M/s MSP Metallics Ltd., Kolkata V. DCIT, CC-XXX, KOLKATA, Kolkata

ITSSA 148/KOL/2014

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2831 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 13-11-2014
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: A K TULSIYAN
• Keywords: Search and seizure; Earning of tax free income
• Section: 43B; 143(3); 153A; 14A; 132

Judgement Text

1 IT(SS)A NOS.148-151/KOL/2014 MSP METALLICS LTD., AYS 2008-09 TO 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T(SS).A NOS. 148 TO 151/KOL/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 M/S. MSP METALLICS LTD. VS. DEPUTY COMMISSIONER OF INCOME-TAX, (PAN: AACCA5907D) CENTRAL CIRCLE-XXX, KOLKATA ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 21.11.2016 DATE OF PRONOUNCEMENT: 02.12.2016 FOR THE APPELLANT: SHRI A. K. TULSIYAN, FCA, A R FOR THE RESPONDENT: SHRI G. MALLIKARJUNA, CIT ORDER PER SHRI M. BALAGANESH, AM: ALL THESE APPEALS BY ASSESSEE ARE ARISING OUT OF SE PARATE ORDERS OF CIT(A), CENTRAL-3, KOLKATA VIDE APPEAL NOS. 110,111,112 & 113/CC-XXX// CIT(A)/C-III/2013-14/KOLKATA DATED 28.08.2014. ASSESSMENTS WERE FRAMED BY DCIT, CC-XXX, KOLKATA U/S. 153A/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) FOR AYS 2008-09 TO 2011- 12 VIDE HIS SEPARATE ORDERS DATED 30.03.2013. SINCE FACTS ARE IDENTICAL AND GROUNDS ARE MOSTLY COMMON, WE DISPOSE OF ALL THESE APPEALS BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE SUM OF RS. 2,34,476/- READ WITH RULE 8D IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE FACTS OF THE CASE FOR THE ASST YEAR 2008- 09 ARE CONSIDERED HEREIN AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FO RCE FOR OTHER ASSESSMENT YEARS ALSO ON THE IMPUGNED ISSUE AS THERE IS ONLY VARIANCE IN FIG URES. 2 IT(SS)A NOS.148-151/KOL/2014 MSP METALLICS LTD., AYS 2008-09 TO 2011-12 2.2. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE WAS NOT IN RECEIPT OF ANY DIVIDEND INCOME. THE ASSESSEE HAD CERTAIN INVESTMENTS IN IT S BALANCE SHEET AND THE LD AO INVOKED DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D O F THE RULES FOR THE SAME AND MADE AN ADDITION OF RS. 2,34,476/- IN THE ASSESSMENT FRAME D U/S 153A OF THE ACT FOR THE ASST YEAR 2008-09. THE LD CITA SIMPLY FOLLOWED THE CBDT CIR CULAR NO. 5 OF 2014 DATED 11.2.2014 WHEREIN IT WAS MENTIONED THAT DISALLOWANCE U/S 14A NEED TO BE MADE EVEN WHERE A TAXPAYER IN A PARTICULAR YEAR HAD NOT EARNED ANY EXEMPT INCO ME. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 2.3. THE LD AR ARGUED THAT OUT OF TOTAL INVESTMENT S OF RS. 4,19,18,950/-, THE ASSESSEE HAD NOT RECEIVED ANY DIVIDEND FROM ANY OF THE INVESTMEN TS AND HENCE THERE CANNOT BE ANY DISALLOWANCE U/S 14A OF THE ACT. HE ARGUED THAT WH EN THERE IS NO EXEMPT INCOME, THEN THERE WOULD NOT HAVE BEEN ANY EXPENDITURE THAT WOUL D BE DEBITED IN THE PROFIT AND LOSS ACCOUNT. IN RESPONSE TO THIS, THE LD DR VEHEMENT LY RELIED ON THE SPECIAL BENCH DECISION OF DELHI TRIBUNAL IN THE CASE OF CHEMINVEST LTD VS ITO REPORTED IN (2009) 121 ITD 318 (DELHI SB) WHEREIN IT WAS HELD THAT THE ENTIRE INVESTMENTS W ERE TO BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D O F THE RULES IRRESPECTIVE OF RECEIPT OF DIVIDEND INCOME THEREON. HE ALSO VEHEMENTLY RELIE D ON THE CBDT CIRCULAR NO. 5 OF 2014 DATED 11.2.2014. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAD NOT RECEIVED ANY DIVIDEND INCOME ON THE INVESTMENTS. WE FIND THAT THE CIRCULAR OF CBDT RELIED UPON BY THE LD DR IS BINDING ONLY ON THE REVENUE AUTHORITIES AN D NOT ON THE COURTS. WE FIND THAT THE DECISION RELIED UPON BY THE LD DR ON THE SPECIAL BE NCH OF DELHI TRIBUNAL HAD BEEN REVERSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD VS CIT REPORTED IN (2015) 378 ITR 33 (DEL) . THE PROVISIONS OF SECTION 14A OF THE ACT ARE VE RY CLEAR IN CONSIDERING ONLY THOSE EXPENDITURE WHICH WERE INCURRED FOR EARN ING ANY INCOME WHICH DO NOT FORM PART 3 IT(SS)A NOS.148-151/KOL/2014 MSP METALLICS LTD., AYS 2008-09 TO 2011-12 OF TOTAL INCOME. WHEN THERE WAS NO EXEMPT INCOME D ERIVED, THEN THERE CANNOT BE ANY EXPENDITURE THAT COULD BE INCURRED FOR THE SAME. H ENCE NO DISALLOWANCE U/S 14A OF THE ACT COULD BE INVOKED. WE ALSO FIND THAT THIS ISSUE HAD BEEN CONSIDERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVE STMENTS PVT LTD VS CIT REPORTED IN (2015) 372 ITR 694 (DEL) IN PARA 9 OF THE JUDGEMENT HAD HELD THAT THE DISALL OWANCE U/S 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. HENCE T HE LOGICAL COROLLARY WOULD BE WHEN THERE IS NO EXEMPT INCOME, THEN THERE CANNOT BE ANY DISALLOWANCE U/S 14A OF THE ACT. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT ARE ALLOWED FOR THE ASST YEARS 2008-09 , 2009-1 0 AND 2010-11. 3. THE NEXT ISSUE TO BE DECIDED IN THESE APPEALS I S AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF EMPLOYEES CONTRIBU TION TO PROVIDENT FUND IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE FACTS OF THE CASE FOR THE ASST YEAR 2008- 09 ARE CONSIDERED HEREIN AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FO RCE FOR OTHER ASSESSMENT YEARS ALSO ON THE IMPUGNED ISSUE AS THERE IS ONLY VARIANCE IN FIG URES. 3.2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO OBSERVED THAT THE ASSESSEE HAD NOT REMITTED THE EMPLOYEES CONTRIBUTION TO PROV IDENT FUND FOR THE MONTH OF FEB 2008 AND MARCH 2008 AMOUNTING TO RS. 2,18,397/- WITHIN T HE DUE DATE PRESCRIBED UNDER THE RELEVANT PF ACT AND HENCE DISALLOWED THE SAME U/S 3 6(1)(VA) READ WITH SECTION 2(24)(X) OF THE ACT. THIS WAS CONFIRMED BY THE LD CITA IN FIRS T APPEAL. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND NO.2:- 2. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE DIS ALLOWANCE OF RS.2,18,397/- U/S. 36(1)(VA)/2(24)(X) ON ACCOUNT OF THE EMPLOYEES CONT RIBUTION TO PROVIDENT FUND PAID BEFORE THE DUE DATE OF FILING OF RETURN U/S. 139(1) OF THE ACT . THE ADDITION NEEDS TO BE DELETED. 3.3. THE LD AR ARGUED THAT THE SAID EMPLOYEES CONT RIBUTION TO PROVIDENT FUND DUES FOR FEB 2008 WAS REMITTED BY THE ASSESSEE ON 3.4.2008 A ND THAT OF MARCH 2008 WAS REMITTED ON 4 IT(SS)A NOS.148-151/KOL/2014 MSP METALLICS LTD., AYS 2008-09 TO 2011-12 12.7.2008. HENCE THE SAME IS ALLOWABLE AS DEDUCTIO N. HE ALSO ARGUED THAT SINCE THE SAME WAS REMITTED BEFORE THE DUE DATE OF FILING THE RETU RN OF INCOME U/S 139(1) OF THE ACT, THE SAME IS ALLOWABLE AS DEDUCTION IN THE LIGHT OF DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS COAL INDIA LTD IN ITA 1 2 OF 2015 DATED 12.8.2015. IN RESPONSE TO THIS, THE LD DR RELIED ON THE CBDT CIRCULAR NO. 22 / 2015 DATED 17.12.2015 AND ARGUED THAT THE DISALLOWANCE MADE BY THE LD AO IS IN ORDER . 