DCIT, C1(1), Chandigarh V. M/s Orbit Resorts (P) Ltd., Chandigarh

MA 47/CHANDI/2020

AI Insights

The case involves three Miscellaneous Applications filed by the Revenue against the orders passed by the Coordinate Bench on 04/09/2019, which were dismissed due to low tax effect without adjudicating on the merits. The applications pertained to disallowances under sections 14A and 36(1)(iii) of the Income Tax Act, related to the assessment years 2012-13 and 2014-15. The Revenue argued that the cases fell under exceptions specified in the CBDT Circular No. 3 of 2018, which warranted a review on merits despite the tax effect being below the monetary limits. The Tribunal agreed for the cases with high tax effect to be heard on merits, recalling the earlier orders.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127523 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 8 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-03-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 29-06-2020
• Other Referred Cases: CIT vs Lakhani Marketing Inc [2014] 49 taxmann.com 257
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Audit objection; Tax effect; Earning of tax free income; Tax effect
• Section: 147; 143(3); 14A

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “ बी ” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “ B ”, CHANDIGARH ी स ु धांश ु ीवा तव, या यक सद य, एवं ी #व$म &संह यादव, लेखा सद य BEFORE: SHRI. SUDHANSHU SRIVASTAVA, JM & SHRI. VIKRAM SINGH YADAV, AM Miscellaneous Application No. 47/Chd/2020 In ( ITA NO. 390 /Chd/ 2019 Assessment Year : 2012-13 The DCIT, C1(1) Chandigarh M/s Orbit Resorts (P) Ltd. # 256, Sector 9-C, Chandigarh PAN NO: AAACO4024H Appellant Respondent Miscellaneous Application No. 48/Chd/2020 In ( ITA NO. 391 /Chd/ 2019 Assessment Year : 2012-13 The DCIT, C1(1) Chandigarh M/s Orbit Resorts (P) Ltd. # 256, Sector 9-C, Chandigarh PAN NO: AAACO4024H Appellant Respondent Miscellaneous Application No. 49/Chd/2020 In ( ITA NO. 1013 /Chd/ 2019 Assessment Year : 2014-15 The DCIT, C1(1) Chandigarh M/s Orbit Resorts (P) Ltd. # 256, Sector 9-C, Chandigarh PAN NO: AAACO4024H Appellant Respondent ! " Assessee by : None (Adj. Application) # ! " Revenue by : Shri Akashdeep, JCIT, Sr. DR $ % ! & Date of Hearing : 17/03/2023 '()* ! & Date of Pronouncement : 21/03/2023 आदेश/Order 2 PER VIKRAM SINGH YADAV, A.M. : These are three Miscellaneous Applications filed by the Revenue directed against the common order passed by the Coordinate Bench dt. 04/09/2019. 2. In ITA No. 390/Chd/2019 pertaining to A.Y. 2012-13, the Revenue has challenged the action of the Ld. CIT(A) in deleting the disallowance under section 14A amounting to Rs. 98,69,342/- and also deleting the disallowance under section 36(1)(iii) amounting to Rs. 7,08,000/- as per the order passed by the AO under section 143(3) dt. 28/02/2015. The said appeal of the Revenue was dismissed by the Coordinate Bench vide its order dt. 04/09/2019 on account of low tax effect without adjudicating on the merits of the case. 3. In the aforesaid background, the Revenue has moved the present Miscellaneous Application no. 47/Chd/2020 stating that the case falls under exception as per para 10(b) of the CBDT’s Circular No. 3 of 2018 and even though the tax effect involved is Rs. 32,68,398/-, the Revenue is required to filed this appeal on merits of the case. It was accordingly submitted that the order so passed by the Coordinate Bench may be recalled and the appeal of the Revenue be heard on merits. 4. None appeared on behalf of the assessee but an adjournment application has been filed by the Ld. AR, Shri Ashwani Kumar, CA. However considering the fact that this Miscellaneous Application is pending for quite sometime, we find that no useful purpose would be served in adjourning the matter any further. Hence basis the material available on the record and after hearing the Ld. DR, the matter is hereby been decided. 5. We have heard the ld DR and perused the material available on the record. On going through the CBDT Circular No. 3 of 2018 in particular Para 10 of the said Circular and the contents thereof read as under: “10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: (a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been 3 accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/ bank accounts.” 6. We therefore find that the exception so carved in para 10(b) talks about a situation where the Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires. In the instant case, the AO has made a disallowance under section 14A amounting to Rs. 98,69,342/- relying on the CBDT Circular no. 5 of 2014 holding that the disallowance under section 14A becomes mandatory once any investment relating to earning of exempt income is made by the assessee and whether there is earning of any exempt income or not is immaterial before invoking the said provisions. The ld CIT(A) has deleted the said disallowance holding that since no exempt income has been earned by the assessee during the assessment year, no disallowance is called for under section 14A of the Act and has relied upon the decision of the Hon’ble Punjab and Haryana High Court decision in case of CIT vs Lakhani Marketing Inc [2014] 49 taxmann.com 257 and coordinate Bench decision in assessee’s own case for A.Y 2011-12 in ITA No. 75/CHD/2016 dated 16/09/2016. We therefore find that the ld CIT(A) has followed the decision of the jurisdictional High Court as well as jurisdictional Tribunal, being binding upon him rather than following the CBDT Circular no. 5 of 2014. Nowhere the ld CIT(A) has recorded any findings holding the CBDT Circular as illegal or ultra vires. In fact, the ld CIT(A) doesn’t have the jurisdiction to challenge the vires of the CBDT Circular. Being the appellate authority, he may not have followed the CBDT Circular and for valid reasons given that there are jurisdictional High court and Tribunal decision , however, not following the CBDT Circular cannot be held by any stretch of imagination as challenging the vires of the CBDT Circular or for that matter, holding it as illegal. In view of the same, we find that the present case clearly doesn’t fall under the exception 10(b) of the CBDT’s Circular No. 3 of 2018 as so contended by the ld DR before us and we are unable to accede to the said prayer so made by the Revenue in the present misc. application and given that the tax effect involved is Rs. 32,68,398/-, we do not think there is any mistake in the order so passed by the Coordinate Bench dismissing the appeal filed by the Revenue on account of low tax effect. 