Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, AHMEDABAD BENCH ‘B’, AHMEDABAD
Per Pramod Kumar, Vice President:
By way of this appeal, the Assessing Officer has challenged correctness of the order dated 9th February 2018 passed by the by the CIT(A)-2, Ahmedabad in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2014-15 on the following grounds:-
“1. The Id. Commissioner of Income Tax (Appeals) has grossly erred in law and on facts of the case in confirming the action of Id. AO in not allowing to withdraw the disallowance of Rs.57,68,182/- made by the Appellant u/s 14A of the Act in the Return of Income inspite of the fact that that during the year under consideration no exempt income was earned and / or claimed by the Appellant in the return of income.
Under the facts and circumstances of the case, the Id. CIT(A) accepted the legal position that the disallowance u/s 14A of the Act cannot be made in the absence of any exempt income earned / claimed by the Appellant, however, the Id. CIT(A) grossly erred in law in not allowing to delete the
ITA No. 690/Ahd/2018 Greenland Infracon Pvt Ltd Vs. DCIT Assessment year: 2014-15 Page 2 of 5
disallowance u/s 14A of the Act made by the Appellant in the return of income.
The Id. Commissioner of Income Tax (Appeals) has grossly erred in law and on facts of the case in confirming the action of Id. AO in not allowing to withdraw disallowance of Rs.57,68,182/- u/s 14A of the Act made by the Appellant in the return of income while computing Book Profit u/s 115JB of the Act.
Both the Id. authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order.
The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s 234A/B/C of the Act.
The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s 271(l)(c) of the Act.”
When the appeal was called out for hearing, learned representatives fairly agreed that the above issues are fully covered, in favour of the assessee, by the decision dated 14.11.2018 of the co-ordinate bench in assessee’s own cases for the two immediately preceding assessment years. Vide the aforesaid order, the co- ordinate bench has, inter alia, observed as follows:-
“6. We have carefully considered the rival submissions and perused the orders of the authorities below. The substantive question arises in the Revenue's appeal is to ascertain the correctness of the action of the CIT(A) in refusing to endorse the action of the AO for resorting to disallowance under s.14A of the Act. Two broad issues emerges in the context of the case; (i) whether the disallowance under s.14A is maintainable where admittedly no exempt income i.e. dividend was earned by the assessee in the relevant assessment year and (ii) whether the CIT(A) was justified in going beyond the return of income and remove the disallowance which the assessee itself has made while filing the return of income. In other words, whether the action of the CIT(A) in bringing down the income returned by the assessee and granting relief on the issues not raised at the time of filing original return of income or by way of revised return at a subsequent stage is justified in law or not.
The first issue framed above appears quite simple as we see. While adjudicating the issue, we take note of CBDT Circular No. 5/2014 dated 11/02/2014 which seeks to emphasize that all expenses pertaining to an exempt income is required to be disallowed notwithstanding the fact that no corresponding tax free income has been earned during the financial year.
ITA No. 690/Ahd/2018 Greenland Infracon Pvt Ltd Vs. DCIT Assessment year: 2014-15 Page 3 of 5
Notwithstanding the aforesaid circular, various Courts have held that Section 14A of the Act disallowance cannot be kicked when there was no exempt income earned by the assessee as is the case in the present appeals. Hon'ble Delhi High Court in PCIT vs IL&FS Energy Development Company Ltd. (2017) 84 Taxman.com 186(Delhi) and the Hon'ble Madras High Court in CIT v. Chettinad Logistics (P.) Limited (2017) 80 taxmann.com 221(Madras) have expressed a clear disagreement with CBDT Circular and held that where there is no exempt income in relevant year there cannot be a disallowance of expenditure under s.14A of the Act. Similar proposition has been laid down by the Hon'ble Gujarat High Court in the case of Corrtech Energy (P.) Ltd (2014) 45 taxmann.com. 116 (Guj) and Pr.CIT vs. India Gelatine and Chemicals Ltd. (2016) 66 taxmann.com 356 (Guj). The aforesaid judicial fiat was reiterated by the Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. vs. CIT reported in 372 ITR 692 (Delhi) wherein Hon'ble Delhi High Court has categorically ruled that disallowance under s.14A of the Act cannot exceed the amount of tax exempt income. Notably, the SLP filed against the decision of Hon'ble Madras High Court in Chettinad Logistics (supra) has been dismissed by Hon'ble Supreme Court in CIT vs. Chettinad Logistics (P.) Ltd. (2018) 95 taxmann.com 250 (SC). Hence, in conformity with the judicial precedents, we find substantial merit in the conclusion drawn by the CIT(A) which essentially holds that Section 14A of the Act can be triggered only if assessee seeks to square off expenditure against the income which does not form part of total income under the Act and Section 14A of the Act cannot be invoked where no exempt income was earned in the relevant assessment years. In consonance with the judicial precedents, we do not see any infirmity in the conclusion drawn by the CIT(A) for non-applicability of Section 14A of the Act in the facts of the case.
