DEVKANT SYNTHETICS (INDIA) P.LTD, MUMBAI v. PR CIT 3, MUMBAI

ITA 3153/MUM/2017 | 2013-2014
Pronouncement Date: 06-11-2017 | Result: Allowed

Appeal Details

RSA Number 315319914 RSA 2017
Assessee PAN AAACD2102K
Bench Mumbai
Appeal Number ITA 3153/MUM/2017
Duration Of Justice 6 month(s) 5 day(s)
Appellant DEVKANT SYNTHETICS (INDIA) P.LTD, MUMBAI
Respondent PR CIT 3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 06-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted D
Tribunal Order Date 06-11-2017
Assessment Year 2013-2014
Appeal Filed On 01-05-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI BEFORE SHRI D.T.GARASIA JM AND SHRI RAJESH KUMAR AM I.T.A. NO. 3153 /MUM/20 1 7 ( / ASSESSMENT YEAR : 20 13 - 14 ) DEVKANT SYNTHETICS (INDIA) PVT LTD.1006 RAHEJA CENTRE 10 TH FLOOR NARIMAN POINT MUMBAI - 400021. / VS. INCOME TAX OFFICER 3(1)(2) MUMBAI. ./ PAN : AAA CD2102K ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI RAJEE V KHANDELWAL / REVENUE BY : SHRI B PRUSETH / DATE OF HEARING : 10.8.2017 / DATE OF PRONOUNCEMENT : 6 . 1 1 . 201 7 / O R D E R PER RAJESH KUMAR A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE CHA LLENGING THE ORDER DATED 19.4.2017 PASSED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX - 3 MUMBAI FOR THE ASSESSMENT YEAR 2 013 - 14 . 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN ALL THE GROUNDS OF APPEAL IS AGAINST THE EXERCISING THE REVISIONARY JURISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT 1961 BY THE P CIT SETTING ASIDE THE ASSESSMENT ORDER BY HOLDING THAT THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 2 I.T.A. NO. 3153 /MUM/2017 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS COMPLETED BY THE AO UND ER SECTION 143(3) OF THE ACT ON 29.3.2016 BY ASSESSING THE TOTAL INCOME OF RS. 25.37.651 / - AS AGAINST THE RETURNED INCOME OF RS.23 16 530/ - . THEREAFTER THE PRINCIPAL COMMISSIONER OF INCOME TAX(PCIT) UPON EXAMINATION OF THE RECORD S OBSERVED THAT THE ORD ER DA T ED 29.3.2016 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS THE DISALLOWANCE WAS NOT AS PER THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R.8D AND ACCORDINGLY ISSUED A SHOW CAUSE NOTICE DATED 14.2.2017 U/S 263 OF THE ACT WHICH IS REPRO DUCED BELOW : ON VERIFICATION CERTAIN DISCREPANCIES WERE FOUND IN THE ASSESSMENT ORDER DATED 29.03.2016 WHICH ARE AS UNDER: THE DISALLOWANCE MADE U/ S. 14A WAS @ 5% OF TH E DIVIDEND OF RS.44 22 416/ - RECEIVED AND THE SAME WAS NOT IN ACC ORDANCE WITH RULE 8 D OF THE I. T. RULES 1962. ON PERUSAL IT WAS OBSERVED THAT THE SAID DISALLOWANCE WAS MADE IN VIEW OF THE DECISION OF THE HONBLE ITAT IN ASSESSEE'S OWN CASE F OR. AY. 2010 - 11 AND 2011 - 1 2 WHEREIN THE HON'BLE I TAT HAD DIRECTED TO AO TO RESTRICT THE DIS ALLOWANCE U/S 14A TO 5% OF THE DIVIDEND RECEIVED. THE AFORESAID ORDER OF THE I TAT RELIED UPON BY THE AO IN ASSESSEES OWN CASE HAS BEEN NOT ACCEPTED BY THE REVENUE AN D APPEAL U/S 260A OF THE I. T. ACT 1961 HAS BEEN FILED FOR A Y. 2010 - 11 AND 2011 - 12 ON THE GROUND THAT DISALL OWANCE OF 14A HAS T O BE MADE IN ACCORDANCE