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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against order dated 10/03/2016 passed by the Ld. Commissioner of Income Tax (Appeals)-49, Mumbai, for the assessment year 2006-07, whereby the Ld. CIT (A) has allowed the appeal filed by the assessee against assessment order passed u/s 143 (3) read with section 153A of the Income Tax Act, 1961 (for short ‘the Act’).
Brief facts of the case are that the assessee filed its return of income for the assessment year consideration declaring the total income of Rs. 22,66,12,633/-. After the scrutiny, assessment was completed u/s 143 (3) of the Act determining the total income at Rs. 25,46,60,650/-. Subsequently search and seizure action u/s 132 (1) of the Act was conducted at the office and residential premises of M/s Maneesh Pharmaceutical Groups. The 2 Assessment Year: 2006-07 residential premises of the assessee was also covered under the search and seizure action being one of the associate members of the said group. Consequently, notice u/s 153A was issued. In response thereof the assessee submitted that the return of income of Rs. 22,66,12,633/- as increased by the disallowance of Rs. 20,55,735/- to be made pursuing to the order of ITAT dated 10.12.2010 may be treated as return of income filed in response to notice u/s 153A of the Act. The AO issued notices u/s 143 (2) and 142 (1) on which the authorized representative of the assessee attended the proceedings and submitted the details called for.
During the year relevant to the assessment year under consideration, the assessee had earned dividend income of Rs. 8,77,90,763/- and claimed the same as exempt. Accordingly, the AO asked the assessee to explain as to why disallowance u/s 14A should not be made. In response thereof the assessee submitted that no incriminating material was found during search relating to disallowance u/s 14A of the Act. In the light of the decision of the Special Bench of ITAT, Mumbai in the case of All Cargo Global Logistics vs. DCIT 147 TTJ (Mum) SB 513, no disallowance can be made. The AR of the assessee further contended that the assessee has already filed the details of source of loan and its utilization. The loan taken were used for giving further loans and for purchase of shares on which taxable short term capital gain was earned and offered to tax.
After hearing the submissions of the assessee the AO made addition of Rs. 2,45,93,571/- u/s 14A. The assessee challenged the action of the AO by filing appeal before the CIT (A). The Ld. CIT (A) after hearing the assessee allowed the appeal of the assessee and deleted the addition of Rs. 2,45,93,571/- made by the AO. Against the said findings of the Ld. CIT (A), the revenue has filed the present appeal before the Tribunal.
3 Assessment Year: 2006-07
The revenue has challenged the impugned order passed by the Ld. CIT
(A) by raising the following effective ground of appeal:
Whether on the facts and in the circumstances of the case and in law, the CIT (A) was justified in directing the AO to delete the disallowance u/s 14A of Rs. 2,45,93,571/- made, relying on the decision of Bombay High Court in the case of All Cargo Logistics Ltd. (374 ITR 645) without appreciating the fact that the decision of the High Court has not been accepted by the department and SLP has been filed and the same is pending.
6. Before us, the Ld. Departmental Representative (DR) relying on the assessment order passed by the AO submitted that the Ld. CIT (A) has erred in directing the AO to delete the disallowance made by the AO u/s 14A of the Act relying on the decision of Hon’ble Bombay High Court in the case of All Cargo Logistics Ltd. without appreciating the fact the department has filed SLP against the said decision.
On the other hand, the Ld. counsel for the assessee submitted that since the findings of the Ld. CIT (A) is based on the judgment of the jurisdictional High Court passed in All Cargo Logistics Ltd. (supra), there is no merit in the appeal of the revenue and the same is liable to be dismissed.
We have heard the rival submission and perused the material on record in the light of the submissions of the parties. The Ld. CIT (A) has deleted the addition holding as under:-
6.2 I find that in the case of All Cargo Logistics Ltd. V DCIT 137 ITD 287 (Mum) (SB) it has been decided that assessment in the case which had not abated has to be made in the following manner. “In addition to the income that has already been assessed the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant 4 Assessment Year: 2006-07 provisions means books of account, other documents, found in the course of search, but not produced in the course of original assessment, and undisclosed income or property disclosed in the course of search.
This decision of the ITAT Special Bench has been approved by the Hon’ble High Court of Mumbai in the case of All Cargo Global Logistics Ltd. 374 ITR 645 (BOM).
