY : MS. A.M.PATEL RESPONDENT BY : SHRI V.KRISHNAMOORTHY DATE OF HEARING : 05/12/2012 DATE OF PRONOUNCEMENT : 07/12/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-23, MUMBAI DATED 08/09/2011 FO R THE ASSESSMENT YEAR 2007-08. THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE READ AS UNDER: 1: 0 RE: ADDITIONAL DISALLOWANCE U/S. 14A: 1: 1 THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS E RRED IN CONFIRMING THE DISALLOWANCE OF RS. 4,76,305/- U/S. 14A OF THE INCO ME-TAX ACT, 1961 ARRIVED AT BY APPLYING RULE 8D OF THE INCOME-TAX RULES, 1962. 1: 2 WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSING OFFICER FAILED TO NOTE THAT THE AMOUNT COMPUTED AS PER RULE 8D IS RS. 4,76,305/- AN D HAS ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT WITHOUT APPRECIAT ING THE FACT THAT A SUM OF RS. 90,732/- HAD ALREADY BEEN SUO-MOTO DISALLOWED BY TH E APPELLANT U/S. 14A THEREBY LEADING TO A DOUBLE DISALLOWANCE OF RS.90,7 32/- AND THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH.. ITA NO.8586/MUM/2011(A.Y. 2007-08) 2 1: 3 THE APPELLANT SUBMITS THAT CONSIDERING THE FAC TS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT, NO FURT HER DISALLOWANCE U/S. 14A IS CALLED FOR AND THE STAND TAKEN BY THE ASSESSING OFF ICER IN THIS REGARD IS INCORRECT, UNWARRANTED AND NOT IN ACCORDANCE WITH L AW AND THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH. 1: 4 THE APPELLANT SUBMITS THAT THE ASSESSING OFFIC ER BE DIRECTED TO DELETE THE ADDITIONAL DISALLOWANCE SO MADE BY HIM AND TO RE-CO MPUTE ITS TOTAL INCOME ACCORDINGLY. 1:5 WITHOUT PREJUDICE TO THE FOREGOING, THE APPELLA NT SUBMITS THAT THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RULES, 1962 ARE NOT APPLICABLE TO ITS CASE AND THE COMMISSIONER OF INCOME-TAX (APPEALS) O UGHT TO HAVE HELD AS SUCH. 2. WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 1 4A OF THE INCOME TAX ACT,1961(THE ACT) THE AO APPLIED RULE 8D OF THE INC OME TAX RULES,1962 AND DISALLOWED A SUM OF RS.4,76,305/-. THOUGH LD. CIT( A) HAS UPHELD THAT RULE 8D COULD NOT BE APPLIED BEFORE A.Y. 2008-09, BUT HE H AS UPHELD THE DISALLOWANCE, AS ACCORDING TO LD. CIT(A) THE DISALLOWANCE MADE BY TH E AO IS REASONABLE. 3. IT IS THE CASE OF THE ASSESSEE THAT FOR IMMEDIA TE PRECEDING YEARS I.E. FOR A.Y 2004-05, 2005-06 AND 2006-07 SIMILAR MATTER CAME B EFORE CONSIDERATION OF THE TRIBUNAL AND REFERENCE IN THIS REGARD WAS MADE TO THE ORDER OF THE TRIBUNAL DATED 27/5/2011 IN ITA NOS. 3217, 3218 &3219/MUM/2009, WH EREIN THE MATTER WAS RESTORED BACK TO THE FILE OF AO, COPY OF THE ORDER WAS PLACED ON OUR RECORD AND ALSO GIVEN TO LD. D.R. IN THE SAID DECISION SIMILA R ISSUE WAS RESTORED BACK TO THE FILE OF AO WITH THE FOLLOWING OBSERVATIONS: 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF T HE PARTIES AND PERUSED THE RECORD. WE FIND THAT THIS ISSUE IS COVE RED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F GODREJ & BOYCE MFG. CO. LTD., [2010] 328 ITR 81 (BORN.) WHEREIN THE HON BLE COURT HELD AS UNDER: THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APPLY WITH E FFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSMENT Y EAR 2008-0 9, WHEN RULE 8D WAS NOT APPLICABLE, THE AO HAD TO ENFO RCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE , TH.E.. AO IS DUTY ITA NO.8586/MUM/2011(A.Y. 2007-08) 3 BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN I NCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONS ISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MA TERIAL ON THE RECORD. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD S TAND REMANDED TO THE AO. THE AO SHOULD DETERMINE AS TO WHETHER TH E ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) IN RE LATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE AO CA N ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. W HILE MAKING THAT DETERMINATION, THE AO SHOULD PROVIDE A REASONABLE O PPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 12. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. ( SUPRA), WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SAID JUDGMENT OF THE HONBLE JU RISDICTIONAL HIGH COURT AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. ACCORDINGLY THIS GROUND OF APPEAL RAISED IN ALL THE YEARS UNDER CONSIDERATION ARE TREATED AS ALLOWED FOR STATISTICA L PURPOSES. 13. IN THE RESULT, APPEALS FOR AY 2004-05 AND 2005- 06 ARE ALLOWED AND THE APPEAL FOR AY 2006-07 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 4. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOT H THE PARTIES AND AFTER CONSIDERING THEIR SUBMISSIONS, RESPECTFULLY FOLLOWI NG THE AFOREMENTIONED ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y 2004-05 , 2005-06 AND 2006-07 WE RESTORE THIS ISSUE TO THE FILE OF AO WITH SIMILAR D IRECTION. WE ORDER ACCORDINGLY. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 7 TH DAY OF DEC. 2012 SD/- SD/- (SANJAY ARORA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 7 TH DEC. 2012 ITA NO.8586/MUM/2011(A.Y. 2007-08) 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R E BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.