DCIT, New Delhi V. M/s. Pinewood Information Systems Pvt. Ltd., New Delhi

ITA 971/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3354 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 24-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PARAMITA TRIPATHY
• Keywords: Earning of tax free income; Additional evidence
• Section: 14A

Judgement Text

ITA NO. 971 /DEL./201 4 ASSESSMENT Y EAR: 2009 - 10 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F BENCH NEW DELHI) BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMB E R & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 9 7 1 / DEL./20 14 ASSESSMENT YEAR: 20 0 9 - 1 0 D CIT CENTRAL CIRCLE - 11 , NEW DELHI VS. PINEWOOD INFORMATION SYSTEMS PVT. LTD. C - 160, OKHLA INDUSTRIAL AREA, PHASE - 1, NEW DELHI (APPLICANT) (RESPONDENT) (PAN: ) REVENUE BY: MRS. PARAMITA TRIPATHY, CIT DR ASSESSEE BY: NONE DATE OF HEARING 24 / 0 4 /201 7 DATE OF PRONOUNCEMENT 2 7 / 0 4 /201 7 ORDER PER AMIT SHUKLA, JUDICIAL MEMBER : TH E AFORESAID APPEAL HA S BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 27 . 11 .201 3 , PASSED BY THE LD. CIT (A PPEALS ) - 3 1 , NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 153A/ 1 4 3 (3) FOR THE A.Y. 20 0 9 - 1 0 . THE GROUNDS RAISED BY THE REVENUE READS AS UNDER: - 1. THE ORDER OF LD.CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD.CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.88,86,377/ - MADE BY AO U/S 14A OF I.T. ACT R.W.R 8D OF IT RULES 1962. PAGE 2 OF 6 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT (A) HAS ERRED IN ACCEPTING THE ADDITIONAL EVIDENCES WITHOUT PROVIDING ANY OPPORTUNITY TO THE AO WHICH IS IN CONTRAVENTION TO RULE 46A OF IT RULES 1962. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. DESPITE SERVICE OF NOTICE TO THE RESPONDENT ASSESSEE , NONE APPEARED NOR HAS ANY ADJOURNMENT APPLICATION BEEN FILED. ON EARLIER OCCASION S ALSO DESPITE ISSUANCE OF NOTICES ON THE GIVEN ADDRESS, THE ASSESSEE HAS NOT RESPONDED. THEREFORE, WE ARE PROCEEDING TO DECIDE THE APPEAL O F THE DEPARTMENT ON MERITS. 3. THE BRIEF FACTS QU A THE ISSUE OF DISALLOWANCE U/S 14A ARE THAT THE LD. ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY HAS MADE INVESTMENT OF RS. 5, 5 7 , 4 8,277/ - ON WHICH DIVIDEND INCOME HAS BEEN EARNED , HOWEVER THERE IS NO MENTION OF ANY QUANTUM OF DIVIDEND INCOME WHICH HAS BEEN EARNED AND CLAIM ED AS EXEMPTION BY THE ASSESSEE. MERELY BY THE FACT THAT THE ASSESSEE HAS MADE INVESTMENT, THE LEARNED ASSESSING OFFICER HAS PROCEEDED TO MAKE THE DISALLOWANCE OF EXPENDITURE AS PER THE FORMULA LAID DOWN IN RULE 8D (2) AND ACCORDINGLY , DISALLOWANCE WAS WORKED OUT AT RS. 93,00,035/ - . T HE SAID DISALLOWANCE INCLUDED D ISALLOWANCE OF INTEREST EXPENDITURE OF RS. 88,86,377/ - UNDER RULE 8D (2) (II) AND INDIRECT EXPENDITURE OF RS. 4,13,658/ - UNDER RULE 8D( 2 )( III) . 4. THE LEARNED CIT (APPEALS) DI D NOT APPRECIATE THE MANNER IN WHICH THE LD ASSESSING OFFICER HAS PROCEEDED TO MAKE THE DISALLOWANCE WITHOUT COMPLYING WITH THE MANDATORY REQUIREMENT OF THE PRO VISIONS CONTAINED IN SECTION 14(2). THE ASSESSEE S MAIN PLEA PAGE 3 OF 6 BEFORE THE LD . CIT (APPEALS) WAS TH AT THERE IS NO SECURED LOAN WHICH HAS BEEN RAISED DURING THE YEAR AND IT HAS ONLY AVAILED A TEMPORARY OVER DRAFT FACILITIES FROM THE BANK WHICH IS ALSO ON ACCOUNT OF DISCOUNTING CHARGES/FEE ETC. THUS , THE LOAN FACILITY HAS BEEN PURELY FOR DISCOUNTING THE A MOUNT PAYABLE ON PURCHASED BILL AND HENCE IT CANNOT BE HELD THAT THE OVERDRAFT ACCOUNT HAS BEEN USED FOR MAKING OF ANY KIND OF INVESTMENT AND CONSEQUENTLY , NO DISALLOWANCE OF INTEREST CAN BE MADE. LD . CIT (APPEALS) AFTER CONSIDERING THE SAID EXPLANATION AND ON VERIFICATION OF THIS FACT HE DELETED THE DISALLOWANCE OF INTEREST MADE UNDER RULE 8D(2)(II). HE HAS FURTHER NOTED THAT THE ASSESSEE WAS INTO INVESTMENT ACTIVITY AND HAS MADE INVESTMENT IN THE GROUP COMPANIES AN D SINCE THE ASSESSEE COULD NOT GIVEN ANY BREAK UP OF INDIRECT EXPENDITURE , THEREFORE , HE CONFIRMED THE DISALLOWANCE UNDER RULE 8D(2)(II I ) WHICH WAS MADE BY TAKING 0.5% OF THE AVERAGE VALUE OF INVESTMENT. AGAINST THE SAID DISALLOWANCE, THERE IS NO APPEAL FI LED BY THE ASSESSEE. 5. BEFORE US THE LEARNED CIT DR SUBMITTED THAT THERE IS NO DETAIL MENTIONED EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT(APPEALS) IN RESPECT OF QUANTUM OF DIVIDEND AND ALSO THE ORDER OF THE ASSESSING OFFICER IS ALSO NOT SPE AKING AS TO HOW HE HAS PROCEEDED TO MAKE DISALLOWANCE, THEREFORE , THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROPER ADJUDICATION AS DESPITE SEVERAL NOTICES , THE ASSESSEE COULD NOT APPEAR BEFORE THE TRIBUNAL TO GIVE PROPER E XPLANATION AND PRESENT THE CORRECT FACTS OF THE CASE. 6. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS THE SUBMISSION MADE BY THE LEARNED CIT DR, WE PAGE 4 OF 6 FIND ON PERUSAL OF THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS ME CHANICALLY MADE THE DISALLOWANCE U/S 14A ONLY ON THE GROUND THAT THE ASSESSEE HAS MADE INVESTMENT OF MORE THAN RS. 5.57 CRORE S AND PROCEEDED TO COMPUTE THE DISALLOWANCE UNDER RULE 8D. S UCH AN APPROACH OF THE ASSESSING OFFICER CANNOT BE APPRECIATED , BECAUSE HE HAS NEITHER ANALYZED THE QUANTUM OF EXACT EXEMPT INCOME AS WELL AS THE NATURE OF ACCOUNTS MAINTAINED AND EXPENDITURE D EBITED BY THE ASSESSEE. SO FAR AS THE DISALLOWANCE OF INDIRECT EXPENDITURE IS CONCERNED, AS PER THE FORMULA LAID DOWN IN RULE 8D (2)(III) , THE SAME HAS BEEN CONFIRMED BY THE LEARNED CIT(APPEALS) AGAINST WHICH THERE IS NO APPEAL AND T HUS , THIS DISALLOWANCE STANDS CONFIRMED. THE ONLY ISSUE REMAINS IS WITH REGARD TO THE DISALLOWANCE OF INTEREST EXPENDITURE UNDER RULE 8D (2 ) (II) . I N THIS REGARD WE FIND THAT THERE IS A CATEGORICAL FINDING OF THE LEARNED CIT(APPEALS) THAT FIRST LY , THE ASSESSEE HAS NO SECURED LOANS ; AND SECONDLY, O VER D RAFT FACILITIES OBTAINED FROM THE BANK IS PURELY ON BILL DISCOUNTING AND HENCE SUCH AN OD FACILITY COUL D NOT HAVE BEEN DIVERTED FOR THE INVESTMENT PURPOSE S . O N THESE FACTS OSTENSIBLY THERE CANNOT BE ANY DISALLOWANCE OF INTEREST EXPENDITURE AND NOTHING HAS BEEN FOUND THAT THERE IS ANY DIVERSION O F INTEREST BEARING FUNDS FOR MAKING SUCH AN INVESTMENT. THUS, O N THE PRESENT FACTS AS DISCUSSED IN THE IMPUGNED ORDER, THE CONCLUSION OF THE LEARNED CIT (APPEALS) TO THE EXTENT OF DELETION OF INTEREST DISALLOWANCE IS AFFIRMED AND CONSEQUENTLY THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. AS REGARDS THE SECOND GROUND TAKEN BY THE REVENUE THAT THERE IS A VIOLATION OF RULE 46A , WE DO NOT FIND ANY MERITS ON SUCH GROUND FOR THE REASON THAT NOTHING H AS B EEN BROUGHT ON RECORD AS TO WHAT WAS/WERE THE ADDITIONAL EVIDENCE /S FILED BY THE ASSESSEE BEFORE THE PAGE 5 OF 6 LEARNED CIT(A PPEALS) . TH ERE IS NO WHISPER REGARDING ANY ADDITIONAL EVIDENCE WHICH CAN BE SAID TO HAVE BEEN ADMITTED BY THE LEARNED CIT (APPEALS) ESPECIALLY QUA THE DELETION OF INTEREST DISALLOWANCE . SO FAR AS THE FINDING ON INTEREST DISALLOWANCE IS CONCERNED THE SAME A PPEARS TO BE BASED ON THE FIGURES MENTIONED IN THE BALANCE SHEET AND AS EXPLAINED BY THE ASSESSEE FROM THE MATERIALS ON RECORD, THEREFORE , THE REVENUE WITHOUT POINTING OUT AS TO WHAT ADDITIONAL EVIDENCES HAVE BEEN FILED BEFORE CIT (A) CANNOT CLAMOUR ABOUT VIOLATION OF RULE 46A. THUS , GROUND NO. 2 IS DEVOID O F ANY MERITS AND HENCE SAME IS DISMISSED. 8 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON 2 7 . 0 4 .201 7. ( L.P. SAHU ) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 7 . 0 4 .2017 NARENDER COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT (APPEALS) PAGE 6 OF 6 5) DR: ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON 24 .0 4 .2017 DRAFT PLACED BEFORE AUTHOR 26 .0 4 .2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 2 7 . 4 .2017 KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK 2 7 . 4 .2017 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.