6.2.1 Since the assessment u/s 143 (3) in this case had been made on 31.03.2008 and the issue of disallowance u/s 14A had been set aside to the file of the A.O vide order of ITAT dated 10.12.2010, it can’t be said that the assessment was pending on the date of search i.e. 29.08.2011 in view of the Board Circular No. 7 of 2003 dated 15.09.2003. This Circular indicates that the appeal, revision etc. arising out of earlier assessment shall not abate, which means that there is no merger of earlier assessment with the assessment made under the new scheme.
6.2.2 Thus, the assessment in this case had not abated and further addition to the assessed income could have been made u/s 153A only on the basis of incriminating material found or undisclosed income found in the course of search. There is no reference to any incriminating material while making the addition of Rs. 245,93,571/- u/s 14A in the assessment order passed u/s 153A to total income. There is no reference to the order of the ITAT dated 10.12.2010 for AY 2006-07, Setting aside the issue of disallowance u/s 14A to the A.O. or the manner in which effect has been given to the directions of ITAT in the A.Y.s 2004-05 and 2005-06 on this issue.
6.2.3 The matter was remanded to the A.O. vide letter dated 08.12.2015 to examine and verify if the disallowance worked for A.Y. 2006-07 at Rs. 20,55,734/- was on the same basis as in A.Y. 2004-05 & 2005-06. In this regard, the report has been received on 29.02.2016 stating that the working of disallowance u/s 14Aof the I T Act for A.Y. 2006-07 was found to be correctly worked out on the same lines as worked for A.Y. 2004-05 & 2005-06 while giving effect to ITAT’s order dated 10.12.2010. 6.2.4 I find that the appellant has filed return u/s 153A, following the search, including the said income of Rs. 20,55,734/- on account of disallowance u/s 14A to the total income declared u/s 139 on 31.10.2006 5 Assessment Year: 2006-07 at Rs. 22,67,12,633/-. I am of the considered opinion that the appellant has correctly worked out the disallowance u/s 14A on the opinion that the appellant has correctly worked out the disallowance u/s 14A on the same lines as computed by the A.O. for A.Y. 2004-05 & 2005-06 vide order dated 07.10.2011 while giving effect to the order of the ITAT dated 10.12.2010 by which this issue was set aside to the file of the A.O. for A.Ys. 2004-05 to 2006-07, on the grounds of consistency. I find no justification for the A.O. to compute the disallowance u/s 14A at Rs. 261,76,004/- ignoring the basis on which disallowance u/s 14A had been worked out for A.Y. 2004-05 & 2005-06 vide order dated 07.10.2011 in the case of the appellant, under similar facts and circumstances and ignoring the fact that interest free funds of Rs. 440.77 crores was available against the investment in shares and securities to the extent of Rs. 411.41 crores.
6.3 In view of the above discussion, the addition of Rs. 245,93,571/- made to the total income filed in response to notice u/s 153A at Rs. 22,87,68,365/- is found to be without any justification and the same is deleted.”
We notice that the Ld. CIT (A) has decided the said issue in favour of the assessee following the judgment of Hon’ble Bombay High Court passed in All Cargo Logistics Ltd. 374 ITR 645 (Bom). The revenue has challenged the findings of the Ld. CIT (A) on the ground that the department has filed SLP against the decision of the Hon’ble Bombay High Court. Hence, there is no dispute regarding the facts of the case incorporated by the Ld. CIT (A) in its order. During the course of arguments, neither the Ld. DR contended that the Hon’ble Supreme Court has stayed the operation of the judgment passed by the Hon’ble High Court in All Cargo Logistics Ltd. (supra) nor any document was produced to establish that the Hon’ble Supreme Court has stayed the said judgment of the Hon’ble High Court. Under these circumstances, we do not find any infirmity in the order of the Ld.CIT (A) to interfere with the same. Since, the impugned order is in accordance with the law laid down by the 6 Assessment Year: 2006-07 Hon’ble jurisdictional High Court, we uphold the findings of Ld. CIT (A) and dismiss the sole ground of appeal of the revenue.
In the result, appeal filed by the revenue for assessment year 2006-2007 is dismissed.