Income Tax Appellate Tribunal - Kolkata
M/S. Ambica Capital Markets Ltd., ... vs Dcit, Central Circle-2(1), Kolkata, ... on 30 August, 2017
आयकर अपील
य अधीकरण, यायपीठ - "A" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH "A" KOLKATA
Before Shri Waseem Ahmed, Accountant Member and
Shri S.S.Viswanethra Ravi, Judicial Member
ITA No.865-866/Kol/2017
Assessment Years:2009-10 to
2010-11
M/s Ambica Capital Markets बनाम / DCIT, Circle-2, 110,
Ltd., 3, Haren Mukherjee V/s . Shanti Pally, E.M. Bye
Road, Belur, Pass, Near Ruby
Howrah-711 202 Hospital, Kolkata-107
[PAN No.AAECA 3328 G]
अपीलाथ /Appellant .. यथ /Respondent
आवेदक क ओर से/By Assessee Shri S.M. Surana, Advocate
राज!व क ओर से/By Respondent Shri R.S. Biswas, CIT-DR
सन
ु वाई क तार
ख/Date of Hearing 21-06-2017
घोषणा क तार
ख/Date of Pronouncement 30-08-2-17
आदे श /O R D E R
PER Waseem Ahmed, Accountant Member:-
Both appeal by the assessee are directed against the separate order of Principal Commissioner of Income Tax, Central-1, Kolkata of even date i.e. on 22.03.2017 u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') pertaining to assessment years 2009-10 & 2010-11 respectively.
Shri S.M. Surana, Ld. Advocate appeared on behalf of assessee and Shri R.S. Biswas, Ld. Departmental Representative represented on behalf of Revenue.
2. Both the appeal of assessee are heard together and are being disposed of by way of consolidate order for the sake of convenience.
ITA No.865-866/Kol/2017 A.Ys 09-10 & 10-11 M/s Ambica Capitl Markets Ltd. Vs. DCIT CC-2(1) Kol. Page 2 First we take up ITA No.865/Kol/2017 for A.Y. 09-10.
3. Grounds raised by assessee are reproduced below:-
"1. For that the order of the Ld. Pr. CIT is arbitrary, illegal and bad in law as he exercised revisionary jurisdiction u/s. 253 on an order passed under sec. 143(3)/153A which was itself invalid since no addition was made on the basis of any incriminating materials unearthed during the course of search in that order.
2. For that the Ld. Pr CIT erred in invoking the provisions of section 263 when the issue with regard to the applicability of section 14A was not the subject matter of order u/s. 153A/143(3) and action u/s. 263 was barred by limitation when the limitation is counted from the original ordered passed u/s. 143(3) on 28.11.2011.
3. For that the Ld. Pr CIT erred in applying the provisions of section 263 when AO applied his mind to the issue of disallowance u/s. 14 and with regard to the disallowance of interest two views were possible since there was no finding that the loans taken were used for purchase of shares as investment on which dividend was earned.
4. For that the Ld. Pr. CIT erred in revising the order u/s. 263 when the same was not erroneous.
5. For that the Ld. Pr. CIT erred in revising the order on the issue of disallowance of interest expenses u/s 14A when the loans were accepted to have been taken for business purposes, was fully allowable and no disallowance u/s 14A was called for in the facts and circumstances of the case.
6. For that on the facts and circumstances of the case the order of the Pr CIT be cancelled and the assessee be given the relief prayed for.
7. For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing."
4. Ground No. 1 to 5 are inter-related and therefore being taken up together. The issue raised is that Ld. Pr.CIT erred in holding the order of Assessing Officer passed u/s. 143(3)/153A of the Act is erroneous and in so far as prejudicial to the interest of revenue u/s 263 of the Act.
5. Briefly stated facts are that assessee is a limited company and engaged in business of financing and investment activities. The assessee for the year under consideration filed its return of income on 14.09.2009 declaring total income at Rs.(4,03,71,507.00) only. Thereafter case was selected under scrutiny under CASS module and accordingly notices u/s 143(2)/142(1) were served upon the assessee. The assessment was framed u/s 143(3) of the Act vide order dated 28.11.2011 after making certain additions as detailed under :
1) Disallowances u/s 14A of the Act 10,56,000.00
2) Disallowances u/s 94(7) of the Act 85,629.00
ITA No.865-866/Kol/2017 A.Ys 09-10 & 10-11
M/s Ambica Capitl Markets Ltd. Vs. DCIT CC-2(1) Kol. Page 3
Thus, the assessment was made at a loss of ₹3,92,29,878/- which was allowed to be carried forward to the subsequent year.
Subsequently a search u/s. 132 of the Act was conducted at the office premises of assessee dated 11.10.2012 and on subsequent dates. Accordingly, assessment was framed u/s. 143(3) / 153A of the Act vide order dated 30.03.2015 at a total loss of ₹3,92,29,878/-only. Under both assessment orders i.e. 143(3) dated 28.11.2011 and 143(3)/153A of the Act dated 31.03.2015, the income of the assessee was assessed at the same amount of loss as discussed above. The AO in both the assessment order invoked the provisions of Sec. 14A of the Act and accordingly made a disallowance under Rule 8D(2)(i) and (iii) for the amount of ₹1,14,125 and ₹9,41,875/- respectively.
6. Subsequently Ld. Pr. CIT u/s. 263 found that AO has not made any disallowance in respect of interest expense which was claimed in the profit and loss account for ₹1,53,70,202/- under the provision of Rule 8D(2)(ii) of the Income Tax Rules, 1962 (hereinafter referred to as 'the Rule'). Accordingly, Ld. Pr. CIT called upon the assessee to clarify why the amount of interest expenses which was not disallowed by the AO in his assessment order framed u/s. 143(3)/153A of the Act vide order dated 30.03.2015 should be allowed.
The assessee before Ld. Pr. CIT submitted that the assessment was framed u/s 153A of the Act at a loss of ₹3,92,29,878/- which is exactly the same amount determined in the regular assessment u/s. 143(3) of the Act dated 28.11.2011. As such, there was no incriminating material found during the course of search. Therefore, the assessment was framed under the Sections i.e. 143(3) r.ws. 153A of the Act by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. 6.1 Further, assessee submitted if at all there is an error causing prejudice to the interest of Revenue in the instant case then the order u/s. 143(3) of the Act with regard to disallowance of interest under Rule 8D(2)(ii) of the IT Rules can only be subject- matter of revision u/s. 263 of the Act and not the assessment order framed under section 143(3)/153A of the Act.
6.2 Assessee again submitted to Ld. Pr. CIT that the AO has taken a view for making the disallowance u/s 14A of the Act in the original assessment order framed ITA No.865-866/Kol/2017 A.Ys 09-10 & 10-11 M/s Ambica Capitl Markets Ltd. Vs. DCIT CC-2(1) Kol. Page 4 u/s. 143(3) as well under section 143(3)/153A of the Act after due verification. Therefore, the Ld. Pr. CIT u/s. 263 of the Act cannot substitute the view taken by the AO by holding the order erroneous and prejudicial to the interest of Revenue. The assessee in this connection relied on the judgment of Hon'ble Supreme Court in the case of M/s The Malabar Industrial Co. vs. CIT reported in 243 ITR 83 (SC). The assessee further submitted that if at all the interest expense needs to be disallowed under the provision of Rule 8D(2)(ii) of the Rules then the amount of net interest can be considered for such disallowance. The amount net interest comes for ₹15 lacs only (interest expense 1.53 crores minus interest income ₹1.38 crores). 6.3 However, Ld. Pr. CIT u/s. 263 has disregarded the contention of assessee and held the order of Assessing Officer passed u/s. 143(3)/153A of the Act as erroneous in so far as prejudicial to the interest of revenue by observing as under:-
"5.a The assessee argued that the am order is not erroneous or prejudicial to the interest of revenue. In this connection, it may be worthwhile to mention that the Assessing Officer had erroneously omitted to compute the disallowance made under Rule 8D(ii) of Income Tax Rule, in-spite of the fact that the assessee had debited an amount of Rs.1,53,70,202/- as interest expenses in the profit and loss accounts. The Assessing Officer had thus, in contravention to Rule 8D(ii) of the Income Tax Rules, erroneously computed the disallowance made u/s. 14A read with Rule 8D as Rs.10,56,000/- whereas it should have been correctly computed at Rs.84,06,049/-. Thus has resulted in under assessment of income in contravention to the provisions of the Income Tax Act and Income Tax Rules. The above facts clearly indicate that the assessment order passed by the AO has caused prejudice to the interest of revenue/.. Considering that the order of the AO is not in accordance with the provisions of section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, the impugned assessment ordered, is thus, erroneous in so far as it is prejudicial to the interest of the revenue.
