M/s Primax Fiscal Services Ltd., Kolkata V. ITO, WD-8(3), KOLKATA, Kolkata

ITA 929/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1584 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G MALLIIKANJURA
• Assessee Lawyers: MRS RIYA ATHAGHARA ACA
• Keywords: Earning of tax free income
• Section: 143(3); 142(1); 14A; 263; 63

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 929 / KOL / 2015 ASSESSMENT YEAR :2010-11 M/S PRIMAX FISCAL SERVICES LTD., FLAT-A-, 6 TH FLOOR, 33A, J.L. NEHRU ROAD, CHATERJEE INTERNATIONAL CENTRE, KOKATA-71 [ PAN NO. AABCP 5060 H ] V/S . INCOME TAX OFFICER, WARD-8(3), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT MRS. RIYA ATHAGHARA ACA /BY RESPONDENT SHRI G. MALLIIKANJURA, CIT-DR /DATE OF HEARING 26-07-2017 !' /DATE OF PRONOUNCEMENT 30-08-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL HAS BEEN FILED BY THE ASSESSEE RELATIN G TO ASSESSMENT YEAR 2010-11. THE APPEAL IS AGAINST THE ORDER PASSED BY COMMISSIONER OF INCOME TAX-3, KOLKATA U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 26.03.2008. MRS. RIYA ATHAGHARA, LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE AND SHRI G.MALLIIKARJUNA, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. AT THE OUTSET, THERE WAS A DELAY OF 24 DAYS IN F ILING THE APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION FOR CON DONATION OF DELAY. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE. WE FIND THAT THERE WAS SUFFICIENT C AUSE FOR NOT FILING THE ITA NO.929/KOL/2015 A.Y. 2010-11 M/S PRIMAX FISCAL SERVICES LTD. VS. ITO WD- 8(3) KOL. PA GE 2 APPEAL BEFORE THE STIPULATED TIME. THEREFORE, WE CO NDONE THE DELAY AND ADMIT TO APPEAL. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1) THAT THE HON'BLE PRINCIPAL COMMISSIONER OF INCOM E TAX 3 ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE INCOME TAX AC T 1961. 2) THAT THE HON'BLE PRINCIPAL COMMISSIONER OF INCOM E TAX 3 ERRED IN HOLDING THAT THE ORDER WAS ERRONEOUS & PREJUDICIAL TO THE I NTEREST OF REVENUE & THE ORDER HAS TO BE SET ASIDE. 3) THAT THE HON'BLE PRINCIPAL COMMISSIONER OF INCOM E TAX 3 ERRED IN DISALLOWING OF RS.49,98,161/- INSTEAD OF DISALLOWAN CE OF RS.8,01,686/- MADE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULE 19 62. 4) THAT THE APPELLANT BE ALLOWED TO ADD/ALTER/AMEND /DELETE EITHER ANY OR ALL OF THE GROUNDS OF APPEAL, EITHER BEFORE OR AT THE TIME OF HEARING. 4. EFFECTIVE ISSUE RAISED BY ASSESSEE IS THAT LD. P R. CIT U/S 263 OF THE ACT ERRED IN HOLDING THE ORDER PASSED BY ASSESSING OFFI CER AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 5. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A LIMI TED COMPANY AND DECLARED ITS INCOME UNDER THE HEAD CAPITAL GAINS. IN THE I NSTANT CASE ASSESSMENT WAS FRAMED BY AO U/S 143(3) OF THE ACT AFTER MAKING CER TAIN ADDITIONS/ DISALLOWANCES TO THE TOTAL INCOME OF ASSESSEE AT 8,88,518/- ONLY VIDE ORDER DATED 31.01.2013. SUBSEQUENTLY LD. CIT U/S 263 OBSE RVED CERTAIN INFIRMITY IN THE ORDER OF AO. THE ASSESSEE IN ITS COMPUTATION OF INCOME HAS MADE A DISALLOWANCE OF 8,01,686/- IN PURSUANCE TO PROVISION TO THE PROVISI ON OF RULE 8D R.W.S. 14A OF THE ACT. THE DISALLOWANCE OFFERED BY THE ASSESSEE WAS ACCEPTED BY THE AO IN THE ASSESSMENT FRAMED U/S 143 (3) OF THE ACT. HOWEVER, THE LD. CIT U/S 263 OF THE ACT OBSERVED TH AT THE DISALLOWANCE TO BE MADE UNDER RULE 8D R.W.S. SECTION 14A OF THE ACT CO MES TO 49,93,761/- ONLY. IN VIEW OF THE ABOVE, LD. CIT U/S 263 ISSUED NOTICE TO THE ASSESSEE FOR REVISING THE ASSESSMENT FRAMED BY AO U/S 143(3) OF THE ACT. IN COMPLIANCE THERETO, ASSESSEE SUBMITTED THAT THERE WAS SUFFICIE NT OWN FUND AVAILABLE WITH IT FOR MAKING THE INVESTMENT IN THE SHARES AND NO BORR OWED FUND UTILIZED FOR THE PURPOSE OF INVESTMENT. THEREFORE, THE ASSESSEE SUBM ITTED THAT NO DISALLOWANCE UNDER RULE 8D OF THE IT RULES, 1962 ON ACCOUNT OF INTEREST CAN BE MADE. ITA NO.929/KOL/2015 A.Y. 2010-11 M/S PRIMAX FISCAL SERVICES LTD. VS. ITO WD- 8(3) KOL. PA GE 3 5.1 THE ASSESSEE FURTHER SUBMITTED THAT IT HAS EARN ED INTEREST INCOME OF 3,30,75,662/- AND INCURRED INTEREST COST OF 3,70,11,037 ONLY. ACCORDINGLY, ASSESSEE FOR THE PURPOSE OF DISALLOWANCE UNDER THE PROVISION OF RULE 8D R.W.S.14A OF THE ACT HAS PLEADED TO CONSIDER THE NE T AMOUNT OF INTEREST EXPENSE I.E. 39,35,375/- ONLY. HOWEVER, LD. CIT U/S 263 OF THE A CT OBSERVED THAT NO ENQUIRY OF WHATSOEVER WAS MADE BY THE AO WI TH REGARD TO INTEREST EXPENSE CLAIMED BY THE ASSESSEE FOR 3,70,11,037/- ONLY. ACCORDINGLY, LD. CIT(A) HAS HELD THE ORDER OF AO AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE DUE TO LACK OF ENQUIRY AND BY OBSERVING AS UNDER:- 6. I HAVE CONSIDERED THE MATTER AND GONE THROUGH TH E SUBMISSIONS AND THE FACTS. IT IS OBSERVED THAT THE AO HAS NOT EXAMINED AND THE AS SESSEE HAS NOT PRODUCED ANY DETAILS OR EVIDENCES TO SHOW THAT ON THE DATE OF IN VESTMENT FOR EARNING EXEMPT INCOME THAT THERE WAS A CASH BALANCE AND/OR A BANK BALANCE FROM ITS OWN SHAREHOLDERS FUNDS SUFFICIENT TO COVER THE INVESTME NT. FURTHER, IN ITS SUBMISSION, THE ASSESSEE HAS TAKEN NET FIGURE OF THE INTEREST INSTE AD OF THE ACTUAL FIGURE OF INTEREST. THE CALCULATION OF DISALLOWANCE U/S 14A READ WITH R ULE 8D(2) SHOULD HAVE BEEN MADE BY TAKING WHOLE INTEREST OF RS.3,7011,037/- AN D INTEREST ON OVERDRAFT OF RS.1,00,503/- WHICH COMES TO RS.3,71,11,540/-. THIS THE AO HAS FAILED TO DO. BASED UPON THE ABOVE, IT IS CLEAR THAT HE AO HAS NO T EXAMINED ALL FACTS AND DETAIL WHILE DISALLOWING AMOUNT U/S. 14A OF THE ACT TO THE ASSESSEE AND THERE IS WRONG ASSUMPTION OF FACTS AND INCORRECT APPLICATION OF LA W. THE ASSESSMENT TO THIS EXTENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. I AM OF THE OPINION THAT THE CASE HAS TO GO BACK TO THE AO FOR FRESH ASSESSMENT AFTER EXAMINING ALL THE FACTS AND SUBMISSIONS OF THE ASSESSEE. BEING AGGRIEVED BY THIS ORDER OF LD. CIT ASSESSEE C AME IN APPEAL BEFORE US. 7. BEFORE US LD. AR FOR THE ASSESSEE FILED PAPER BO OK WHICH IS RUNNING PAGES 1 TO 69 AND SUBMITTED THE DETAILED WORKING FO R THE DISALLOWANCE UNDER RULE 8D R.W.S SECTION 14A OF THE ACT WAS MADE AVAIL ABLE TO THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS. THEREFORE THE AO AFTER C ONSIDERING THE SAME CHOSE NOT TO MAKE ANY ADDITION ON ACCOUNT OF INTERE ST EXPENSES. LD. AR DREW OUR ATTENTION ON PAGES 3 OF THE PAPER BOOK WHERE DE TAILED WORKING FOR THE DISALLOWANCE UNDER RULE 8D R.W.S 14A OF THE ACT WAS PLACED. LD. AR FURTHER SUBMITTED THAT AO HAS NOT CONSCIOUSLY MADE THE DISA LLOWANCE UNDER RULE 8D R.W.S. 14A OF THE ACT. HE PRAYED BEFORE THE BENCH T O CONFIRM THE ORDER OF AO. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LD . CIT AND PRAYED BEFORE THE BENCH TO CONFIRM THE SAME. ITA NO.929/KOL/2015 A.Y. 2010-11 M/S PRIMAX FISCAL SERVICES LTD. VS. ITO WD- 8(3) KOL. PA GE 4 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, ASSESSMENT ORDER FRAMED U/S. 143(3) OF THE ACT WAS HELD ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE BY THE LD. CIT IN HIS ORDER PASSED U/S 2 63 OF THE ACT ON THE GROUND THAT NO VERIFICATION / ENQUIRY WAS CONDUCTED BY THE AO WITH REGARD TO DISALLOWANCE TO BE MADE UNDER THE RULE 8D R.W.S. 14 A OF THE ACT WHEREAS THE ARGUMENT MADE BY LD. AR IS THAT DETAILED WORKING WA S MADE AVAILABLE TO THE AO AT THE TIME OF ASSESSMENT FOR THE DISALLOWANCE M ADE U/S. 14A R.W.S. 8D OF THE IT RULES, 1962. THUS, THE AO AFTER CONSIDERING THE RECORDS AVAILABLE BEFORE HIM TOOK A DECISION NOT TO MAKE ANY DISALLOW ANCE OTHER THAN THE DISALLOWANCE MADE UNDER RULE 8D R.W.S. SECTION 14A OF THE ACT FOR RS. 8,01,686.00 ONLY. FROM THE ABOVE, THE UNDISPUTED FA CT IS THAT THE DISALLOWANCE MADE BY THE ASSESSEE AT ITS OWN IN THE COMPUTATION OF INCOME IS OF RS. 8,01,686.00 ONLY WHICH WAS ACCEPTED BY THE AO WITHO UT ANY ENQUIRY. THE LD. AR BEFORE US HAS NOT BROUGHT ANYTHING ON RE CORD SUGGESTING THAT AT THE TIME OF ASSESSMENT PROCEEDINGS ANY NOTICE U/S. 142(1) OF THE ACT WAS ISSUED. THUS IN OUR CONSIDERED VIEW THE LD. FAILED TO PROVE THAT ENQUIRY WAS CONDUCTED BY AO AT THE TIME OF ASSESSMENT. ON PERUSAL OF AO ORDER, WE NOTE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS CONDUCTED NO ENQUIRY WITH REGARD TO THE DISALLOWANCE U/S 14A OF THE ACT. THEREFORE THE INCO ME OF ASSESSEE HAS BEEN ASSESSED BY THE AO WITHOUT CONSIDERING THE ASPECT O F THE PROVISIONS OF SECTION 14A OF THE ACT. THUS THE CIT U/S 263 OF THE ACT HELD THE ORDER OF AO AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERE ST OF REVENUE DUE TO NON- ENQUIRY OF THE LOAN TAKEN BY IT. NOW THE ISSUE BEFORE US ARISES WHETHER THE DISALLOW ANCE OF INTEREST EXPENSES NEEDS TO BE MADE AS PER RULE 8D(2)(II) OF INCOME TA X RULES. THE ASSESSEE IN THE INSTANT CASE CLAIMED THAT IT HAS NOT INVESTED A NY BORROWED FUNDS IN THE SHARES/SECURITIES. THE LD. CIT IN HIS IMPUGNED ORDER U/S 263 HAS ALLEG ED THAT AO HAS NOT CARRIED OUT ANY ENQUIRY FOR THE DISALLOWANCE UNDER RULE 8D( 2)(II) OF INCOME TAX RULES. ITA NO.929/KOL/2015 A.Y. 2010-11 M/S PRIMAX FISCAL SERVICES LTD. VS. ITO WD- 8(3) KOL. PA GE 5 IN THIS REGARD, WE FIND THAT NO ENQUIRY WAS CONDUCT ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS IN THE ABSENCE OF ANY ENQUIRY ON THE PART OF AO WE HOLD THAT THE ORDER PASSED BY AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. IN HOLDING SO, WE DRAW OUR SUPPORT FROM THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME- TAX VS. SUNBEAM AUTO LTD. REPORTED IN 332 ITR 167 WHEREIN THE HON'BLE COURT HAS HELD:- ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN 'LA CK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVE N INADEQUATE, THAT WOULD NOT, BY ITSELF, GIVE OCCASION TO THE COMMISSIONER TO PAS S ORDERS UNDER SECTION 263 MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATT ER. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION WOUL D BE OPEN. IN THE CASE ON HAND, LD.AR HAS NOT BROUGHT ANYTHING ON RECORD SUGGESTING THAT ENQUIRY WAS CONDUCTED BY THE AO WITH REGARD TO THE DISALLOWANCE U/S 14A OF THE ACT R.W.R. 8D OF INCOME TAX RULES. ACCORDING LY, WE FIND NO REASON TO INTERFERE IN THE IMPUGNED ORDER PASSED BY LD. CIT(A ) U/S. 263. HENCE, THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 9. IN THE RESULT, ASSESSEES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 30 /08/2017 SD/- SD/- ($%&) ( %&) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S (%)*- 30 / 08 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S PRIMAX FISCAL SERVICES LTD., FLAT-A-2, 6 TH FLOOR, 33A, J.L.NEHRU ROAD, CHATTERJEE INTERNATIONAL CENTRE, KOLKATA-71 2. /RESPONDENT-ITO, WARD-8(3) AAYAKAR BHAWAN, P-7 CHOW RINGHEE SQUARE, KOL-69 3.)2)3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5.789$$3 , 3 , / DR, ITAT, KOLKATA 6.9;<=> / GUARD FILE. BY ORDER/ %, /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3 ,