ABT LIMITED,CHENNAI vs. DCIT, COIMBATORE

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

Through this appeal assessee assails an order dated

30.03.2017 passed by the ld. Commissioner of Income Tax-I,

Coimbatore u/s. 263 of the Income Tax Act, 1961 (in short ‘’the Act’’).

Facts apropos are that assessee carrying on business of 2.

passenger, parcel service, Maruti dealership & service station, petrol

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bunk etc had filed its return of income for the impugned assessment

year declaring an income of Rs.19,05,23,190/- under normal provisions

and book profit of Rs.14,40,52,949/- u/s. 115JB of the Act. Assessee

had claimed a sum of Rs.3,14,86,158/- as Revenue expenditure under

the head “Construction of building on leasehold land’’, which was

disallowed by the ld. Assessing Officer. Ld. Assessing Officer took a

view in the original assessment completed under section 143(3) of the

Act that this was a capital expenditure. Assessee’s claim for

depreciation at the rate of 50% on commercial vehicles was also not

allowed in such assessment.

of the Act. As per the ld. Commissioner of Income Tax (Appeals),

assessee had taken MAT credit on surcharge and education cess which

was not available u/s. 115JAA(1A) of the Act. Further, as per the ld.

CIT, assessee had claimed exempt dividend income of Rs.93,28,301/-

as exempt but disallowance u/s. 14A of the Act which was worked out

by the assessee at Rs.93,283/- was accepted without verification. As

per the ld. CIT there was a short disallowance of Rs.2,81,63,908/- u/s.

14A of the Act.

Reply of the assessee on the above was that MAT credit 4.

which was to be carried forward had to be computed by deducting

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tax payable on total income under normal provisions from tax payable

u/s.115JB of the Act. As per the assessee its treatment of MAT credit

was correct and there was no error in the assessment order.

assessee was that expenditure which was not claimed as deductible

could not be disallowed u/s. 14A of the Act.

Ld. CIT accepted the reply of the assessee, in so far as the 6.

issue of MAT credit was concerned. However, on the issue of

disallowance u/s. 14A of the Act, he was of the opinion that assessee

having incurred finance cost Rs.28,06,86,000/-, second and third limb

of Rule 8D of the Income Act Rules, 1962 would clearly apply. As per

the ld. CIT, ld. Assessing Officer had accepted the suo-motu

disallowance of Rs.93,283/- made by the assessee without any

verification, and hence the assessment order was erroneous and

prejudicial to the interest of the revenue. He set aside the assessment

and directed the ld. Assessing Officer to examine afresh the issue of

disallowance required u/s. 14A of the Act and pass fresh order after

carrying out independent verification.

Now before us, the ld. Authorised Representative strongly 7.

assailing the order of the ld. Commissioner of Income Tax submitted

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that assessee had made a suo motu disallowance of Rs.93,283/- u/s.

14A of the Act. As per the ld. Authorised Representative, ld. Assessing

Officer had not made any further disallowance u/s.14A of the Act

because he was satisfied with the suo-motu disallowance made by the

assessee. According to him, the assessment order did not have in it

any error which was prejudicial to the interest of the Revenue.

Per contra, ld. Departmental Representative strongly 8. supported the orders of the authorities below.

orders of the authorities below. A reading of the assessment order

show that only disallowances considered by the ld. Assessing Officer

were on the claim of expenditure on construction of building on

leasehold land and on excess deprecation for commercial vehicles.

There is not even a whisper in the assessment order regarding the

computation of disallowance u/s.14A of the Act. It has not been

disputed by the ld. Authorised Representative that assessee had

claimed exempt dividend income of Rs.93,28,301/-. Ld. Assessing

Officer had not examined at any time the correctness of the suo-motu

disallowance of Rs.93,283/- done by the assessee u/s.14A of the Act.

Obviously, disallowance made by the assessee was by taking one

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percent of the dividend income as the expenditure incurred in relation

to such dividend income. This is a pure estimate and whether such

estimate satisfied the requirements of law was never examined by the

ld. Assessing Officer. Hon’ble Apex Court in the case of Toyota Motor

Corporation vs. CIT, 306 ITR 52, after considering the judgment of

Hon’ble Delhi High Court in the case of CIT vs. Toyota Motor

Corporation, 306 ITR 49 had clearly held that order which is silent and

cryptic is erroneous and prejudicial to the interest of the Revenue.

Especially so when ld. Assessing Officer had not made any enquiry on

the claim of the assessee during the course of assessment

proceedings. What was held by Hon’ble Delhi High Court and later by

Hon’ble Apex Court are reproduced hereunder:-

CIT vs. Toyota Motor Corporation 306 ITR 49 (Delhi HC) ‘’9. We find from the order passed by the Tribunal that it has come to the conclusion that the AO had carried out due verification of relevant facts and the assessee had also shown its bona fides and its reasonable belief in not deducting tax at the appropriate stage. The penalty proceedings were not dropped casually by the AO but after verification of full facts disclosed by the assessee in the reply. 10. We are unable to appreciate this reasoning given by the Tribunal simply because that the AO himself did not say any such thing in his order. There is no doubt that the proceedings before the AO are quasi judicial proceedings and a decision taken by the AO in this regard must be supported by reasons. Otherwise, every order, such as the one passed by the AO, could result in a theoretical possibility that it may be revised by the CIT under s. 263 of the Act. Such a situation is clearly impermissible.

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TOYOTA MOTOR CORPORATION VS CIT 306ITR52 (SC) ‘’4. We are not inclined to interfere with the impugned order of the High Court. The High Court has held that the AO had disposed the proceedings stating the penalty proceedings initiated in this case under s. 271C r/w s. 274 of the IT Act, 1961 are hereby dropped. According to the High Court, there was no basis indicated for dropping the proceedings. The Tribunal referred to certain aspects and held that the initiation of proceedings under s. 263 of the IT Act, 1961 (in short, the 'IT Act') was impermissible when considered in the background of the materials purportedly placed by the assessee before the AO. What the High Court has done is to require the AO to pass a reasoned order. The High Court was of the view that Tribunal could not have substituted its own reasonings which were required to be recorded by the AO. According to the assessee all relevant aspects were placed for consideration and if the officer did not record reasons, assessee cannot be faulted. 5. We do not think it necessary to interfere at this stage. It goes without saying that when the matter be taken up by the AO on remand, it shall be his duty to take into account all the relevant aspects including the materials, if any, already placed by the assessee, and pass a reasoned order’’.

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We cannot therefore fault the order of the ld. CIT holding that assessment was erroneous and prejudicial to the interest of the Revenue on the aspect of disallowance u/s.14A of the Act. We do not find any reason to interfere with the order of the ld. CIT.

In the result, the appeal of the assessee stands dismissed. 10.

Order pronounced on Monday, the 27th day of November, 2017, at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन)) (अ�ाहम पी. जॉज�) (N.R.S. GANESAN) (ABRAHAM P. GEORGE) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai �दनांक/Dated:27th November, 2017 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF