TITAGARH CAPITAL MANAGEMENT SERVICES(P)LTD,KOLKATA vs. ITO, KOLKATA
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that tax authorities should assist assessees in determining correct tax liability and not take advantage of mistakes. The disallowance under Section 14A should be calculated on the net interest expenditure.
What were the facts?
The assessee initially made a suo moto disallowance of Rs. 72,84,803/- under Section 14A. Later, it realized that this disallowance should be calculated on the net interest expenditure of Rs. 18,81,370/- after considering interest income. The Assessing Officer, however, retained the original disallowance.
What were the issues?
Whether the disallowance under Section 14A should be calculated on the gross or net expenditure, and the role of the Assessing Officer in correcting assessee's mistakes.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(9)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- Cheminvest Ltd. v. CIT1,569 citing378 ITR 33 · 2015 · HC · Read judgment
- ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd.1,030 citing291 ITR 500 · 2007 · SC · Read judgment
- CIT v. Reliance Industries Ltd.501 citing410 ITR 466 · 2019 · SC
- CIT v. Bharat General Reinsurance Co Ltd.202 citing81 ITR 303 · 1971 · HC
- CIT v. Shivam Motors (P.) Ltd.179 citing230 Taxmann 63 · 2015 · HC
- Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd.167 citing161 Taxmann 316 · 2007 · SC
- CIT v. Shelly Products158 citing129 Taxmann 271 · 2003 · SC · Read judgment
- Balmukund Acharya v. DCIT116 citing176 Taxmann 316 · 2009 · HC · Read judgment
- Nirmala L. Mehta v. A. Balasubramaniam, CIT108 citing269 ITR 1 · 2004 · HC
Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Before: Shri Sanjay Garg & Shri Girish Agrawal
order : November 21, 2023 आदेश / ORDER संजय गग�, �या�यकसद�य�वारा/ Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 22.02.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The sole issue raised by the assessee through its grounds of appeal
is relating to the confirmation of disallowance of Rs.72,84,803/- u/s 14A of the Act r.w.r 8D of the Income Tax Rules on account of notional expenditure for earning of tax exempt income.
3. At the outset, the ld. Counsel for the assessee has submitted that the assessee in the return of income inadvertently out of mistake made Assessment Year: 2013- M/s Titagarh Capital Management Services (P) Ltd suo moto disallowance of entire expenditure of Rs.72,84,803/- u/s 14A of the Act. However, the assessee realising its mistake, during the assessment proceedings brought to the knowledge of the Assessing Officer that the assessee had also earned interest income of Rs.54,00,207/- and therefore, net interest expenditure was only Rs.18,81,370/-. That the notional interest disallowance u/s 14A r.w.r. 8D of the Income Tax Rules was required to be worked on the net expenditure of Rs.18,81,370/- only. However, the Assessing Officer ignoring the submissions of the assessee, calculated the disallowance u/s 14A of the Act r.w.r 8D of the Income Tax Rules at Rs.51,34,346/- but retained the disallowance at Rs.72,84,803/- only, observing that the assessee, itself, has offered the said amount as disallowance u/s 14A of the Act.
3.1 The ld. Counsel for the assessee, in this respect, has relied upon the decision of the Hon’ble Supreme Court in the case of Commissioner Of Income Tax-LTU vs Reliance Industries Ltd reported in 410 ITR 466. The ld. counsel has further made the following submissions:
Ld. AO failed to consider the claim of appellant and in such respect it is submitted that :- a) Article 265 of the Constitution of India reads that No tax shall be levied or collected except by the authority of law." In terms of the Article 265 of the Constitution, tax can be levied only if it is authorized by law. The taxing authority cannot collect or retain tax that is not authorized. Any retention of tax collected, which is not otherwise payable, would be illegal and unconstitutional. b) The Supreme Court of India in CIT V. Shelly Products [2003] 261 ITR 367/129 Taxman 271 held that if the assessee has by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax or is not income within the contemplation of law, the assessee may bring the same to the notice of the assessing officer, which if satisfied, may grant the assessee necessary relief and refund the tax paid in cess, if any.
Assessment Year: 2013- M/s Titagarh Capital Management Services (P) Ltd c) In CIT v. Bharat General Reinsurance Co. Ltd [1971] 81 ITR 303 (Delhi), this court held that merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the department to tax that income in that year even though legally such income did not pertain to that year. d) The Bombay High Court in Balmukund Acharya v. Dy. CIT, Special Range [2009] 310 ITR 310/176 Taxman 316 held that Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. e) The Bombay High Court in Nirmala L. Mehta v. A. Balasubramaniam, CIT v. [2004] 269 ITR 1/139 Taxman 394 held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to .here the tax is levied or collected without authority of law. f) Circular No. 14(XL-35) of 1955, dated 1 1.4.1955, issued by the Central Board Direct Taxes and relied upon by the Petitioner reads as under: "0fficers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should - (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other: (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs". g) A reading of the circular shows that a duty is cast upon the assessing officer to assist and aid the assessee in the matter of taxation. They are Assessment Year: 2013- M/s Titagarh Capital Management Services (P) Ltd obliged to advise the assessee and guide them and not to take advantage of any error or mistake committed by the assessee or of their ignorance. The function of the Assessing Officer is to administer the statute with solicitude for public exchequer with an inbuilt idea of fairness to taxpayers. ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500/161 Taxman 316 (SC). Hence the claim of the appellant as made before the AO should have been considered by the A.O and allowed accordingly.”
The ld. DR, on the other hand, has relied upon the findings of the lower authorities.
We have considered the rival submissions. It has been held time and again by the Hon’ble Apex Court and various High Courts that the Income Tax Authorities are supposed to charge legitimate taxes from an assessee. Income Tax Authorities are not supposed to punish the tax- payers for their bona fide mistakes, rather, it has been held time and again that the Assessing Officer/Income Tax Authorities should assist the assessees for determining and charging their correct tax liability. They are not supposed to work as post office to put stamp on the mistakes of the assessee and charge higher tax than that they are not statutorily entitled to. In case in hand, the counsel of the assessee has demonstrated that there was interest income of Rs.54,00,207/- and in view of the law laid down by the Hon’ble Supreme Court in the case of Commissioner Of Income Tax-LTU vs Reliance Industries Ltd reported in 410 ITR 466, wherein, the Hon’ble Supreme Court confirmed the proposition of law that if the own funds/interest free funds are available with the assessee to meet the investment, presumption will be that the assessee has used own interest free funds for the said investment. In view of this, the interest expenditure disallowance u/s 14A was required to be worked on the balance interest expenditure of Rs.18,81,370/- only. Further, as held by the various High Courts, the
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