5.b. It transpires from the above argument of the assessee had also stated that 'the AO has taken a view with regard to the applicability of section14A and has to record his satisfaction as to whether the provisions of sec. 14A were applicable or not. The view cannot be substituted with the view of any other authority. Moreover when the AO has taken a view simply because your honour has taken a different view provisions of section 263 cannot be applied.' In the instant case, the AO had erroneously omitted to compute the disallowance made u/s. 14A read with Rule 8D(2)(ii) of the Income Tax Rules. In this connection, it is pertinent to mention that the proceeding u/s. 263 has not been initiated challenging the enquiry and findings of the assessing officer on the aforementioned ground that disallowance be made on account of section 14A read with Rule 8D of the Income Tax Rules. Thus, it is clearly evident that the view of the AO is not substituted. The proceedings u/s. 263 simply relates to the erroneous application of law by the AO. The Assessing Officer had erroneously omitted to compute the disallowance made under Rule 8D(22)(ii) of the Income Tax Rules, which cascaded in subsequently erroneous computation of the ITA No.865-866/Kol/2017 A.Ys 09-10 & 10-11 M/s Ambica Capitl Markets Ltd. Vs. DCIT CC-2(1) Kol. Page 5 disallowance made u/s. 14A read with Rule 8D as Rs.10,56,000/- whereas it should have been correctly computed at Rs.84,06,049/-. Therefore the Assessing Officer passed by the AO, in contravention of Rule 8D(2)(ii) of the Income Tax Rules is clearly erroneous, thus, suffers from infirmity on the above ground.
6. The assessee further stated that 'no amount of loan was used for making the investment and since no fresh loan was obtained during the year and in earlier years it was duly accepted that the loans have been taken for business purposes.'. it appears that this issue was not pointed out to the AO during the course of assessment proceedings and thus, was not examined by the AO during the course of assessment proceedings u/s 143(3)/153A. The AO should have enquired into the matter to ascertain the nature of loan and their subsequent utilization to determine the scope and quantum of disallowances to be made in the Assessment Order. In light of the above discussion as narrated above, I set aside the Assessment Order u/s. 143(3)/153A dated 30.03.2015, on the aforesaid points, for the AY 2009-10 and direct the AO to pass fresh assessment order by making proper and adequate verification and enquiry in respect of the issues as elaborate above, in accordance with the provisions of the Income Tax Act and Income Tax Rules. The AO is directed to pass fresh assessment order in the case of the assessee for the AY 2009-10, after allowing the assessee a fair and reasonable opportunity of being heard and according to the provisions of law."
Being aggrieved by this order of Ld. Pr. CIT assessee came in appeal before us.
7. At the outset, Ld. AR for the assessee challenged the very initiation of additions made under the proceedings u/s 143(3)/153A of the Act on the ground that no such incriminating material was found during the course of search pertaining to the year under consideration which is unabated assessment year. Therefore, the assessment framed u/s 143(3) of the Act cannot be disturbed u/s. 153A of the Act without having found any incriminating material. Once the additions are not sustainable then there is question of revising the order passed u/s 143(3)/153A of the Act u/s 263 of the Act. The Ld. AR reiterated the arguments that were made before Ld. Pr. CIT u/s. 263 of the Act whereas Ld. DR vehemently relied on the order of Ld. CIT.