7. In the result, the misc. application no. 47/Chd/2020 filed by the Revenue is dismissed. 4 8. In ITA No. 391/Chd/2019 pertaining to A.Y. 2012-13, the Revenue has challenged the action of the Ld. CIT(A) in deleting the disallowance of excess claim of depreciation amounting to Rs. 69,039,00/- as per order under section 147 r.w.s 143(3) dt. 12/12/2017. The appeal of the Revenue was dismissed by the Coordinate Bench vide its common order dt. 04/09/2019 on account of low tax effect without adjudicating on merits of the case. 9. In the aforesaid background, in the present Miscellaneous Application no. 48/Chd/2020, the Revenue has submitted that the case falls under exception of the para 10(c) of the CBDT’s Circular No. 3 of 2018 as the issue on which the addition were made had arisen from the Revenue Audit Objection and which has been accepted by the Department and even though the tax effect involved in this case is Rs. 21,33,305/-, the Revenue is required to file the appeal seeking adjudication on merits of the case. It was accordingly prayed that the order so passed by the Coordinate Bench may be recalled and appeal of the Revenue be heard on merits. 10. None appeared on behalf of the assessee but an adjournment application has been filed by the Ld. AR Shri Ashwani Kumar, CA. However considering the facts that this Miscellaneous Application is pending for quite sometime, we find no useful purpose would be served in adjourning the matter any further. Hence basis the material available on the record and after hearing the Ld. DR the matter is hereby been decided. 11. We have heard the ld DR and perused the material available on the record. On going through the CBDT Circular No. 3 of 2018 in particular Para 10(c) of the said Circular, we find that the same talks about an exception where the Revenue audit objection has been accepted by the department and it is still required to file appeal on merits irrespective of low tax effect. The ld DR has submitted in writing that there has been an audit objection in this case and which has been accepted by the department and hence, the said falls under exception 10(C) of the aforesaid CBDT Circular. 12. In view of the same, where the present case falls under the exception as so provided in para 10(c) of the CBDT’s Circular No. 3 of 2018, the appeal so filed by the Revenue needs to be heard on merits of the case. The order so passed by the 5 Coordinate Bench is hereby recalled for limited purposes of adjudication of matter relating to disallowance of excess claim of depreciation. 13. In the result, misc. application no. 48/Chd/2020 so filed by the Revenue is allowed. 14. In ITA No. 1013/Chd/2019 pertaining to A.Y. 2014-15, the Revenue has challenged the action of the Ld. CIT(A) in deleting the disallowance under section 14A of the Act amounting to Rs. 1,44,89,975/- and deleting the disallowance of interest under section 36(1)(iii) amounting to Rs. 11,69,645/- as per order under section 143(3) dt. 13/12/2016. The appeal of the Revenue was dismissed by the Coordinate Bench vide its common order dt. 04/09/2019 on account of low tax effect without adjudicating on merits of the case. 15. In the aforesaid background, the present Miscellaneous Application no. 49/Chd/2020 has been filed by the Revenue and it has been submitted that the case falls under exception carved out as per Para 10(b) of the CBDT’s Circular No. 3 of 2018 and secondly the tax effect involved in this case is Rs. 53,22,704/- and it was submitted that even on account of high tax effect, there is mistake which has crept in order so passed by the Coordinate Bench and the order so passed may be recalled and appeal of the Revenue be heard on merits. 16. None appeared on behalf of the assessee but an adjournment application has been filed by the Ld. AR Shri Ashwani Kumar, CA. However considering the facts that this Miscellaneous Application is pending for quite sometime, we find no useful purpose would be served in adjourning the matter any further. Hence basis the material available on the record and after hearing the Ld. DR the matter is hereby been decided. 17. We have heard the ld DR and perused the material available on the record. Given that the tax effect involved in the present appeal is Rs 53,22,704/-which is beyond the prescribed threshold as per the CBDT Circular No. 3 of 2018, the appeal so filed by the Revenue needs to be heard on merits of the case. The order so passed by the Coordinate Bench is hereby recalled and the Registry is directed to list the matter in due course. 6 18. In the result, misc. application no. 49/Chd/2020 so filed by the Revenue is allowed. (Order pronounced in the open Court on 21/03/2023 ) Sd/- Sd/- स ु धांश ु ीवा तव #व$म &संह यादव (SUDHANSHU SRIVASTAVA) ( VIKRAM SINGH YADAV) या यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER AG Date: 21/03/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar