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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMARJIT SINGH
O R D E R
PER D. KARUNAKARA RAO, AM:
The captioned appeal is filed by the Revenue and the Cross Objection is filed by the assessee against the order of the CIT (A)-1, Mumbai dated 10.1.2014 for the assessment year 2008-2009. Since, the issues involved in these appeals are inter-connected, therefore, for the sake of convenience, they are clubbed, heard together and disposed of in this consolidated order. Appeal wise adjudication is given in the following paragraphs of this order.
ITA No.2381/M/2014 (Revenue’s appeal)
This appeal filed by the Revenue on 9.4.2014 is against the said order of the CIT (A). In this appeal, Revenue raised the following grounds which read as under:
“1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in directing the AO to recomputed the disallowance under Rule 8D by taking into consideration the investment made in Tulip Star Hotels Ltd without appreciating the fact that the assessee has not proved one to one nexus of funds received and unutilized.
2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in admitting or accepting the additional evidences furnished by the assessee before him which were not verified by the AO at the time of remand report proceedings and hence was in violation of Rule 46A of the IT Rules.”
The issue raised in Ground no.1 relates to the disallowance u/s 14A r.w. Rule 8D, when the assessee has not earned any exempt income. On this issue, Ld Counsel for the assessee demonstrated that an identical issue was came up for adjudication before the Tribunal in the assessee’s own case for the AY 2009-2010 in dated 4.11.2015 and mentioned that para 16 at page of the said Tribunal’s order (page 28 of the paper book) is relevant in this regard. While adjudicating the identical ground, the Tribunal set aside the issue to the file of the AO. For the sake of completeness of this order, the said para 16 of the Tribunal’s order (supra), dated 4.11.2015 is extracted as under:- “16. Fourth issue relates to disallowance of Rs. 65,64,655/- made u/s 14A read with Rule 8D of the IT Rules, 1962. In this regard, it is the case of the assessee that the assessee has not earned any dividend income or exempt income during the year and therefore, the said provisions of section 14A of the Act do not attract. If fact, the same was submitted before the AO but relying on the judgment of the Bombay High Court in the case of Godrej & Boyce Co Pvt Ltd (328 ITR 81) (Bom), AO applied the provisions of Rule 8D of the IT Rules, 1962 and made disallowance. On appeal, DRP confirmed the AO’s decision. Aggrieved, assessee raised the issue before the Tribunal. Before us, Ld Counsel for the assessee reiterated the submissions made before the lower authorities and relied on various precedents viz., judgment of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Lakhani Marketing (P&H) (272 CTR 265); decision of the Delhi High Court in the case of Cheminvest Limited (ITA No.749/2014); decision of the Tribunal in the case of ACIT vs. M. Bhaskaran (152 ITD 844) (Mds. Tribunal) and others, copies of which are placed in paper book placed before us, which are relevant for the proposition that “section 14A will not apply if no exempt income is received or receivable during the relevant previous year”. After hearing the Ld Representatives of both the parties and on perusal of the decisions cited by the Ld Counsel for the assessee, we agree with the ratio laid down by the said precedents. We, respectfully following the above cited decisions and the ratio laid down therein, direct the AO to examine and apply the same to the facts of the present and adjudicate the issue afresh after affording a reasonable opportunity of being heard to the assessee. Thus, the relevant grounds raised by the assessee are allowed.”
Considering the above, we set aside this issue to the file of the AO with identical directions. AO shall examine the assessee’s arguments raised without prejudice that four out of the five investments are made out of the own funds therefore, as such there is need for rectifying the errors crept in the calculations. AO is directed to adjudicate this issue afresh considering all the objections raised by the assessee and after granting a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, Ground no.1 raised by the Revenue as well as Cross Objection nos. 1 and 3 raised by the assessee, since connected are set aside. Thus, Ground no.1 of the Revenue’s appeal and cross objection nos.1 and 3 of the assessee’s CO are allowed for statistical purposes.
Second issue raised in the Revenue’s appeals relates to the admitting of the additional evidences in violation of Rule 46A of the IT Rules, 1962. In this regard, Ld Counsel for the assessee brought our attention to para 8.12 of the CIT (A)’s order and submitted that the CIT (A) admitted the same after issuing an opportunity to the AO as per the set principles of natural justice. In this regard, he brought our attention to the CIT (A)’s letter No. CIT (A)-1/Remand Report/2012-13, dated 27.11.2012. Further, he also brought our attention to the AO’s reply letter dated 19.2.2013. After perusing the said letters of the CIT (A) / AO and after hearing the Ld Representatives of both the parties, we find the order of the CIT (A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, Ground no.2 raised by the Revenue is dismissed. 6. In the result, appeal of the Revenue is partly allowed for statistical purposes. C.O.135/M/2015 (By Assessee)
This Cross Objection is filed by the assessee on 1.9.2015 is against the said order of the CIT (A)-1, Mumbai.
Cross objection nos. 1 and 3 are already adjudicated by us and remanded them while deciding the Ground no.1 of the Revenue’s appeal in the above paragraphs of this order. Thus, cross objection nos. 1 and 3 raised by the assessee are allowed for statistical purposes. 9. Cross objection no.2 relates to the Ground no.2 of the Revenue’s appeal, wherein the said ground was already dismissed and therefore, it is in favour of the assessee. Hence, the cross objection no.2 being supportive in nature to the order of the CIT (A), therefore, the same is dismissed as such. 10. That leaves, cross objection no.4 for adjudication. The relevant facts in this regard are that the assessee made payment of Rs. 12.66,318 to RSABPL. During the assessment proceedings, assessee submitted the evidences in support of the same. By that time, the matter reached the Tribunal and a sum of Rs. 2,51,500/- remained unexplained / reconciled with evidences. In this regard, Ld Counsel for the assessee brought our attention to pages 114 and 117 of the paper book and the figures appearing thereon ie Rs. 2,51,000/- involving ICICI Bank (dated 7.5.2007) and Rs. 40,000/- involving IDBI Bank (dated 7.5.2007) respectively and mentioned that the said amounts are confirmed by the respective Banks. These amounts constitute a payment made to RSABPL (Raising Star Air Broking Private Limited). After hearing both the parties in this regard, we find merit in the Ld Counsel’s request for remanding this issue for considering the papers filed for the first time before us and adjudicating the issue afresh. Accordingly, we admit the said papers as they are relevant for adjudication of the issue afresh. AO shall grant a reasonable opportunity of being heard to the assessee. Thus, cross objection no.4 raised by the assessee is allowed for statistical purposes. 11. In the result, cross objection raised by the assessee is partly allowed for statistical purposes. 12. Conclusively, Revenue’s appeal and the assessee’s cross objection are partly allowed for statistical purposes. Order pronounced in the open court on 14th January, 2016. Sd/- Sd/- (AMARJIT SINGH) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 14 /01/2016 व.नन.स./ OKK , Sr. PS