DY CIT CC 5 (3), MUMBAI vs. M/S GLOBAL SOFTECH LTD., MUMBAI

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ITA 759/MUM/2020Status: DisposedITAT Mumbai12 April 2022AY 2016-175 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal noted that it was undisputed that Form No. 5, prescribed under the Direct Tax Vivad Se Vishwas Act, 2020, had been issued by the designated authority on 14.02.2022, with reference to the present appeal. The Tribunal referred to Section 4(2) of the Direct Tax Vivad Se Vishwas Act, 2020, which states that upon the filing of the declaration, any appeal pending before the Income-tax Appellate Tribunal in respect of the disputed income or tax arrear shall be deemed to have been withdrawn from the date on which the certificate under sub-section (1) of Section 5 is issued. The Tribunal also referred to Rule 4 of the Vivad Se Vishwas Rules, 2020, and Section 5(1) and 5(2) of the Act, which stipulate that the certificate has to be issued in Form No. 5. Since the assessee had paid the disputed tax and no tax arrears were pending as per the certificate in Form No. 5, the Tribunal held that the present appeal is deemed to be withdrawn in terms of Section 4(2) of the Vivad Se Vishwas Act, 2020. The appeal was accordingly dismissed as deemed to be withdrawn. No specific findings were made on the merits of the grounds of appeal as the appeal was disposed of on a procedural basis.

What were the facts?

The Revenue has appealed against an order dated 25.11.2019 passed by the Commissioner of Income Tax (Appeals)-53, Mumbai, for the assessment year 2016-17. The appeal challenges the deletion of an addition of ₹2,72,35,813/- made under Section 14A of the Income Tax Act, 1961, and also disputes the CIT(A)'s actions regarding best judgment assessments related to Gross Profit (GP). The assessee, M/s Global Softech Ltd., did not appear before the Tribunal. However, the assessee's counsel informed the Tribunal that the assessee had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020. The disputed tax had been deposited, and Form No. 5, as prescribed under the Act, was produced. The Departmental Representative concurred with this submission.

What were the issues?

1. Whether the Ld. CIT(A) erred in deleting the addition of ₹2,72,35,813/- under Section 14A, ignoring that the provisions of Section 14A apply even if no exempt income was earned or received during the year? (Question of law) 2. Whether the Ld. CIT(A) erred in deleting the addition under Section 14A by ignoring CBDT Circular No. 5/2014, which clarifies that Rule 8D read with Section 14A provides for disallowance of expenditure even if no exempt income was earned in a particular year? (Question of law) 3. Whether the Ld. CIT(A) erred in substituting the Assessing Officer's (AO) best judgment with his own, when the AO's estimation was bonafide and reasonable? (Question of mixed law and fact) 4. Whether the Ld. CIT(A) erred in estimating the addition in a best judgment assessment when the AO's estimation of GP had a reasonable nexus with the basis adopted? (Question of mixed law and fact) 5. Whether the Ld. CIT(A) had jurisdiction to substitute the GP addition estimated by the AO in his best judgment assessment, when the AO's GP estimation was reasonable and lower than that of its sister concern? (Question of mixed law and fact) Assessee's contention: The assessee has settled the dispute under the Direct Tax Vivad Se Vishwas Act, 2020, deposited the disputed tax, and obtained Form No. 5. Therefore, the appeal is deemed to be withdrawn as per Section 4(2) of the Act. Revenue's contention: The Revenue's grounds of appeal challenge the deletion of additions made under Section 14A and the CIT(A)'s actions in best judgment assessments, arguing that the CIT(A) erred in deleting the additions and substituting the AO's reasonable estimations.

Which sections of the Income-tax Act were involved?

Section 14A,Section 4(2),Section 5(1),Section 5(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI

Before: SHRI VIKAS AWASTHY & SHRI OM PRAKASH KANT

For Respondent: Mr. O.P. Sharma, CIT-DR
Hearing: 12/04/2022Pronounced: 12/04/2022

ORDER

PER OM PRAKASH KANT, AM

1.

This appeal has been preferred by the Revenue against order dated 25.11.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-53, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2016-17 raising following grounds :

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