DCIT, NEW DELHI vs. M/S. LALLY AUTOMOBILES PVT. LTD., NEW DELHI

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ITA 756/DEL/2014Status: DisposedITAT Delhi09 February 2016AY 2009-103 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A) exceeded his powers by setting aside the issue to the AO without following the prescribed procedure. The CIT(A) should have passed a speaking order after obtaining a remand report or conducting necessary verification.

What were the facts?

The Revenue appealed against an order by the CIT(A) that deleted a disallowance of Rs. 55,42,112/- made under Section 14A read with Rule 8D. The CIT(A) had directed the AO to verify a fact and delete the addition, without obtaining a remand report.

What were the issues?

Whether the CIT(A) erred in deleting the disallowance under Section 14A by directing the AO to verify and delete the addition without following the statutory procedure for disposing of an appeal.

Which sections of the Income-tax Act were involved?

Section 14A,Section 251

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI

Before: SMT DIVA SINGH & SH.L.P.SAHU

For Appellant: Ms. Rishpal Bedi, Sr.DR
Hearing: 11.01.2016Pronounced: 09.02.2016

Date of Hearing 11.01.2016 Date of Pronouncement 09.02.2016 ORDER PER DIVA SINGH, JM The present appeal has been filed by the Revenue assailing the correctness of the order dated 29.11.2013 of CIT(A)-VIII, New Delhi pertaining to 2009-10 assessment year on the following grounds:-

1. “Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting disallowance of Rs.55,42,112/- under section 14A r.w.Rule 8D(ii) & 8D(iii).

2. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 3. That the appellant craves leave to add, alter, amend or forgo any ground(s) of appeal raised above at the time of hearing.”

2.

No one was present at the time of hearing on behalf of the assessee.

However, the appeal is being decided after hearing the Ld. Sr.DR who pointed out that contrary to the statutory mandate the CIT(A) instead of deciding the appeal in the facts of the present case has instead restored the issue back to the AO. The order accordingly it was submitted could not be sustained.

I.T.A .No.-756/Del/2014

3.

We have heard the submissions and perused the material available on record. It is seen that the assessee in the year under consideration declared a loss return of Rs. 1,46,77,658/-. The said return was processed u/s 143(1) and after issuance of notice u/s 143(2) etc. it was selected for scrutiny. The assessee in the year under consideration is stated to be engaged in the business of trading and services of automobiles. The issue under consideration pertains to investment in share income which as per the computation of income does not part of income. The assessee was required to explain why disallowance u/s 14A r.w. Rule 8D should not be made. Considering the reply, the AO made a disallowance of Rs.55,42,112/-. The assessee challenged this in appeal before the CIT(A). The arguments advanced before the CIT(A) are found reproduced in pages 2 to 6 in the impugned order. A perusal of the conclusion arrived at shows that the ld.CIT(A) instead of obtaining a Remand Report restored the issue for verification to the AO. As would be evident from the following extract of the order:-

“I have perused the assessment order, grounds of appeal, statements of facts and submissions. I have discussed the matter with the AR very carefully. The AR argued that there is no exempt income in the P&L account, hence the disallowance u/s 14A for expenditure incurred in relation to earning exempt income does not arise at all. The investment by appellant company in the land of subsidiary company was in the nature of trading/business for opening a show room. The subsidiary company Amtrac Automobiles (P.) Ltd. Was having no income for last 10 years. The appellant company invested there to have land, building showroom for itself. The AO is directed to verify this fact and delete the addition as there is no exempt income in the tax audit report in P&L account filed alongwith return.” (emphasis provided)

4. It is seen that the power of the CIT(A) to set aside has subsequently been withdrawn by the Finance Act w.e.f 01.06.2001. We find sub-section (1) of section 251 of the Income Tax Act, 1961 which addresses the powers of I.T.A .No.-756/Del/2014 Commissioner of Appeals specifically mandates that while disposing the appeal the Commissioner may confirm, reduce, enhance or annul the assessment. In the facts of the present case, we find that the ld. CIT(A) has exercised a power which is not vested in him by the Statute. Accordingly, we find that the Ld.Sr.DR is correct in her submissions as the finding arrived at cannot be sustained. In view thereof the impugned order is set aside and the issue is restored back to the Ld. CIT(A) with the direction to pass a speaking order in accordance with law by way of obtaining a Remand Report, if need be from the AO and/ or carry out the necessary verification at his own and confronting the same to the AO for rebuttal etc. Needless to say that a reasonable opportunity of being heard shall be granted to the assessee.

5.

In the result, the appeal of the Revenue is allowed for statistical purposes in terms of the above directions.

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