M/S JINDAL BUILDTECH PVT. LTD.,GURGAON vs. DCIT CIRCLE, PARWANOO

The said ground No.2 is, therefore, dismissed as not pressed.

Ground No.1 of the appeal reads as under:-

The argument of the Ld. Counsel for the assessee vis-à-vis the above ground was that the case of the assessee had been selected for scrutiny in violation of the CBDT guidelines applicable and, therefore, the assessment order passed as a consequence was bad in law and needed to be quashed. In support of this proposition, reliance was placed on the decision of the Coordinate Bench of the ITAT in the case of Mrs. Payal Kumari,Jagadhari Vs. assessee order dated 24-02-2011. -Chd-2020 M/s Jindal BuildtechPvt.Ltd., Gurgaon 3 4. The Ld. Counsel for the assessee took us first to the assessment order pointing out from para 1 of the order that the case was selected for Compulsory Scrutiny. He, thereafter, took us to the notice issued to the assessee u/s 143(2) of the Act dated 20.9.2017 and drew our attention to the fact that the notice was issued under Compulsory Manual Selection on the basis of the parameter at para 1(i) of the Manual compulsory Guidelines of the CBDT issued by Instruction No. 5/ 2017 dated 7.7.2017. The relevant contents of the notice issued u/s 143(2) of the Act are reproduced as under:- -Chd-2020 M/s Jindal BuildtechPvt.Ltd., Gurgaon 4 5. He, thereafter, drew our attention to the guidelines of the CBDT referred to in the notice u/s 143(2) placed at paper book page No.4 as under:-

Referring to the above, he stated that as per CBDT guidelines for Manual Section of cases, it could have been selected for scrutiny on the criteria that there was recurring addition in the past, the quantum exceeding Rs. 10 lacs and the issue had either become final in favour of the Revenue or the appeal was pending in this regard.

He, thereafter pointed out that the assessee had raised an objection during the assessment proceedings itself to the selection of the case pointing out that there was no recurring addition, as under:- -Chd-2020 M/s Jindal BuildtechPvt.Ltd., Gurgaon 5

He stated that the Assessing officer, in response, summarily dismissed his contention in his notice u/s 142(1) of the Act dated 5.12.2018 by simply stating that the assessment proceedings u/s 143(3) of the Act was statutory proceedings and had to be completed by passing order u/s 143(3) of the Act as under:-

The Ld. counsel for the assessee thereafter took us to the order of the Ld. CIT(A) pointing out therefrom that he had dismissed this contention of the assessee by stating that in the assessment year 2013- 14, the assessee had been denied deduction u/s 80IC on the interest income of Rs. 10,57,218/- and since this was of a recurring nature and since the assessee had not filed appeal against the same ,the case had been rightly selected for scrutiny. Our attention was drawn to para 5.2 of the CIT(A) order as under:-

The Ld. counsel for the assessee, thereafter, drew our attention to the fact that the disallowance of deduction u/s 80IC of the Act on interest income in assessment year 2013-14, referred to by the Ld. CIT(A), was an error and was rectified on an application filed by the assessee u/s 154 of the Act vide order passed u/s 154 dated 15.6.2020.

We have heard the rival contentions and have also carefully considered the documents referred to before us. We are not in agreement with the contention of the Ld. Counsel for the assessee that the assessee’s case in the impugned assessment year was selected for scrutiny in violation of the CBDT guidelines in this regard and the reasons for the same are evident from the arguments made by both the parties before us and the undisputed facts of the case . -Chd-2020 M/s Jindal BuildtechPvt.Ltd., Gurgaon 10 14. It is not denied that as on the date when the assessee’s case for the impugned assessment year i.e. A.Y 2016-17 was selected for scrutiny, the assessment order for the assessment year 2013-14 had been passed making disallowance of deduction claimed by the assessee u/s 80IC of the Act on interest income which exceeded Rs.10 lacs. There is no dispute vis- a-vis this fact. It is also not denied that no appeal had been filed by the assessee against the said order. The CBDT guidelines, as pointed out by the Ld. counsel for the assessee himself before us, categorically states that cases for Manual Selection have to be taken on the basis when certain disallowances made in the past have remained uncontested by the assessee. Now, as on the date of selection of the assessee’scase for scrutiny for the impugned year, position being so that a disallowance exceeding Rs. 10 lacs had been made in the assessees case which had remained uncontested, We do not find any mistake in the order of the Ld. CIT(A) holding that the selection of the assessee’s case for scrutiny was as per CBDT guidelines. That subsequently, disallowance had been found to have been done erroneously and was rectified u/s 154 of the Act, does not change the position, since as on date of selection of the case of the assessee for manual scrutiny, the assessees case fulfilled the conditions as specified in the CBDT guidelines and there was no way by which the Assessing officer could have known that the disallowance had been made erroneously, which he could have been made aware of and could have come to his knowledge -Chd-2020 M/s Jindal BuildtechPvt.Ltd., Gurgaon 11 only by way of an order passed, and which ,is a fact on record, was affected subsequently only after the order passed in appeal by the CIT(A). It is the fact situation as on the date of selection of the case for scrutiny which is to be considered and seen whether they fulfill the criteria mentioned therein for selection of cases for scrutiny. It is impossible for the Assessing officer to forsee on the date of selection of case for scrutiny that the fulfillment of conditions was erroneous. A strict interpretation to the affect that disallowance which could never have been made by the Department could not have been the criteria for selection of case, in our view, cannot be applied to administrative matters relating to the selection of case for scrutiny. The CBDT guidelines in this regard are only to facilitate selection of cases for scrutiny for effective and worthwhile assessments to be conducted and to ensure that there is no adhocism resorted to in the same resulting in wastage of resources of the department in inconsequential assessments..

In view of the above, we dismiss this contention of assessee that the assessees case was selected for scrutiny in violation of the CBDT Guidelines and we uphold the order of the CIT(A) in this regard.

Ground No.3 of the appeal reads as under:- 3. That the Ld. CIT Appeal, Shimla was further not justified to arbitrarily uphold the addition on account of interest of Rs. 4,00,800.00, regarding advances to AdhunikEnercon, when there were sufficient interest free funds.

Now, the solitary contention of the Ld. counsel for the assessee before us was that the assessee had sufficient interest free own funds for the purpose of making the impugned advances and the presumption, therefore, was that the said interest free funds were used for making the advances calling for no disallowance of interest. Our attention was drawn to the decision of the Hon'ble Apex Court in the case of CIT Vs. Reliance Utilities & Power Ltd.’ 313 ITR 340 (SC) laying down and settling the aforesaid proposition. He further pointed out that this contention had been raised before the Ld. CIT(A) also at para5.4.3 of the order but had been summarily dismissed by the Ld. CIT(A) stating that the assessee had failed to establish the nexus between the interest free funds and the interest free advances made.

We have heard the contentions of both the parties. -Chd-2020 M/s Jindal BuildtechPvt.Ltd., Gurgaon 14 19. The issue to be adjudicated relates to disallowance of interest u/s 36(1)(iii) of the Act on account of interest free non business advances made . As pointed out by the Ld.Counsel for the assessee, the Hon’ble apex court, in the case of CIT Vs. Reliance Utilities & Power Ltd(supra), has settled the proposition in this regard that where sufficient own interest free funds are available, the presumption is that the said funds have been used for the purpose of making interest free non business advances calling for no disallowance of interest u/s 36(1)(ii) of the Act .Having said so, we find that the assessee had pleaded that sufficient own funds were available for the purpose of making interest free non business advance to M/s Adhunik Enercon, in the present case, amounting to Rs. 33,40,000/-, but the same has not been dealt with by the Ld. CIT(A) in accordance with the settled proposition of law as stated above. We, therefore, consider it fit to restore the issue back to the file of the Assessing officer to verify the fact of availability of own funds with the assessee and thereafter adjudicate the issue afresh in accordance with law.

Ground No. 4 reads as under:-

The grievance of the assessee in the above ground is vis-a-vis the adhoc disallowance of 0.5% of the total expenditure incurred by the assessee of Rs. 45,75,10,830/-. The Ld. counsel for the assessee pointed out from paragraph 7 of the assessment order that the said adhoc disallowance was made for the reason that the assessee did not produce its books of account and bill and vouchers to authenticate the claim of various expenses. The same was upheld by the Ld. CIT(A) also for the same reason.

The Ld. counsel for the assessee contended before us that it was never asked to produce its books of account during the entire assessment proceedings and assessee being a private limited company, its books of accounts were statutorily audited as required by law as per the Companies Act and was even subjected to tax audit under the Income Tax Act also and nothing adverse had been pointed out by either of the auditors with regard to the expenses claimed by it. He contended that even in the past, no expenditure had ever been disallowed in the case of the assessee.

We have heard both the parties. We have noted that out of the total expenses of Rs. 45,75,10,830/- as claimed by the assessee, 0.5% of the same have been disallowed for non-production of books and vouchers.

Ground No.5 of the appeal reads as under:- 5. That the appellant craves leave to add delete or modify any ground of appeal before the same is heard or disposed off.

In the result, the appeal of the assessee is partly allowed for statistical purposes..