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE CIRCULAR OF CBDT ARE BINDING ONLY ON THE REVENUE AUTHORITIES AND NOT ON THE COUR TS. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS COA L INDIA LTD IN ITA 12 OF 2015 DATED 12.8.2015 HAD HELD AS UNDER:- IT IS SUBMITTED BY MR. KHAITAN, LEARNED SENIOR ADV OCATE, APPEARING ON BEHALF OF THE RESPONDENT THAT WHETHER EMPLOYEES CONTRIBUTION TO P ROVIDENT FUND WOULD CALL FOR DEDUCTION UNDER SECTION 43B(B) OF THE INCOME TAX ACT, 1961 CA ME UP FOR CONSIDERATION IN CIT CIRCLE I KOLKATA VS VIJAY SHREE LTD ; 224 TAXMAN 12 (CAL) WH EREIN COURT HELD THAT THE AMOUNT PAID FOR EMPLOYEES CONTRIBUTION BEYOND DUE DATE WAS DEDUCTIB LE BY INVOKING THE AMENDED PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT, 1961 AND THUS , THE ISSUES STAND COVERED IN FAVOUR OF THE ASSESSEE. IT IS TO BE NOTED THAT THE JURISDICTIONA L COURT WHILE PASSING THE JUDGEMENT IN CIT VS VIJAY SHREE (SUPRA) HAD FOLLOWED THE JUDGEMENT IN C IT VS ALOM EXTRUSIONS LTD : 319 ITR 306 (SC) WHEREIN IT WAS HELD THAT AMENDMENT TO THE SECO ND PROVISO TO SECTION 43B OF THE ACT AS INTRODUCED BY FINANCE ACT, 2003 WAS CURATIVE IN NAT URE AND IS REQUIRED TO BE APPLIED RETROSPECTIVELY WITH EFFECT FROM 1 ST APRIL, 1988. MR.KHAITAN SUBMITS SAVE AND EXCEPT T HE JUDGEMENT IN CIT VS GUJARAT STATE ROAD TRANSPORT CO RPORATION : 223 TAXMAN 398 (GUJ) WHEREIN A DIFFERENT VIEW HAS BEEN TAKEN, ALL OTHER HIGH COURTS HAVE TAKEN A VIEW SIMILAR TO THE JUDGMENT PASSED BY THE CALCUTTA HIGH COURT. SINCE WE FIND THAT THE ISSUES STAND COVERED BY THE JUDGMENT OF THE JURISDICTIONAL COURT IN CIT VS VIJAY SHREE (SUPRA) , THE QUESTION NO. 1 IS ANSW ERED IN THE NEGATIVE, IN FAVOUR OF THE RESPONDENT AND AGAINST THE APPELLANT. THE QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE, AGAINST THE APPELLANT AND IN FAVOUR OF THE RESPONDE NT. THE APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE A LLOW THE GROUNDS RAISED BY THE ASSESSEE FOR THE ASST YEARS 2008-09 , 2009-10 , 2010-11 & 2 011-12. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD AO IS JUSTIFIED IN MAKING ADDITIONS IN ASSESSMENTS FRAMED U/S 153A OF THE ACT FOR THE ASST YEAR 2009-10 IN 5 IT(SS)A NOS.148-151/KOL/2014 MSP METALLICS LTD., AYS 2008-09 TO 2011-12 THE ABSENCE OF INCRIMINATING MATERIALS FOUND IN THE COURSE OF SEARCH RELATABLE TO UNABATED ASSESSMENTS IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THERE WAS A SEARCH AND SEIZURE OPERATION CONDUCTED U/S 132 OF THE ACT ON 6.10.2010 IN THE VARIOUS PREM ISES / OFFICES OF THE GROUP. THE ASSESSEE STATED THAT FOR THE ORIGINAL RETURN FILED FOR THE A SST YEAR 2009-10, NO ASSESSMENT WAS FRAMED EITHER U/S 143(1) OR 143(3) OF THE ACT AND THE TIM E LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) OF THE ACT HAD EXPIRED AS ON THE DATE OF SEARCH. IN S UCH A SCENARIO, THE RETURNED INCOME WOULD HAVE TO BE CONSTRUED AS THE ASSESSED INCOME. HENCE THE SAID ASST YEAR (I.E AY 2009-10) FALL UNDER THE CATEGORY OF UNABATED ASSESSMENT AND HENCE THE INCOME ASSESSED ORIGINALLY THEREON COULD NOT BE DISTURBED UNLESS THERE IS ANY INCRIMIN ATING MATERIAL FOUND IN THE COURSE OF SEARCH RELATABLE TO THAT ASSESSMENT YEAR. IT WAS A RGUED THAT ADMITTEDLY NO INCRIMINATING MATERIALS WERE FOUND FOR SUCH ASSESSMENT YEAR IN TH E COURSE OF SEARCH AND ACCORDINGLY PLEADED NOT TO DISTURB THE ORIGINALLY ASSESSED INCO ME. THE LD AO HOWEVER DID NOT HEED TO THE CONTENTIONS OF THE ASSESSEE AND PROCEEDED TO FR AME THE ASSESSMENTS U/S 153A OF THE ACT BY MAKING REGULAR DISALLOWANCE OF EXPENSES ON THE P LEA THAT THE ASSESSMENTS TO BE FRAMED U/S 153A OF THE ACT CLEARS ALL THE DECKS AND WOULD ENABLE THE LD AO TO ASSESS OR REASSESS THE TOTAL INCOME AS PER THE PROVISIONS OF THE ACT IRRES PECTIVE OF INCRIMINATING MATERIALS FOUND IN THE SEARCH. THIS ACTION OF THE LD AO WAS ALSO CO NFIRMED BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE HAD BEEN CONSIDERED AT LENGTH BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RAHEE TRACK TECHNOLOGIES PVT LTD VS DCIT IN IT(SS)A NOS. 08 TO 13/KOL/2015 D ATED 7.10.2016 WHEREIN IT WAS HELD AS FOLLOWS :- 2.11. WE FIND THAT THE PROVISIONS OF SECTION 132 O F THE ACT RELIED UPON BY THE LD DR WOULD BE RELEVANT ONLY FOR THE PURPOSE OF CONDUCTING THE SEARCH ACTION AND INITIATING PROCEEDINGS U/S 153A OF THE ACT. ONCE THE PROCEEDINGS U/S 153A OF THE ACT ARE INITIATED, WHICH ARE SPECIAL PROCEEDINGS, THE LEGISLATURE IN ITS WISDOM BIFURCATES DIFFERENTIAL TREATMENTS FOR 6 IT(SS)A NOS.148-151/KOL/2014 MSP METALLICS LTD., AYS 2008-09 TO 2011-12 ABATED ASSESSMENTS AND UNABATED ASSESSMENTS. AT TH E COST OF REPETITION, WE STATE THAT IN RESPECT OF ABATED ASSESSMENTS (I.E PENDING PROCEEDI NGS ON THE DATE OF SEARCH) , FRESH ASSESSMENTS ARE TO BE FRAMED BY THE LD AO U/S 153A OF THE ACT WHICH WOULD HAVE A BEARING ON THE DETERMINATION OF TOTAL INCOME BY CONSIDERING ALL THE ASPECTS, WHEREIN THE EXISTENCE OF INCRIMINATING MATERIALS DOES NOT HAVE ANY RELEVANCE . HOWEVER, IN RESPECT OF UNABATED ASSESSMENTS, THE LEGISLATURE HAD CONFERRED POWERS O N THE LD AO TO JUST FOLLOW THE ASSESSMENTS ALREADY CONCLUDED UNLESS THERE IS AN IN CRIMINATING MATERIAL FOUND IN THE SEARCH TO DISTURB THE SAID CONCLUDED ASSESSMENT. IN OUR CONSIDERED OPINION, THIS WOULD BE THE CORRECT UNDERSTANDING OF THE PROVISIONS OF SECTION 153A OF THE ACT , AS OTHERWISE, THE NECESSITY OF BIFURCATION OF ABATED AND UNABATED ASS ESSMENTS IN SECTION 153A OF THE ACT WOULD BECOME REDUNDANT AND WOULD LOSE ITS RELEVANCE . HENCE THE ARGUMENTS ADVANCED BY THE LD DR IN THIS REGARD DESERVES TO BE DISMISSED. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE H OLD THAT THE ASST YEAR 2009-10 BEING AN UNABATED ASSESSMENT ON THE DATE OF SEARCH, NO ADDIT ION COULD BE MADE IN THE ASSESSMENT FRAMED U/S 153A OF THE ACT IN THE ABSENCE OF ANY IN CRIMINATING MATERIALS FOUND IN THE COURSE OF SEARCH RELATABLE TO SUCH ASSESSMENT YEAR (I.E AY 2009-10). ACCORDINGLY, THE GROUND RAISED IN THIS REGARD BY THE ASSESSEE IS ALL OWED. 5. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN IT(SS) A NO. 148/KOL/2014 FOR ASST YEAR 2008-09 IS ALLOWED. IT(SS) A NO. 149/KOL/2014 FOR ASST YEAR 2009-10 IS ALLOWED. IT(SS) A NO. 150/KOL/2014 FOR ASST YEAR 2010-11 IS ALLOWED. IT(SS) A NO. 151/KOL/2014 FOR ASST YEAR 2011-12 IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 02.12.201 6 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED :2 ND DECEMBER, 2016 JD.(SR.P.S.) 7 IT(SS)A NOS.148-151/KOL/2014 MSP METALLICS LTD., AYS 2008-09 TO 2011-12 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. MSP METALLICS LTD., 1, CROOKED LAN E, KOLKATA-700 069. 2 RESPONDENT DCIT, CC-XXX, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .