M/s. Bindyavasini Projects Pvt. Ltd., , Kolkata V. DCIT, Central Circle - 4(3), , Kolkata

ITSSA 105/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2623 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 06-02-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 14-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 133A; 153A; 14A; 143(2); 139(1); 132

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( . . , . . , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A.L. SAINI, AM] I.T.(SS)A. NOS. 104 TO 106/KOL/2018 ASSESSMENT YEARS: 2013-14, 2014-15 & 2016-17 M?S. BINDYAVASINI PROJECTS PVT. LTD. (PAN: AACCB5764H) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4(3), KOLKATA APPELLANT RESPONDENT FOR THE APPELLANT SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT SHRI VIJAY SHANKAR, CIT, DR DATE OF HEARING 06.02.2020 DATE OF PRONOUNCEMENT 18.03.2020 ORDER PER SHRI A.T.VARKEY, JM : ALL THESE APPEALS PREFERRED BY THE ASSESSEE ARE AG AINST THE SEPARATE ORDERS OF LD. CIT(A)-21, KOLKATA DATED 27.07.2018 FOR AYS. 20 13-14, 2014-15 AND 2016-17. SINCE GROUND ARE IDENTICAL AND FACTS ARE COMMON AND ALL THESE APPEALS HAVE BEEN HEARD TOGETHER, WE DISPOSE OF ALL THESE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE BY TAKING THE IT(SS) A NO. 104/KOL/2 018 AS THE LEAD CASE FOR AY 2013-14 AND AY 2014-15 AND THE RESULT OF WHICH WILL BE APPLIED FOR THESE TWO APPEALS. 2. THE SOLE GROUND OF APPEAL OF THE ASSESSEE IS A GAINST THE ACTION OF LD. CIT(A) IN UPHOLDING THE DISALLOWANCE MADE BY THE AO U/S. 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ALL THE ASSESSMENT YEARS BEFORE US. HOWEVER, IT WAS BROUGHT TO OUR NOTICE BY THE LD. AR THAT AY 2013-14 AND AY 2014-15 WAS NOT PENDING BEFORE THE AO ON THE DATE OF SEARCH I.E. ON 01.12.2015 AND, THEREFORE, THESE TWO ASSESSMENT YEARS ARE UNABATED ASSESSMENT YEARS AND FURTHER HE CONTENDED THAT IT IS TRITE LAW THAT IN THE CASE OF UNABATED ASSESSME NTS, THE ADDITION/DISALLOWANCE CAN BE RESORTED TO BY THE AO U/S. 153A OF THE ACT ONLY ON THE BASIS OF INCRIMINATING MATERIALS AND SINCE THERE IS NO WHISPER IN THE ASSESSMENT ORD ER ABOUT ANY INCRIMINATING MATERIAL WARRANTING ANY DISALLOWANCE U/S. 14A READ WITH RULE 8D, ACCORDING TO HIM, NO 2 I.T(SS).A. NOS.104-106/KOL/2018 ASSESSMENT YEARS: 2013-14, 2014-15 & 2016-17 BINDYAVASINI PROJECTS PVT. LTD. DISALLOWANCE U/S. 14A CAN BE LEGALLY FASTENED ON TH E ASSESSEE. IN THE LIGHT OF THIS CONTENTION, FIRST OF ALL WE TAKE UP BOTH AYS. 2013- 14 AND 2014-15. SINCE FACTS ARE SAME, WE TAKE UP AY 2013-14 AS LEAD CASE AND ITS RE SULT WILL FOLLOW FOR AY 2014-15. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE CARR IES ON THE BUSINESS OF TRANSPORTATION. ASSESSEE HAD FILED ITS RETURN OF I NCOME U/S. 139(1) OF THE ACT ON 30.09.2013 DECLARING INCOME AT RS.10,85,470/-. A S EARCH OPERATION U/S. 132 OF THE ACT WAS CONDUCTED ON 01.12.2015 AT THE ASSESSEE S RESIDENTIAL AS WELL AS OFFICE PREMISES BELONGING TO THE BHALOTIA GROUP. IN SOME OF THE BUSINESS PREMISES OF THE BHALOTIA GROUP OF ASSESSEES SURVEY OPERATIONS WERE ALSO CARRIED OUT U/S. 133A OF THE ACT. SINCE WARRANT OF SEARCH U/S. 132(1) OF THE ACT WAS EXECUTED AGAINST THE ASSESSEE, A NOTICE DATED 09.01 .2017 WAS ISSUED U/S. 153A OF THE ACT BY THE DCIT. ACCORDING TO AO, DURING THE R ELEVANT PREVIOUS YEAR THE ASSESSEE GOT INVESTMENT IN SHARES FROM WHICH HE HA D DERIVED EXEMPT INCOME IN FORM OF DIVIDEND OF RS.8,10,813/- BUT DISALLOWANCE U/S. 14A OF THE ACT HAS BEEN MADE ONLY OF RS.95,496/-. THE ASSESSEE WAS ASKED T O EXPLAIN THE REASONS FOR NON DISALLOWANCE AS PER RULE 8D. BUT ACCORDING TO AO T HE ASSESSEE HAD NOT FURNISHED ANY EXPLANATION IN THIS REGARD. SINCE NO EXPLANATION HAS BEEN FILED BY THE ASSESSEE, THE DISALLOWANCE U/S. 14A WAS RESORTE D BY AO WHICH COMES TO RS.3,19,768/-. AGGRIEVED, ASSESSEE PREFERRED AN AP PEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDE R: BE THAT THE CASE, I FIND THAT THE APPELLANT HAS E ARNED EXEMPT INCOME IN FORM OF DIVIDEND FOR RS.8,10,813/- BUT NO DISALLOWANCE U/S 14A OF THE I.T. ACT'61 WAS MADE SUO-MOTTU BY THE ASSESSEE IN COMPUTATION OF IN COME AS PER PARAMETERS LAID DOWN IN RULE 8D. AS HAS BEEN RECORDED BY THE LD. AO , THE ASSESSEE WAS ASKED TO EXPLAIN THE REASONS FOR NON-DISALLOWANCE, WHICH HOW EVER THE ASSESSEE WAS UNABLE TO DO. ACCORDINGLY, THE LD. AO INVOKED RULE 8D(2)(II) & 8D(2)(III), AND WORKED OUT A DISALLOWANCE OF RS.3,19,768/-. IN APPE AL, IT HAS BEEN ARGUED BY THE APPELLANT THAT ONLY DIVIDEND YIELDING INSTRUMENTS O UGHT TO BE TAKEN FOR CALCULATION, WHICH IS NOT BEING DISPUTED. HOWEVER, THE APPELLANT, WHO HAS FULL KNOWLEDGE OF THESE MATTERS AND NOT GIVEN ANY WORKIN G SOLUTION TO HELP ARRIVE AT THE AMOUNT OF DISALLOWANCE TO BE MADE IN ITS CASE. THEREFORE, I HOLD THE VIEW THAT THE METHOD APPLIED BY THE LD. AO DOES NOT WARRANT A NY INTERFERENCE, AND THE DISALLOWANCE OF RS.3,19,769/- STANDS CONFIRMED. THE GROUND IS THEREFORE DISMISSED. AGGRIEVED, THE ASSESSEE IS BEFORE US. 3 I.T(SS).A. NOS.104-106/KOL/2018 ASSESSMENT YEARS: 2013-14, 2014-15 & 2016-17 BINDYAVASINI PROJECTS PVT. LTD. 4. AT THE TIME OF HEARING THE LD. AR SUBMITTED TH AT THE TIME LIMIT TO ISSUE NOTICE U/S. 143(2) OF THE ACT HAD EXPIRED FOR BOTH AY 2013 -14 AND AY 2014-15, SO ACCORDING TO LD AR, THESE TWO ASSESSMENT YEARS WERE NOT PENDING BEFORE THE AO ON THE DATE OF SEARCH ON 01.12.2015, SO THESE YEARS WE RE UNABATED ASSESSMENTS. AFTER SEARCH OPERATION, IN COMPLIANCE TO THE NOTICE DATED 09.01.2017 U/S. 153A OF THE ACT THE ASSESSEE HAD FILED A RETURN U/S. 153A OF THE AC T ON 16.02.2017 DISCLOSING THE SAME INCOME RETURNED ORIGINALLY AT RS.10,85,470/-. ACCO RDING TO LD. R, THE DISALLOWANCE OF RS.3,19,768/- WAS COMPUTED BY THE AO BY INVOKING TH E PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D(I) AND (III) OF THE INCOM E TAX RULES, 1962 (HEREINAFTER AS THE RULES) FROM THE INVESTMENTS DULY DISCLOSED IN THE ORIGINAL RETURN FILED FOR THE RELEVANT ASSESSMENT YEAR WHICH DID NOT ABATE AND FU RTHER, THERE IS NO RECITALS IN THE ASSESSMENT ORDER THAT THIS DISALLOWANCE WAS FALL O UT OF ANY INCRIMINATING MATERIALS UNEARTHED DURING SEARCH U/S. 132 OF THE ACT. SO ACC ORDING TO LD AR, SINCE THE ASSESSMENT WAS NOT PENDING BEFORE THE AO ON THE DAT E OF SEARCH, NO ADDITION COULD HAVE BEEN SADDLED ON THE ASSESSEE WITHOUT THE AID O F INCRIMINATING MATERIALS WHILE ASSESSMENT IS FRAMED UNDER THE PROVISIONS OF SECTIO N 153A OF THE ACT. ACCORDING TO LD. AR, IT IS SETTLED LAW THAT UNABATED ASSESSMENTS CAN BE INTERFERED BY AO WHILE MAKING ASSESSMENT U/S. 153A ONLY ON THE BASIS OF SO ME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH WHICH WAS NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN COURSE OF ORIGINAL ASSES SMENT. HE ALSO RELIED ON THE DECISION IN THE CASE OF CIT VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL.), DCIT VS. REKHA JHUNJHUNWALA (ITA NO. 3824/MUM/2016 DATED 17. 01.2018 AND DCIT VS. ASHOK JASRAJ JAIN (ITA NO. 5718/MUM/2016 DATED 23.0 5.2018. PER CONTRA, THE LD. DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHOR ITIES AND URGED BEFORE THE BENCH NOT TO INTERFERE WITH THE ORDER OF THE AUTHORITIES BELOW. 5. AFTER HEARING BOTH THE PARTIES AND AFTER PERUSAL OF THE RECORDS, WE NOTE THAT BOTH AYS I.E. AYS. 2013-14 AND 2014-15 WERE NOT PENDING BEFORE THE AO ON THE DATE OF SEARCH ON 01.12.2015 AND, THEREFORE, BOTH ASSESSMEN T YEARS ARE UNABATED ASSESSMENT AND, THEREFORE, AS PER THE SETTLED POSITION OF LAW, NO ADDITION/DISALLOWANCE IS PERMISSIBLE IN AYS. 2013-14 AND 2014-15 WITHOUT THE AID OF INCRIMINATING MATERIALS 4 I.T(SS).A. NOS.104-106/KOL/2018 ASSESSMENT YEARS: 2013-14, 2014-15 & 2016-17 BINDYAVASINI PROJECTS PVT. LTD. UNEARTHED QUA THE ISSUE, AND THE YEAR UNDER CONSIDE RATION U/S. 153A OF THE ACT. SINCE THERE IS NO WHISPER BY THE AO/LD. CIT(A) ABOUT ANY INCRIMINATING MATERIAL TO SHOW THAT ASSESSEE HAD IN FACT HAD INCURRED EXPENDITURE FOR EARNING THE EXEMPT INCOME IN THESE TWO ASSESSMENT YEARS, NO DISALLOWANCE COULD H AVE BEEN RESORTED TO BY THE AO U/S. 153A OF THE ACT. THEREFORE, WE FIND MERIT IN THE CONTENTION OF THE LD. AR FOR ASSESSEE AND ALLOW THE APPEAL BY DIRECTING DELETION OF ADDITION MADE U/S. 14A READ WITH RULE 8D OF THE RULES. 6. COMING TO AY 2016-17, THE LD. AR FAIRLY CONCEDE D THAT THIS YEAR WAS ABATED ASSESSMENT YEAR. WE NOTE THAT IN THIS ASSESSMENT Y EAR ASSESSEE RECEIVED EXEMPT INCOME OF RS.2,10,000/- AND THE AO HAS MADE DISALLO WANCE OF RS.1,06,773/- BY APPLYING RULE 8D(2)(I) I.E. DIRECT EXPENDITURE OF R S.2,132/- AND RULE 8D(2)(III) % OF AVERAGE INVESTMENT RS.1,03,641/-. WE NOTE THA T NO DISALLOWANCE WAS MADE BY AO UNDER RULE 8D(2)(II). THE LIMITED PRAYER OF THE LD. AR OF THE ASSESSEE IS THAT THE DISALLOWANCE MADE U/S. 14A READ WITH RULE 8D(2)(III ) MAY BE RESTRICTED TO .5% OF THE INVESTMENT MADE IN THE DIVIDEND YIELDING SCRIPS. W E FIND FORCE IN THE CONTENTION OF THE LD. AR AND THIS TRIBUNAL HAVE BEEN CONSISTENTLY TAKING SUCH A VIEW AFTER THE DECISION IN REI AGRO LTD. VS. DCIT (144 ITD 141). SO, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE UNDER RULE 8D2(III) AT .5% OF THE INVESTMENT IN DIVIDEND YIELDING SCRIPS. WITH THIS DIRECTION, WE DISPOSE OF THIS AP PEAL OF THE ASSESSEE FOR AY 2016-17. 7. IN THE RESULT, THE APPEAL OF ASSESSEE FOR AYS. 2 013-14 AND 2014-15 ARE ALLOWED AND THE APPEAL OF ASSESSEE FOR AY 2016-17 IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18TH MARCH , 2020. SD/- SD/- (A.L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18TH MARCH, 2020 JD. SR. PS 5 I.T(SS).A. NOS.104-106/KOL/2018 ASSESSMENT YEARS: 2013-14, 2014-15 & 2016-17 BINDYAVASINI PROJECTS PVT. LTD. COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. BNDYAVASINI PROJECTS PVT. LTD., 21 , CENTRE POINT, HEMANT BASU SARANI, KOLKATA-700 001. 2. RESPONDENT DCIT, CENTRAL CIRCLE-4(3), KOLKATA. 3. CIT(A)-21, KOLKATA. (SENT THROUGH E-MAIL) 4. CIT , KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA. (SENT THROUGH E-MAIL) TRUE COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES