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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM
1. This appeal has been preferred by the assessee against order dated 29.06.2022 passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter shall be referred as ‘Ld. First Appellate Authority’), for assessment year 2014-15 raising following grounds:
1. On the facts and in the circumstance of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal.
Hari Kumar Ruliram Sharma 2 ITA No. 1941/M/2022
2. On the facts and in the circumstance of the case and in law, On the facts and in the circumstance of the case and in law, On the facts and in the circumstance of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal and that the learned C.I.T. (A) erred in dismissing the appeal and that the learned C.I.T. (A) erred in dismissing the appeal and that too without even appreciating fully and properly the facts of too without even appreciating fully and properly the facts of too without even appreciating fully and properly the facts of the case. the case.
3. On the facts and On the facts and in the circumstance of the case and in law, in the circumstance of the case and in law, the learned C.I.T.(A) erred in confirming the action of the the learned C.I.T.(A) erred in confirming the action of the the learned C.I.T.(A) erred in confirming the action of the learned learned learned A.O. A.O. A.O. in in in making making making addition addition addition of of of an an an amount amount amount of of of Rs.4,21,66,567/ Rs.4,21,66,567/- as deemed dividend u/s 2(22)(e) of the act. as deemed dividend u/s 2(22)(e) of the act. 4. On the facts and in the circumstance of th On the facts and in the circumstance of the case and in law, e case and in law, the learned C.I.T.(A) erred in confirming the action of the the learned C.I.T.(A) erred in confirming the action of the the learned C.I.T.(A) erred in confirming the action of the learned A.O. in making a disallowance of an amount of learned A.O. in making a disallowance of an amount of learned A.O. in making a disallowance of an amount of Rs.9,56,024/ Rs.9,56,024/- u/s 14A of the act.
Briefly stated, facts of the case are that the assessee was Briefly stated, facts of the case are that the assessee was Briefly stated, facts of the case are that the assessee was engaged in the transport b engaged in the transport business. The assessee is one of the usiness. The assessee is one of the promoters of a company namely M/s R.R. Roadways Pvt. Ltd. of a company namely M/s R.R. Roadways Pvt. Ltd. of a company namely M/s R.R. Roadways Pvt. Ltd. wherein he was holding 87.5% shares. For the year under wherein he was holding 87.5% shares. For the year under wherein he was holding 87.5% shares. For the year under consideration, the assessee filed return of income on 31.03.2015 consideration, the assessee filed return of income on 31.03.2015 consideration, the assessee filed return of income on 31.03.2015 declaring total income of declaring total income of ₹10,98,410/-. The return of income filed he return of income filed by the assessee was selected for scrutiny assessment, which was by the assessee was selected for scrutiny assessment, which was by the assessee was selected for scrutiny assessment, which was completed on 29.12.2016 after making addition of ₹4,21,66,567/- completed on 29.12.2016 after making addition of completed on 29.12.2016 after making addition of tax Act, 1961 (in for deemed dividend u/s 2(22)(e) of the Income for deemed dividend u/s 2(22)(e) of the Income-tax Act, 1961 (in short ‘the Act’) and disallowance u/s 14A of ₹9,56,024/ short ‘the Act’) and disallowance u/s 9,56,024/-. On Hari Kumar Ruliram Sharma 3 ITA No. 1941/M/2022 further appeal, the Ld. First Appellate Authority upheld the urther appeal, the Ld. First Appellate Authority upheld the urther appeal, the Ld. First Appellate Authority upheld the disallowances.
3. Aggrieved, the assessee is before the Tribunal by way of raising Aggrieved, the assessee is before the Tribunal by way of raising Aggrieved, the assessee is before the Tribunal by way of raising grounds as reproduced above. grounds as reproduced above.
Before us, the assessee Before us, the assessee has filed a Paperbook containin filed a Paperbook containing pages 1 to 268.
The ground No. 1 and 2 of the appeal are general in nature 5. The ground No. 1 and 2 of the appeal are general in nature The ground No. 1 and 2 of the appeal are general in nature and therefore, same are dismissed as infructuous. and therefore, same are dismissed as infructuous.
In ground No. 3, the assessee is aggrieved with the addition of In ground No. 3, the assessee is aggrieved with the addition of In ground No. 3, the assessee is aggrieved with the addition of ₹4,21,66,567/- made by the Assessing Officer as deemed di made by the Assessing Officer as deemed di made by the Assessing Officer as deemed dividend u/s 2(22)(e) of the Act. Before us, the Ld. Counsel of the assessee u/s 2(22)(e) of the Act. Before us, the Ld. Counsel of the assessee u/s 2(22)(e) of the Act. Before us, the Ld. Counsel of the assessee referred to the application of the assessee under Rule 29 of the ITAT referred to the application of the assessee under Rule 29 of the ITAT referred to the application of the assessee under Rule 29 of the ITAT Rules, 1963 for filing additional evidence. The facts in brief qua the Rules, 1963 for filing additional evidence. The facts in brief qua the Rules, 1963 for filing additional evidence. The facts in brief qua the issue-in-dispute are are that the assessee during the year under uring the year under consideration has received loans/ onsideration has received loans/advances from the company M/s advances from the company M/s R.R. Roadways Pvt. Ltd. R.R. Roadways Pvt. Ltd. in which he is holding 87.5% shares. The is holding 87.5% shares. The Assessing Officer observed amount of loan of ₹4,21,66,567/ Assessing Officer observed amount of loan of 4,21,66,567/- from Hari Kumar Ruliram Sharma 4 ITA No. 1941/M/2022 the Tax Audit Report Tax Audit Report filed by the assessee in prescribed Form No. the assessee in prescribed Form No. 3CB. The relevant part of the 3CB. The relevant part of the Tax Audit Report has been reproduced has been reproduced by the Assessing officer in para 4.6 of the impugned assessment by the Assessing officer in para 4.6 of the impugned assessment by the Assessing officer in para 4.6 of the impugned assessment order. The Ld. Assessing Officer also verified the shareholding of the order. The Ld. Assessing Officer also verified the shareholding of the order. The Ld. Assessing Officer also verified the shareholding of the assessee from the balance sheet of M/s R.R. Roadways Pvt. Ltd. balance sheet of M/s R.R. Roadways Pvt. Ltd. balance sheet of M/s R.R. Roadways Pvt. Ltd. Before the Assessing Officer, the assessee contended that correct Before the Assessing Officer, the assessee contended that correct Before the Assessing Officer, the assessee contended that correct figure of loan amount of loan amount should have been taken at should have been taken at ₹2,96,95,799/- because part of the advances/loans were returned back during the because part of the advances/loans were returned back during the because part of the advances/loans were returned back during the year under consideration. Whereas, the Assessing Officer has added deration. Whereas, the Assessing Officer has added deration. Whereas, the Assessing Officer has added entire balance of ledger account of the assessee in the books of M/s ledger account of the assessee in the books of M/s ledger account of the assessee in the books of M/s R.R. Roadways Pvt. Ltd. R.R. Roadways Pvt. Ltd. 6.1 Before us, the asessee claimed that both the assessee and the Before us, the asessee claimed that both the assessee and the Before us, the asessee claimed that both the assessee and the company are engaged in the business of transpo company are engaged in the business of transportation and in order rtation and in order to get more business, particularly from the more business, particularly from the corporates corporates, private limited company was was established by the assessee along with his established by the assessee along with his family members as shareholders. It was submitted that main object family members as shareholders. It was submitted that main object family members as shareholders. It was submitted that main object of the company was was carry on of business of transport and cargo transport and cargo agents, take contract take contract for arranging and operating of of transport and Hari Kumar Ruliram Sharma 5 ITA No. 1941/M/2022 cargo movers. The Ld. Counsel of the assessee submitted that the cargo movers. The Ld. Counsel of the assessee submitted that the cargo movers. The Ld. Counsel of the assessee submitted that the alleged loan/advance alleged loan/advance transaction in dispute are actually not loan transaction in dispute are actually not loan and and advances advances but but same same are are in in the the nature natur e of of business business transactions/dealing transactions/dealing and totally commercial in nature and totally commercial in nature and therefore, the provision of section 2(22)(e) of the Act are not therefore, the provision of section 2(22)(e) of the Act are not therefore, the provision of section 2(22)(e) of the Act are not applicable in the case applicable in the case of such transaction. In support of his n support of his contention, the Ld. Counsel relied on following decisions : contention, the Ld. Counsel relied on following decisions contention, the Ld. Counsel relied on following decisions
i. CIT v. Suraj Dev Dada 367 ITR 78 (P&H) CIT v. Suraj Dev Dada 367 ITR 78 (P&H) ii. CIT v. Gayatri Chakraborty 407 ITR 730 (Cal) CIT v. Gayatri Chakraborty 407 ITR 730 (Cal) iii. Ravindra R. Fotedar v. ACIT 167 ITD 100 Ravindra R. Fotedar v. ACIT 167 ITD 100 6.2 Further, the Ld. Counsel also submitted that the company Further, the Ld. Counsel also submitted that the company Further, the Ld. Counsel also submitted that the company obtained a loan of ₹ ₹4.80 crores from Kotak Mahindra Bank Ltd. 4.80 crores from Kotak Mahindra Bank Ltd. towards which the assessee stood guarantee by mortgaging his towards which the assessee stood guarantee by mortgaging his towards which the assessee stood guarantee by mortgaging his personal properties. Similarly, loans raised by the company from personal properties. Similarly, loans raised by the company from personal properties. Similarly, loans raised by the company from HDFC Bank wherein assessee was a personal guarantor. It was HDFC Bank wherein assessee was a personal guarantor. HDFC Bank wherein assessee was a personal guarantor. further submitted that amount of ₹2,96,95,799/- further submitted that amoun shown as loan from the company was a direct repayment of the old loan of the from the company was a direct repayment of the old loan of the from the company was a direct repayment of the old loan of the assessee to obtain new loan in the n assessee to obtain new loan in the name of the company which is ame of the company which is available on page 251 of the Paperbook. The Ld. Counsel of the available on page 251 of the Paperbook. The Ld. Counsel of the available on page 251 of the Paperbook. The Ld. Counsel of the Hari Kumar Ruliram Sharma 6 ITA No. 1941/M/2022 assessee referred to the referred to the application under Rule 29 of the ITAT Rules tion under Rule 29 of the ITAT Rules and requested that matter may be restored back to the file of the and requested that matter may be restored back to the file of the and requested that matter may be restored back to the file of the Assessing Officer for deciding issue Assessing Officer for deciding issue-in-dispute in the light of the dispute in the light of the additional evidence filed by the assessee. The list of the additional additional evidence filed by the assessee. The list of the additional additional evidence filed by the assessee. The list of the additional by the assessee are reproduced as under: evidences filed by the assessee are reproduced as under: by the assessee are reproduced as under:
Sr. No. Description Page No.
Copy of Return of income along with audited financial Copy of Return of income along with audited financial 1-21 Copy of Return of income along with audited financial statements, tax audit report etc. statements, tax audit report etc.
2. Copy of the notice dated 15.12.2015 issued u/s 142(1) of Copy of the notice dated 15.12.2015 issued u/s 142(1) of 22-23 Copy of the notice dated 15.12.2015 issued u/s 142(1) of the Act.