We shall now turn to the second issue raised on behalf of the Revenue regarding propriety of the action of the CIT(A) in granting relief on the disallowance (suo moto made by the assessee) beyond the return of income and in the absence of any formal revised return. The CIT(A) has discussed this aspect in very great detail in para 2.5 to 2.28 of its order. We are not inclined to reiterate the findings of the CIT(A). However, we fully endorse the observations of the CIT(A) which essentially holds that the mistake or inadvertence on the part of the assessee whereby an income not taxable has been wrongly offered for tax, will not operate as any kind of estoppel against the assessee and regardless of whether the revised return was filed or not. Once the assessee is in a position to show that it has been over assessed under the provisions of the Act even on account of assessee's own mistake or otherwise, the Revenue is under duty to assess correct income.
It is trite that the authorities under the Act are under sacrosanct obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, mis-conception or not being properly instructed, is over assessed, the authorities under the Act are required to ensure that only legitimate tax dues are collected. This is the view which flows
ITA No. 690/Ahd/2018 Greenland Infracon Pvt Ltd Vs. DCIT Assessment year: 2014-15 Page 4 of 5
from innumerable judgments including CIT vs. Shelly Products (2003) 261 ITR 367 (SC), S. R. Koshti vs. CIT (2005) 276 ITR 165 (Guj), Ester Industries vs. CIT (2009) 185 TAXMAN 266 (Delhi) and CIT vs. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336 (Bom). The essence of these decisions are that mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. The Revenue authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed in correctly owing to its own mistake.
So viewed, we do not see any potency in the argument laid on behalf of the Revenue that the CIT(A) allegedly committed error in granting total relief in the matter of disallowance under s.14A of the Act. In our considered view, the action of the CIT(A) in granting relief under s.14A of the Act on account suo moto disallowance by the assessee and thereby granting relief higher than claimed in the return of income cannot be faulted in law.”
We see no reasons to take any other view of the matter than the view so taken by the co-ordinate bench. Respectfully following the coordinate bench decision in assessee’s own case for the earlier assessment years, we uphold the plea of the assessee. The assessee gets the relief accordingly.
In the result, the appeal is allowed. Pronounced in the open court today on the 4th day of June, 2019.
Sd/- Sd/-
Justice P P Bhatt Pramod Kumar (President) (Vice President) Ahmedabad, dated the 4th day of June, 2019 bt Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order etc True Copy Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad
ITA No. 690/Ahd/2018 Greenland Infracon Pvt Ltd Vs. DCIT Assessment year: 2014-15 Page 5 of 5
Date of dictation: ...order prepared as per the two pages manuscripts of Hon’ble VP which are attached herewith.....04.06.2019............. 2. Date on which the typed draft is placed before the Dictating Member: ... 04.06.2019........ 3. Date on which the approved draft comes to the Sr. P.S./P.S.: ….04.06.2019.. 4. Date on which the fair order is placed before the Dictating Member for Pronouncement:… 04.06.2019… 5. Date on which the file goes to the Bench Clerk : .... 04.06.2019.. 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …. 8. Date of Despatch of the Order: ………………......