WITH RULE 8D . THEREFORE THE ORDER PASSED U/S 143(3) BY THE ITO 3(1)(2) MUMBAI DAED 29.3.2016 APPEARS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND IT IS EVIDENT THAT THE AO HAS COMMITTED THE LAPSE OF NOT APPLYING HIS MIND TO THE ISSUES DISCUSSED ABOVE. I THEREFORE PROPOSE TO PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR 3 I.T.A. NO. 3153 /MUM/2017 CANCELLING T HE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT UNDER THE PROVISIONS OF SECTION 263. 4. FINALLY T HE O CIT AFTER CONSIDERING THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE AND REJECTING THE SAME SET ASIDE THE ASSESSMENT ORDER OF THE AO BY HOLDING THA T THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT AO HAS MADE ADHOC ADDITION AT THE RATE OF 5% OF THE DIVIDEND INSTEAD OF FOLLOWING RULE 8D OF THE INCOME TAX RULES 1962. THE PCIT FURTHER OBSERVED THAT THE AO FOLL OWED THE ORDER OF THE ITAT IN ASSESEES OWN CASE FOR THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 DESPITE THE FACT THAT THESE ORDERS WERE CHALLENGED BY THE REVENUE BEFORE THE JURISDICTIONAL HIGH COURT. THE LD. PCIT NOTED THAT IT IS A CASE OF COMPLETE NO N - APPLICATION OF MIND BY THE AO AS THE INQUIRY CONDUCTED IS EXCEEDINGLY INADEQUATE AND HENCE FALL IN THE CATEGORY OF NO - INQUIRY CONDUCTED BY THE AO THEREBY RESULTING INTO INCORRECT ASSUMPTION OF FACTS MAKES THE ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE. 5 . THE LD. AR VEHEMENTLY SUBMITTED THAT THE REVISIONARY JURISDICTION U/S 263 OF THE ACT WAS WRONGLY ASSUMED BY THE PCIT AS THE TWIN CONDITIONS OF ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WERE NOT SATISFIED CONCURRENTLY A S THE AO HAS TAKEN CONSCIOUS DECISION BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 . THE AO SPECIFICALLY RAISED THE QUERIES QUA THE DISALLOWANCE MADE 4 I.T.A. NO. 3153 /MUM/2017 BY THE AO BY APPLYING THE PROVISIONS OF SECTION 14A R.W.S.RULE 8D OF THE RULES AND THE ASSESSEE FILED SPECIFIC RELY AND ONLY THEREAFTER TOOK THE POSSIBLE VIEW BY FOLLOWING THE TRIBUNAL ORDER IN ASSESSEES OWN CASE . THEREFORE THE OBSERVATIONS AND ASSUMPTION OF SECTION 263 BY THE LD.PCIT O N THE GROUND THAT THERE WAS NO APPLICATION OF MIND AND INADEQUATE INQUIRY ON THE PART OF AO LEADING TO INCORRECT EXAMINATION OF FACTS WAS TOTALLY WRONG. IN SUPPORT ITS CONTENTION THE LD. AR RELIED UPON THE SERIES OF CASE LAWS WHICH ARE AS UNDER : A) GABRI EL INDIA LTD. 203 ITR 108 BOM B) S S MUDDANNA V/S STATE OF KARNATAKA REPORTED 89 STC 90 C) PAUL MATHEWS AND SONS V/S CIT 263 ITR 101. THE LD. AR SUBMITTED THAT WHILE PASSING THE ASSESSMENT ORDER THE AO IS BOUND TO FOLLOW THE DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE PASSED IN THE EARLIER YEARS AS HAS BEEN DECIDED IN THE CASE OF SEIMENS INDIA LTD REPORTED IN 156 ITR 11(BOM). 6 . THE LD.DR RELIED ON THE DECISION OF LD. PCIT AND ALSO THE DECISION RENDERED IN THE CASE OF GARDEN SILK MILLS LTD V /S CIT 221 ITR 861. T HE LD .DR RELIED HEAVILY ON THE ORDER OF LD.PCIT BY SUBMITTED THAT WHEN THE ORDER IS CHALLENGED BEFORE THE HIGHER FORUM THE AO HAS COMMITTED THE ERROR BY A BY ACCEPTING THE ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 201 0 - 11 AND 2011 - 12 APPLIED THE RATE OF 5% EXEMPT INCOME TO MAKE U/S 14A R.W.R.8D DESPITE THE FACT THAT THERE IS A SPECIFIC MECHANISM PROVIDED UNDER 5 I.T.A. NO. 3153 /MUM/2017 THE ACT TO DEAL WITH SUCH TYPE OF DISALLOWANCE S . THE LD. DR RELIED ON THE FOLLOWING DECISIONS : A) RAJRN ANDIR ESTATES PVT LTD - 386 ITR 162 B) SUBHLAKSHMI VANIJYA PVT. LTD - 155 ITD 171 C) KALWA DEVADATTAM & ORS - 49 ITR 165 D) K.S.N. BHATT - 37 CTR 273 E) SIR KIKABHAI PREMCHAND - 24 ITR 506 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS PERUSED THE MA TERIAL PLACED BEFORE US DURING THE COURSE OF HEARING INCLUDING THE DECISION S OF AUTHORITIES BELOW AND ALSO THE DECISIONS RELIED UPON BY THE PARTIES. WE FIND IN THE INSTANT CASE THE REVISIONARY JURISDICTION HAS BEEN EXERCISED BY THE LD.PCIT SET TING ASIDE THE ASSESSMENT ORDER U/S 143(3) OF THE ACT ON THE GROUND THAT THE AO HAS PASSED THE ORDER WITHOUT APPLICATION OF MIND AND ALSO BY FOLLOWING THE TRIBUNAL ORDER FOR THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 WHEREIN THE TRIBUNAL HAS HELD THAT THE DISALLOWA NCE U/S 14A R.W.8D ON 5% OFMTHE EXEMPT INCOME. T HE LD.PCIT OBSERVED THAT SIN C E THE SAID ORDER WAS NOT ACCEPTED BY THE REVENUE AND WAS CHALLENGED BEFORE THE HIGHER FORUM THE AO HAS COMMITTED ERROR IN NOT APPLYING THE MIND AND BY FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE SPECIFICALLY WHEN THERE IS A CLEAR CUT MECHANISM PROVIDED U/S 14A R.W.R.8D AND THUS T HE SAME IS A CASE OF NON - APPLICATION OF MIND AND INADEQUATE INQUIRE AND WRONG ASSUMPTION OF FACTS. WE ALSO NOTE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS RAISED THE SPECIFIC QUERY ON THE ISSUE 6 I.T.A. NO. 3153 /MUM/2017 OF DISALLOWANCE U/S14A R.W.R 8D WHICH WAS REPLIED BY THE ASSESSEE. ANOTHER FACTOR WHICH IS WORTH MENTION ING I S THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT S IN TH E SECURITY YIELDING T HE TAX FREE INCOME BUT WAS HOLDING THE SHARES AS STOCK - IN - TRADE AS THE ASSESSEE WA S MAKING PURCHASE OF SHARES FOR THE PURPOSE OF TRADING I N SHARES AND SECURITIES. HAVING ALL THE FACTS OF THE CASE AND IN THE LIGHT OF VARIOUS DECISIO NS AS CITED BY BOTH THE PARTIES WE ARE NOT IN AGREEMENT WITH THE LD. PCIT THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF REVENUE AS THE AO AFTER CALLING FOR INFORMATION FROM THE ASSESSEE ON THE ISSUE OF DISALLOWANCE U/S 14A R.W .R 8D HAS TAKEN A CONSCIOUS VIEW WHICH IS A POSSIBLE VIEW OUT OF T WO VIEWS AND APPLIED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER YEARS. THE MERE FACT THAT THE REVENUE HAS CHALLENGED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2010 - 11 AND 2011 - 12 IS NOT RENDERED THE DECISION OF THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS THE AO HAS TAKEN A POSSIBLE VIEW AFTER EXAMINING AND CONSIDERING THE REPLY AND ARGUMENTS OF THE ASSES SEE AS RENDERED DURING THE COURSE OF ASSE SS M ENT PROCEEDINGS. WHILE CONCLUDING OUR FINDINGS WE TAKE A SHELTER OF FOLLOWING DECISIONS : IN THE CASE OF SEIMENS INDIA LTD (SUPRA) IT