Copy of compliance to notice issued u/s 143(2) dated compliance to notice issued u/s 143(2) dated compliance to notice issued u/s 143(2) dated 24-28 11.09.2015 142(1) of the Act dated 29.12.2015, 18.10.2016 11.09.2015 142(1) of the Act dated 29.12.2015, 18.10.2016 11.09.2015 142(1) of the Act dated 29.12.2015, 18.10.2016 & 28.12.2016 4. Copy of show cause notice dated 3.11.2016 issued by the Copy of show cause notice dated 3.11.2016 issued by the 29 Copy of show cause notice dated 3.11.2016 issued by the AO 5. Copy of Articles of Association and Memorandum of Copy of Articles of Association and Memorandum of 30-53 Copy of Articles of Association and Memorandum of Association of R.R. Roadways Pvt. Ltd. Association of 6. Copy of all loan sanction letter issued by Kotak Mahindra Copy of all loan sanction letter issued by Kotak Mahindra 54-69 Copy of all loan sanction letter issued by Kotak Mahindra Bank Ltd. dated 03.06.2016 Bank Ltd. dated 03.06.2016 7. Copy of all loan sanction letter issued by HDFC Bank Ltd. Copy of all loan sanction letter issued by HDFC Bank Ltd. 70-73 Copy of all loan sanction letter issued by HDFC Bank Ltd. dated 10.06.2013 dated 10.06.2013 8. Copy of purchase agreement (two properties) owned by Hari Copy of purchase agreement (two properties) owned by Hari 74-207 Kumar Sharma and mortgaged to Kotak Mahindra Bank Kumar Sharma and mortgaged to Kotak Mahindra Bank Kumar Sharma and mortgaged to Kotak Mahindra Bank Ltd.
Copy of valuation report dated 14.10.2015 of the said Copy of valuation report dated 14.10.2015 of the said 208-217 Copy of valuation report dated 14.10.2015 of the said property offered as security to the Bank. property offered as security to the Bank.
On the contrary, the Ld. Departmental Representative (DR On the contrary, the Ld. Departmental Representative (DR On the contrary, the Ld. Departmental Representative (DR) relied on the order of the lower authorities. relied on the order of the lower authorities.
We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. The issue dispute and perused the relevant material on record. The issue dispute and perused the relevant material on record. The issue
Hari Kumar Ruliram Sharma 7 ITA No. 1941/M/2022 before us is firstly, whether the Assessing Officer has recorded the whether the Assessing Officer has recorded the whether the Assessing Officer has recorded the correct amount of loan or advances for the purpose of treating the amount of loan or advances for the purpose of treating the amount of loan or advances for the purpose of treating the same as deemed dividend. The second issue is whether the same as deemed dividend. The second issue is whether the same as deemed dividend. The second issue is whether the transactions in in in dispute dispute dispute are are are loan loan loan transaction transaction transaction or or or business business business transaction. Before us, for the first time transaction. Before us, for the first time, the assessee has filed the assessee has filed additional evidence and contended that transaction in dispute are nce and contended that transaction in dispute are nce and contended that transaction in dispute are business transactions. We are of the opinion that this claim of the business transactions. We are of the opinion that this claim of the business transactions. We are of the opinion that this claim of the assessee need verification at the end of the Assessing Officer and assessee need verification at the end of the Assessing Officer and assessee need verification at the end of the Assessing Officer and therefore, we feel it appropriate to restore this issue to the file of the therefore, we feel it appropriate to restore this issue to the file of therefore, we feel it appropriate to restore this issue to the file of Assessing Officer for deciding afresh after considering the evidences Assessing Officer for deciding afresh after considering the evidence Assessing Officer for deciding afresh after considering the evidence filed by the assessee in this regard. The ground No. 3 of the appeal filed by the assessee in this regard. The ground No. 3 of the appeal filed by the assessee in this regard. The ground No. 3 of the appeal of the assessee is accordingly allowed for statistical purposes. of the assessee is accordingly allowed for statistical purposes. of the assessee is accordingly allowed for statistical purposes.
9. The ground No. 4 of the appeal relates to di The ground No. 4 of the appeal relates to di The ground No. 4 of the appeal relates to disallowance of ₹9,546,024/- u/s 14A of the Act. u/s 14A of the Act.
Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that during the year under consideration no exempted income was during the year under consideration no exempted income was during the year under consideration no exempted income was earned by the assessee and therefore, in view of the decision of the earned by the assessee and therefore, in view of the decision of the earned by the assessee and therefore, in view of the decision of the Hon’ble Bombay High Court in the case of PCIT v. Wockhardt PCIT v. Wockhardt Hon’ble Bombay High Court in the case of Hari Kumar Ruliram Sharma 8 ITA No. 1941/M/2022 Hospitals Ltd. 192 DTR 289 (Bom) Hospitals Ltd. 192 DTR 289 (Bom), no disallowance is called for , no disallowance is called for where there is no exepted income in the hands of the assessee. where there is no exepted income in the hands of the assessee. where there is no exepted income in the hands of the assessee. Further, the Ld. Counsel submitted that Hon’ble Delhi High Court urther, the Ld. Counsel submitted that Hon’ble Delhi High Court urther, the Ld. Counsel submitted that Hon’ble Delhi High Court in the case of PCIT v. Era Infrastructure (India) Ltd. 216 DTR PCIT v. Era Infrastructure (India) Ltd. 216 DTR PCIT v. Era Infrastructure (India) Ltd. 216 DTR 191 (Delhi) has held that amendment to section 14A for has held that amendment to section 14A for has held that amendment to section 14A for disallowance of expenditure of expenditure even though there is no exempt income, has been held to be prospective in nature and therefore n held to be prospective in nature and therefore n held to be prospective in nature and therefore said amendment is not applicable in the year under consideration. said amendment is not applicable in the year under consideration. said amendment is not applicable in the year under consideration.
On the contrary, the Ld. DR relied on the order of the lower On the contrary, the Ld. DR relied on the order of the lower On the contrary, the Ld. DR relied on the order of the lower authorities.
We have heard rival submission of the parties on the issu We have heard rival submission of the parties on the issu We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that Hon’ble Bombay High Court in the case of Wockhardt Hospitals Wockhardt Hospitals Hon’ble Bombay High Court in the case of Ltd. (supra) has held that wherever the assessee has not earned has held that wherever the assessee has not earned has held that wherever the assessee has not earned any exempt income, no disallowance is called for. The relevant any exempt income, no disallowance is called for. The releva any exempt income, no disallowance is called for. The releva finding of the Hon’ble High Court is reproduced as under : finding of the Hon’ble High Court is reproduced as under : finding of the Hon’ble High Court is reproduced as under :
“8.6 Tribunal held that assessee had not earned any exempt 8.6 Tribunal held that assessee had not earned any exempt 8.6 Tribunal held that assessee had not earned any exempt income during the assessment year under consideration. nor it had income during the assessment year under consideration. nor it had income during the assessment year under consideration. nor it had claimed any expenditure against any tax free income. Thus, the claimed any expenditure against any tax free income. Thus, the claimed any expenditure against any tax free income. Thus, the Hari Kumar Ruliram Sharma 9 ITA No. 1941/M/2022 twin preconditions for invoking the provisions of s. 14A r/w r. 8D of preconditions for invoking the provisions of s. 14A r/w r. 8D of preconditions for invoking the provisions of s. 14A r/w r. 8D of the Rules i.e., earning of exempt income and claiming expenditure to the Rules i.e., earning of exempt income and claiming expenditure to the Rules i.e., earning of exempt income and claiming expenditure to earn the same were absent. Therefore, the order passed by the first earn the same were absent. Therefore, the order passed by the first earn the same were absent. Therefore, the order passed by the first appellate authority was affirmed. appellate authority was affirmed.
8.7 We are in agreem 8.7 We are in agreement with the view taken by the Tribunal. As ent with the view taken by the Tribunal. As rightly held by the Tribunal, assessee had neither earned any rightly held by the Tribunal, assessee had neither earned any rightly held by the Tribunal, assessee had neither earned any exempt income nor claimed any expenditure for earning such exempt income nor claimed any expenditure for earning such exempt income nor claimed any expenditure for earning such exempt income. That being the position, AO was not justified in exempt income. That being the position, AO was not justified in exempt income. That being the position, AO was not justified in making the disallowance by making the disallowance by invoking the aforesaid two provisions. invoking the aforesaid two provisions. The same was rightly deleted by the first appellate authority which The same was rightly deleted by the first appellate authority which The same was rightly deleted by the first appellate authority which order has been affirmed by the Tribunal. Therefore, this question order has been affirmed by the Tribunal. Therefore, this question order has been affirmed by the Tribunal. Therefore, this question proposed by the revenue also fails. proposed by the revenue also fails.”
12.1 In the instant In the instant case from the para 5.1 of case from the para 5.1 of the impugned assessment order it is evident that no exempt income was earned assessment order it is evident that no exempt income was earned assessment order it is evident that no exempt income was earned by the assessee and therefore following the decision of the Hon’ble by the assessee and therefore following the decision of the Hon’ble by the assessee and therefore following the decision of the Hon’ble Bombay High Court (supra), no disallowance is called for. Further, no disallowance is called for. Further, in the case of Era Infrastructure (India) Lt in the case of Era Infrastructure (India) Ltd. (supra), it is held that d. (supra), it is held that amendment by way of amendment by way of Finance Act, 2022, which stipulate that which stipulate that provision of section 14A are applicable even in case of no exempt provision of section 14A are applicable even in case of no exempt provision of section 14A are applicable even in case of no exempt income in the year under consideration. However, said amendment income in the year under consideration. However, said amendment income in the year under consideration. However, said amendment has been held by the Hon’ble has been held by the Hon’ble Delhi High Court t (supra) to be prospective in nature. The relevant finding of the Hon’ble High prospective in nature. The relevant finding of the Hon’ble High prospective in nature. The relevant finding of the Hon’ble High Court is reproduced as under : Court is reproduced as under :
Hari Kumar Ruliram Sharma 10 ITA No. 1941/M/2022
“8. Consequently, this Court is of the view that the Consequently, this Court is of the view that the Consequently, this Court is of the view that the amendment of section 14A which is “for removal of doubts” amendment of section 14A which is “for removal of doubts” amendment of section 14A which is “for removal of doubts” cannot be presumed to be retrospective ev cannot be presumed to be retrospective even where such en where such language is used. If it alters or changes the law as it earlier language is used. If it alters or changes the law as it earlier language is used. If it alters or changes the law as it earlier stood.”
12.2 Respectfully following the finding of the Hon’ble High Court Respectfully following the finding of the Hon’ble High Court Respectfully following the finding of the Hon’ble High Court (supra), we set aside the order of Ld. First Appellate Authority and (supra), we set aside the order of Ld. First Appellate Authority and (supra), we set aside the order of Ld. First Appellate Authority and direct the Assessing Officer to delete the disallowance in dispute. direct the Assessing Officer to delete the disallowance in dispute. direct the Assessing Officer to delete the disallowance in dispute. The ground No. 4 of the appeal of the assessee is accordingly The ground No. 4 of the appeal of the assessee is accordin The ground No. 4 of the appeal of the assessee is accordin allowed.
In the result, the appeal filed by the assessee is partly allowed In the result, the appeal filed by the assessee is partly allowed In the result, the appeal filed by the assessee is partly allowed for statistical purposes. for statistical purposes.
Order pronounced under Rule 34(4) Order pronounced under Rule 34(4) of the ITAT Rules, of the ITAT Rules, 1963 on 25/11/2022. /11/2022. Sd/- Sd/- Sd/ (SANDEEP SINGH KARHAIL SANDEEP SINGH KARHAIL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 25/11/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to :
1. 1. The Appellant 2. The Respondent. 3. The CIT(A)- Hari Kumar Ruliram Sharma 11 ITA No. 1941/M/2022