DCIT CEN CIR 5(1), MUMBAI vs. ANAND RATHI FINANICAL SERVICES LTD, MUMBAI

First we take up the appeals of the Revenue in ITA.No. 952, 954 & 955/Mum/2017 for the Assessment Years 2008-09, 2010-11 & 2011-12 as the issues are common.

Identical and common grounds have been raised by the Revenue in these appeals which are as under: - “1. "On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in setting aside the assessment made u/s 153(A) r.w.s 143(3) of the Income Tax Act, 1961 by relying upon the decision of ITAT, (S.B), Mumbai in the case of All Cargo Global Logistic Ltd. vs. DCIT 137 ITD 287, when the said decision has not been accepted by the department and has not yet attained finality." "2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made u/s 14A by the A.O by setting aside the assessment made u/s 153A r.w.s. 143(3) by relying upon the decision of ITAT (S.B), Mumbai in All Cargo Global Logistic Ltd v. DCIT 137 ITD 287 (Mum) without appreciating the fact that the assessee has made investments during the year, income from which shall not or does not form part of the total income of the assessee."

Briefly stated the facts are that, there was a search and seizure action u/s.132 of the Act in the case of the assessee group on 24.09.2013.

On appeal the Ld.CIT(A) deleted the disallowance made u/s. 14A of the Act for the reason that there was no incriminating material seized in the course of search. Ld.CIT(A) held that in the absence of any incriminating materials the assessments u/s. 153A have to be made on originally assessed income only and no addition/disallowance can be made as no incriminating evidences recovered during the course of search. In holding so, the Ld.CIT(A) followed the decisions of the Hon'ble Jurisdictional High Court in the case of CIT v. Murli Agro Products Ltd., [ITA.No. 36 of 2009 dated 26.10.2010]; CIT v. Continental Warehousing Corporation [374 ITR 645] and the Special Bench decision of the Mumbai in the case of All Cargo Global Logistics Ltd. v. DCIT [137 ITD 287], against this order the Revenue is in appeal before us for the Assessment Years 2008-09, 2010-11 & 2011-12.

We have heard the rival submissions, perused the orders of the authorities below. It is an undisputed fact that there was no incriminating material found in the course of search leading to addition/disallowance made u/s. 14A of the Act. It is the finding of the Assessing Officer that assessee had filed return of income making suomotu disallowance u/s. 14A of the Act which return was filed prior to the date of search and the assessment was completed u/s. 143 of the Act. The Revenue could not rebut the findings of the Ld.CIT(A). Therefore, in the absence of any incriminating material found in the course of search and in view of the of the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation (supra) and CIT v. Murli Agro Products Ltd., (supra) the Ld.CIT(A) has rightly deleted the disallowance made u/s. 14A of the Act. Thus we sustain the order passed by the Ld.CIT(A) for the Assessment Years 2008-09, 2010-11 & 2011-12.

Now we take up the appeals of the Revenue for the Assessment Years 2012-13, 2013-14 & 2014-15 and the cross appeal of the assessee for the Assessment Year 2013-14.

Ld. DR vehemently supported the orders of the Assessing Officer and the Ld. Counsel for the assessee placed reliance on the orders of the Ld.CIT(A).

We have heard the rival submissions, perused the orders of the authorities below. We do not find any infirmity in the order passed by the Ld.CIT(A) in holding that only those investments which yielded dividend income should be considered for the purpose of disallowance under Rule 8D (2)(ii) and 8D (2)(iii) of the Act. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue.

Coming to the appeal of the Department as well as assessee for the Assessment Year 2013-14, it is the submission of the Ld. Counsel for the 7 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., assessee that during this Assessment Year the assessee earned dividend income of ₹.750/- only and therefore the disallowance if any shall not exceed the dividend income. It is also further submitted that the assessee himself has made suomoto disallowance of ₹.5,00,000/-.

Ld. DR vehemently supported the orders of the Assessing Officer.

We have heard the rival submissions, perused the orders of the authorities below. We find that the Ld.CIT(A) upheld the action of the Assessing Officer in so far as the disallowance of indirect expenses under Rule 8D (2)(ii) of the Act is concerned. However, he directed the Assessing Officer to compute the disallowance under Rule 8D (2)(ii) and 8D (2)(iii) of the Act by taking only the average value of investments should be worked out considering only those investments which yielded dividend income during the relevant Assessment Year. It is the finding of the Assessing Officer that the assessee received dividend income of ₹.750/- and claimed as exempt income. In the circumstances, the disallowance shall be restricted only to the exempt income received by the assessee. Thus, we direct the Assessing Officer to restrict the disallowance u/s. 14A r.w. Rule 8D to ₹.750/-. Grounds raised by the Revenue are dismissed and the grounds raised by the assessee for the Assessment Year 2013-14 are partly allowed.

In the result, appeals of the Revenue are dismissed and appeal of the assessee is partly allowed as indicated above.