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Income Tax Appellate Tribunal, DELHI BENCHES “E” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
This appeal by Revenue has been directed against the order of the Ld. CIT(A)-VIII, New Delhi, dated 21st October, 2014,
2 ITA.No.243/Del./2015 M/s. MMTC Ltd., New Delhi. for the A.Y. 2001-2002, challenging the cancellation of penalty under section 271(1)(c) of the I.T. Act, 1961.
Briefly, the facts of the case as noted in the impugned order are that the A.O. levied the penalty under section 271(1)(c) of the I.T. Act on making disallowance under section 14A of the I.T. Act,1961 read with Rule 8D of the I.T. Rules. The assessee is a Government of India Public Sector Enterprise engaged in the Import and Export of various bulk commodities. It had earned tax free income of Rs.7.02 crores by way of dividends of units of US-64, major portion of which was invested by the assessee in various years prior to previous year relevant to assessment year under reference. The A.O. made disallowance under section 14A of the I.T. Act read with Rule 8D of the I.T.
Rule as per discussion in the order passed by the A.O. under section 250/254/148/ 143(3) dated 15th June, 2010 and made disallowance of Rs.2,20,84,567/-. The assessee-company has furnished details of investments which had yielded tax free investments and availability of its own funds from F.Y. 1990-
3 ITA.No.243/Del./2015 M/s. MMTC Ltd., New Delhi.
1991 till the year under reference which is reproduced in the appellate order. It was submitted that assessee had its own funds around Rs.743.48 crores as on 31st March, 2000 which were many times higher than the amount invested in investments yielding tax free income. Therefore, there were no justification to make disallowance or to levy penalty under section 271(1)(c) of the I.T. Act. The order of Ld. CIT(A) for A.Y. 2003-2004 was referred to, in which, A.O. was directed to allow necessary expenditure relating to earning of interest income. It is, therefore, clear that interest expenditure incurred by the assessee is for the purpose of earning of interest income.
Therefore, same cannot be attributed to having been incurred for making investments which yielded tax free income. The order of the A.O. dated 15th June, 2010 was also referred to plead that A.O. was not justified in disallowing any portion of interest expenditure incurred by assessee under section 14A read with Rule 8D of I.T. Rules. It was further seen by the Ld. CIT(A) that for A.Y. 2005-2006, in assessee’s own case, disallowance to the extent of Rs.1 lakh was found reasonable
4 ITA.No.243/Del./2015 M/s. MMTC Ltd., New Delhi. following the order giving effect to the order of ITAT in assessee’s own case for A.Y. 1995-1996. The assessee also relied upon the decision of the Hon’ble Delhi High Court in the case of Maxopp Investment Ltd., vs. CIT 347 ITR 272 (Del.) for the premise that Rule 8D is applicable w.e.f. A.Y. 2008-2009 onwards. Therefore, it cannot be applied in assessment year under appeal. The Ld. CIT(A) considered that it is a controversial issue because appellate authorities have taken different views and relied upon the decision of Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd., vs. CIT reported in 348 ITR 306 (SC) in which it was held that penalty under section 271(1)(c) was not sustainable in spite of the fact that assessee did not offer provision for gratuity u/s. 40A(7) for disallowance in spite of the same being shown as disallowance in Tax Audit Report.
The Ld. CIT(A) relied upon the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products (P.) Ltd., (2010) 322 ITR 158 (SC) and held that there is no concealment for levy of penalty against the assessee. The Ld. CIT(A), ultimately, held that the disallowance made on estimate would
5 ITA.No.243/Del./2015 M/s. MMTC Ltd., New Delhi. not warrant levy of penalty. Accordingly, appeal of assessee was allowed.
Ld. D.R. relied upon the order of the A.O.
On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and relied upon the order of ITAT, Delhi “E” Bench in the case of same assessee for assessment year under appeal in ITA.No.2487/Del./2010 etc., dated 30th November, 2016, in which the Tribunal following the earlier orders in the case of assessee, restored the matter back to the file of A.O. for computing disallowance on similar directions. Copy of the order is filed on record. He has further submitted that A.O. in the set aside order under section 254/143(3) dated 22nd December, 2017, disallowed Rs.2 lakhs only under section 14A of the I.T.
Act. Copy of the order is also placed on record. He has, therefore, submitted that penalty is not leviable in these circumstances.
6 ITA.No.243/Del./2015 M/s. MMTC Ltd., New Delhi.
On consideration of the rival submissions, we do not find any merit in the Departmental Appeal. The A.O. levied the penalty under section 271(1)(c) of the I.T. Act on making disallowance under section 14A of the I.T. Act. The Tribunal set aside the orders of the authorities below and restored the disallowance under section 14A to the file of A.O. vide order dated 30th November, 2016. Therefore, nothing survive in favour of the Revenue at this stage to levy any penalty against the assessee. Once quantum addition does not survive, there is no question of levy of penalty against the assessee for concealment of income or furnishing of inaccurate particulars of income. The A.O. in the appeal effect order dated 22nd December, 2017, made the addition of Rs.2 lakhs under section 14A of the I.T.
Act as well as initiated penalty proceedings separately. These facts would support our finding that no penalty is leviable at this stage. The penalty, therefore, cannot be levied. The Departmental Appeal stands dismissed. However, A.O. is at liberty to take action as per law, if so, advised in accordance
7 ITA.No.243/Del./2015 M/s. MMTC Ltd., New Delhi. with law, on passing fresh assessment order Dated 22nd December, 2017.
In the result, Appeal of the Department is dismissed.
Order pronounced in the open Court.