8. We have heard the rival contentions of the parties and perused the material available on record. We have also gone through the orders of the lower authorities and the case laws relied upon by the assessee. In the instant case the undisputed fact is that the disallowances were made by the AO under both the orders i.e. 143(3) and 153A for the AY 2009-10 on the identical counts as discussed above. But the ld. Pr. CIT chose to revise the order passed under section 153A of the Act despite the fact that the ITA No.865-866/Kol/2017 A.Ys 09-10 & 10-11 M/s Ambica Capitl Markets Ltd. Vs. DCIT CC-2(1) Kol. Page 6 impugned dispute is arising from the assessment order passed under section 143(3) of the Act.
In such a situation the ld. Pr. CIT if wishes to revise the order u/s 263 of the Act then he can do so in relation to the order passed under section 143(3) of the Act. Thus in our considered view the ld. Pr. CIT erred in revising the order passed under section 153A of the Act on the ground of non-disallowance of interest expenses under section 14A read with rule 8D of Income Tax Rules 1962.
In holding so, we find guidance and support from the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Murli Agro Products Limited 49 taxmann.com 172 wherein it was held as under :
13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.
Besides the above, we also find that there was no incriminating material unearthed during search proceedings qua to the disallowance made u/s 14A of the Act. Thus, the additions made u/s 14A of the Act are not sustainable in the proceedings framed u/s 143(3)/153A of the Act and accordingly no revisionary proceedings u/s 263 of the Act can be initiated.
In holding so, we find guidance and support from the judgment of Hon'ble Jurisdictional High Court in the case of Commissioner of Income-tax Kolkata -III Vs. Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Cal)wherein it was held as under :
"Thus, where no material belonging to a third party is found during a search, but only an inference of an undisclosed income is drawn during the course of enquiry, during search or during post-search enquiry, section 153C would have no application. Thus, the detection of incriminating material leading to an inference of undisclosed income is a sine qua non for invocation of section 153C."
In view of the above, we hold that the validity of the order u/s. 263 of the Act is invalid. It is because the subject matter of revision in the instant case is emanating from the order of AO passed under section 143(3) of the Act. The AO while framing ITA No.865-866/Kol/2017 A.Ys 09-10 & 10-11 M/s Ambica Capitl Markets Ltd. Vs. DCIT CC-2(1) Kol. Page 7 the assessment u/s 153A of the Act has just copied the disallowance made under the original assessment order u/s 143(3) of the Act. We, therefore, hold that order passed u/s 263 of the Act dated 22.03.2017 for the year under consideration is invalid and accordingly quashed. Thus, the appeal being ITA No.865/Kol/2017 is allowed. Coming to assessee's appeal in ITA No.866/Kol/2017 for A.Y. 10-11.
13. In this appeal, since the facts are exactly identical, both the parties are agreed whatever view taken in the above appeal of assessee in ITA No.865/Kol/2017 may be taken in this appeal also, we hold accordingly.
14. In the result, both the appeal of assessee stand allowed.
Order pronounced in open court on 30/08/2017
Sd/- Sd/-
( या(यक सद!य) (लेखा सद!य)
(S.S.Viswanethra Ravi) (Waseem Ahmed)
Judicial Member Accountant Member
*Dkp-Sr.PS
*दनांकः- 30/08/2017 कोलकाता / Kolkata
आदे श क त
ल प अ े षत / Copy of Order Forwarded to:-
1. आवेदक/Assessee-M/s Ambica Capital Markets Ltd., 3Haren Mukherjee Road, Belur, Howrah, West Bengal-711202
2. राज!व/Revenue-DCIT, C.C. 2(1), 110, Shanti Pally, E.M.Bye Pass, Nr. Ruby Hospital, Kolkata-107
3. संबं-धत आयकर आयु.त / Concerned CIT
4. आयकर आयु.त- अपील / CIT (A)
5. /वभागीय (त(न-ध, आयकर अपील य अ-धकरण कोलकाता / DR, ITAT, Kolkata
6. गाड3 फाइल / Guard file.
By order/आदे श से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील य अ-धकरण, कोलकाता