HAS BEEN OBSERVED AND HELD AS UNDER : SO FAR AS THE LEGAL POSITION IS CONCERN ED THE ITO WOULD BE BOUND BY A DECISION OF THE SUPREME COURT AS ALSO BY A DECISION OF THE HIGH COURT 7 I.T.A. NO. 3153 /MUM/2017 OF THE STATE WITHIN WHOSE JURISDICTION HE IS IRRESPECTIVE OF THE PENDENCY OF ANY APPEAL OR SPECIAL LEAVE APPLICATION AGAINST THAT JUDGMENT. HE WOULD EQUA LLY BE BOUND BY A DECISION OF ANOTHER HIGH COURT ON THE POINT BECAUSE NOT TO FOLLOW THAT DECISION WOULD BE TO CAUSE GRAVE PREJUDICE TO THE ASSESSEE. WHERE THERE IS A CONFLICT BETWEEN DIFFERENT HIGH COURTS HE MUST FOLLOW THE DECISION OF THE HIGH COURT WIT HIN WHOSE JURISDICTION HE IS BUT IF THE CONFLICT IS BETWEEN DECISIONS OF OTHER HIGH COURTS HE MUST TAKE THE VIEW WHICH IS IN FAVOUR OF THE ASSESSEE AND NOT AGAINST HIM. SIMILARLY IF THE INCOME - TAX APPELLATE TRIBUNAL HAS DECIDED A POINT IN FAVOUR OF TH E ASSESSEE HE CANNOT IGNORE THAT DECISION AND TAKE A CONTRARY VIEW BECAUSE THAT WOULD EQUALLY PREJUDICE THE ASSESSEE. HE CAN HOWEVER REJECT CLAIMS WHICH AE CLARLY AND INDISPUTABLY UNTENABLE AND ABOUT WHICH A DIFFERENT VIEW IS NOT RATIONALLY POSSIBLE. IN THE CASE OF GARDEN SILK MILLS LTD (SUPRA) IT HAS BEEN OBSERVED AND HELD : MERELY BECAUSE THE DEPARTMENT IS CONTEMPLATING TO FILE A SPECIAL LEAVE PETITION THE COMMISSIONER CANNOT REFUSE TO FOLLOW THE DECISION WHEN THE COURT HAS SETTLED THE LAW IN QU ESTION. IT MAY HAPPEN THAT THE DECISION OF AN APPELLATE AUTHORITY OR THE TRIBUNAL PERTAINING TO AN EARLIER ASSESSMENT YEAR ON A PARTICULAR POINT IS IN FAVOUR OF THE ASSESSEE AND THAT IS FOLLOWED IN THE ASSESSMENT RELATING TO THE SUBSEQUENT ASSESSMENT YEARS . IT MAY HAPPEN THAT THE COMMISSIONER MAY CONSIDER THAT SUCH A DECISION OF THE APPELLATE AUTHORITY OR THE TRIBUNAL IS NOT IN ACCORDANCE WITH LAW AND MAY ALSO FIND THAT SUCH A DECISION IS THE SUBJECT - MATTER OF FURTHER APPEAL OR REVISION AS THE CASE MAY BE. HE MAY EXPECT THAT THE HIGHER COURT OR AUTHORITY MAY DECIDE IN FAVOUR OF THE REVENUE BUT THAT MAY TAKE A NUMBER OF YEARS. HE MAY BE OF THE VIEW THAT BY THE TIME OF DECISION OF THE HIGHER COURT OR AUTHORITY ARRIVES A NUMBER OF YEARS MAY ELAPSE BY WHICH TI ME THE EXERCISE OF THE POWER UNDER SECTION 263 MAY BECOME BARRED. 8 I.T.A. NO. 3153 /MUM/2017 IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE VIEW TH A T THE ASSESSMENT ORDER PASSED BY THE AO AFTER CONSIDERING OF ALL THE FACTS IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE THE LD.PCIT IS WRONG IN ASSUMING THE REVISIONARY JURISDICTION U/S 263 OF THE ACT. ACCORDINGLY WE HOLD THE ASSUMPTION OF REVISIONARY JURISDICTION U/S 263 OF THE ACT AS BAD AND INVAL ID AND ALSO THE CONSEQUENT ORDER PASSED U/S 263 OF THE ACT. 8 . IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE OR DER PRONOUNCED ON 6.11.2017. S D SD ( D.T.GARASIA ) ( RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : . 6 . 1 1 .2017 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / TH E CIT(A) 4. / CIT CONCERNED 5. / DR ITAT MUMBAI 6. / GUARD F ILE / BY ORDER T RUE COPY / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI