DCIT CC 5(1), MUMBAI vs ANAND RATHI GLOBAL FINANCE LTD, MUMBAI

Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI

Before: SHRI G.S. PANNU & SHRI PAWAN SINGH

For Appellant: Smt. Vidisha Kalra (CIT-DR)

For Respondent: Shri Vijay Mehta

Hearing: 14/11/2017Pronounced: 30/11/2017

The captioned are four appeals by the Revenue relating to the same assessee for Assessment Years 2008-09 to 2011-12 and since common issues are involved, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.

The captioned proceedings are as a result of a search and seizure action carried out in the Anand Rathi group of cases, which included the 2 Anand Rathi Global Finance Ltd. to 7468/Mum/2016 assessee company also. Appeal in ITA No. 7465/Mum/2016 for Assessment Year 2009-10 is taken as the lead case. This appeal by the Revenue is directed against the order of CIT(A)-53, Mumbai dated 31.08.2016 pertaining to the Assessment Year 2009-10, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 28.03.2016 u/s 143(3) r.w.s 153A of the Income Tax Act, 1961 (in short ‘the Act’).

In order to appreciate the controversy, the relevant facts can be summarised as follows. The assessee is a company incorporated under the provisions of the Companies Act, 1956 and is part of Anand Rathi group of cases wherein a search and seizure action was carried out by the Department u/s 132(1) of the Act on 28.09.2013. Subsequently, notice u/s 153A of the Act was issued on 02.02.2015 in response to which assessee filed a return of income declaring an income of Rs.46,30,323/-. Notably, the assessee had originally filed a return of income u/s 139(1) of the Act on 30.09.2008 as a consequence of which, assessment u/s 143(3) of the Act was completed on 29.11.2011. In the assessment finalised u/s 143(3) r.w.s. 153A of the Act on 28.03.2016, the total income was determined at Rs.1,19,12,970/- after enhancing the disallowance u/s 14A of the Act by an amount of Rs.72,82,652/-. This addition was challenged in appeal before the CIT(A) on various Grounds. One of the points raised by the assessee was that the addition was lacking in jurisdiction inasmuch as there was no incriminating material found connected to the said addition and the original assessment was not pending on the date of the search; thus, the original assessment having not abated, no addition could be made in the impugned assessment without recourse to the incriminating material found in the course of search. The CIT(A) found it expedient to accept the plea of the 3 Anand Rathi Global Finance Ltd. to 7468/Mum/2016 assessee on facts as well as in law and found support from the decision of the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. vs. DCIT, 137 ITD 287, which has been approved by the Hon'ble Bombay High Court in the case of CIT vs. All Cargo Global Logistics Ltd., 374 ITR 645 (Bom.). Accordingly, the CIT(A) has deleted the addition against which Revenue is in appeal before us.

Before us, the ld. CIT-DR appearing for the Revenue has not controverted the factual finding arrived at by the CIT(A). So however, it has been canvassed by him that the judgment relied upon by the CIT(A) has not attained finality inasmuch as the Department has preferred an appeal against the same.

On the other hand, the learned representative for the assessee defended the decision of the CIT(A) by placing reliance on the same.

We have carefully considered the rival submissions. Factually speaking, the only disallowance in dispute is the sum of Rs.72,82,652/- made by the Assessing Officer by invoking Sec. 14A of the Act. Pertinently, on the date of the search, the assessment for the instant year stood completed u/s 143(3) of the Act dated 29.11.2011 and, therefore, in terms of the second proviso to Sec. 153A(1) of the Act, such an assessment did not abate. In this background, the judgment of the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra) comes into play. As per the Hon'ble High Court, in cases where no assessment was pending on the date of search, no addition could be made in an assessment finalised u/s 153A(1) r.w.s. 143(3) of the Act unless it is based on any incriminating material found

4 Anand Rathi Global Finance Ltd. to 7468/Mum/2016 in the course of search. The finding of CIT(A) in the instant case is that the disallowance enhanced by the Assessing Officer u/s 14A of the Act is not based on any incriminating material found in the course of search. We find that the aforesaid finding of the CIT(A) is clearly borne out of record and there is no discussion in the order of the Assessing Officer which would show that any incriminating material was indeed found in the course of search which could be relatable to the impugned disallowance. Therefore, under these circumstances, we find no error on the part of the CIT(A) in deleting the addition, which is hereby affirmed.

In the result, appeal of the Revenue for Assessment Year 2009-10 is dismissed.

Insofar as the facts and circumstances in the appeal of the Revenue for Assessment Year 2010-11 is concerned, they are pari materia to the facts and circumstances in appeal for Assessment Year 2009-10 inasmuch as in this year also, the original assessment u/s 143(3) of the Act was finalised on 24.03.2013, i.e. before the date of search and, therefore, our decision in the appeal for Assessment Year 2009-10 shall apply mutatis mutandis to the said appeal also.

In the result, appeal of the Revenue for Assessment Year 2010-11 is dismissed.

10.

We may now take up the appeal of the Revenue for Assessment Year 2008-09 wherein also the only addition in dispute is on account of application of Sec. 14A of the Act. In this year, the respondent-assessee had 5 Anand Rathi Global Finance Ltd. to 7468/Mum/2016 filed its return of income originally u/s 139 of the Act on 29.09.2008. It has been noted by the CIT(A) that no notice u/s 143(2) of the Act was issued for the instant year within the period prescribed in law and, therefore, as on the date of search, i.e. 28.09.2013, no assessment could be said to have been pending as the period permissible to pick-up the return of income for scrutiny assessment by issuance of a notice u/s 143(2) of the Act had lapsed. On this basis, the CIT(A) has concluded that the assessment was not pending as on the date of search and, therefore, he has tested the efficacy of the disallowance made u/s 14A of the Act on the basis of the proposition laid down by the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra), which we have dealt with in the earlier paragraphs. We find no reasons to distract from the findings of the CIT(A), which are factually as well as on point of law in compliance with the ratio laid down by the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra). Accordingly, the decision of the CIT(A) in this year is also affirmed, and Revenue fails.

11.

In the result, appeal of the Revenue for Assessment Year 2008-09 is dismissed.

12.

Now, we may take up the appeal of the Revenue for Assessment Year 2011-12 wherein also the only addition in dispute is the disallowance enhanced u/s 14A of the Act by Rs.86,15,780/-. The CIT(A) has deleted the addition following the ratio of the judgment of the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra).

6 Anand Rathi Global Finance Ltd. to 7468/Mum/2016 13. At the time of hearing, the learned representative for the assessee quite fairly pointed out that the fact-situation in the instant appeal is not covered by the ratio of the judgment of the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra). It is seen that the original return u/s 139(1) of the Act was filed by the assessee on 30.09.2011 and a notice u/s 143(2) of the Act was issued on 31.07.2012, and as on the date of search, i.e. 28.09.2013, the assessment was pending. As a consequence, in terms of the second proviso to Sec. 153A(1), the original assessment abated. Thus, in such a fact-situation, the ratio of the judgment of the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra) is not attracted. Quite clearly, the CIT(A) was wrong in deleting the disallowance by relying on the legal position laid down in the case of All Cargo Global Logistics Ltd. (supra).

14.

In this background, the learned representative for the assessee pointed out that it is quite well-settled that the disallowance u/s 14A of the Act should be limited to the extent of available exempt income whereas in the instant case, the disallowance has been worked out u/s 14A of the Act even in excess of the exempt income. Since the aforesaid plea has not been examined by any income-tax authorities, we deem it fit and proper to restore the matter back to the file of the CIT(A) who shall adjudicate the appeal afresh in accordance with the law. Needless to mention, the CIT(A) shall allow the assessee a reasonable opportunity of being heard and only thereafter shall pass an order afresh in accordance with law.

15.

In the result, appeal of the Revenue for Assessment Year 2011-12 is allowed, as above.

7 Anand Rathi Global Finance Ltd. to 7468/Mum/2016

16.

Resultantly, whereas the appeals of the Revenue for Assessment Years 2008-09, 2009-10 and 2010-11 are dismissed, that of Assessment Year 2011- 12 is allowed, as above.

Order pronounced in the open court on 30th November, 2017

DCIT CC 5(1), MUMBAI vs. ANAND RATHI GLOBAL FINANCE LTD, MUMBAI