IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ` F', NEW DELHI)
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No. 150 & 4764/Del/2013
Assessment year : 2002-03
Raja Rani Overseas P. Ltd., Vs. DCIT, Circle 15(1),
F-29, South Extention-II, New Delhi
New Delhi-110 049
GIR / PAN:AAACR1378P
(Appellant) (Respondent)
Appellant by : Shri P. N. Monga & Manu Monga, Adv.
Respondent by : Shri Manoj Kumar Chopra, Sr. DR
ORDER
PER T.S. KAPOOR, AM:
These two appeals are filed by the assessee against separate orders of
Ld. CIT(A) dated 10.10.2012 and 31.05.2013 respectively. In I.T.A.No.
150/Del/2013, the assessee is aggrieved with the action of Ld. CIT(A) by
which he had upheld the addition made by the Assessing Officer u/s 14A
amounting to Rs.6,18,010/- and in I.T.A.No. 4764/Del/2013, the assessee is
aggrieved with the action of Ld. CIT(A) by which he had confirmed the
penalty of Rs.2,20,700/- imposed by the Assessing Officer u/s 271(1)(c) of
the Act.
2. At the outset, Ld. A.R. submitted that the challenge under I.T.A.No.
150/Del/2013 is due to second round of litigation before Ld. CIT(A) and
submitted that earlier, Ld. CIT(A) vide his order dated 27.09.2010 had
remitted back the appeal of the assessee to the Assessing Officer for
readjudication. In this respect, our attention was invited to para 6.5 of the
said order and it was submitted that Ld. CIT(A) had directed the Assessing
2 ITA Nos.150 & 4764/Del/2013
Officer to verify the complete facts and accordingly disallow the expenditure
u/s 14A on a reasonable estimate. But the Assessing Officer in his order
passed u/s 250/143(3) on dated 20.03.2012 again disallowed the same
amount and, therefore the assessee had again filed appeal before Ld. CIT(A)
who without considering the earlier Ld. CIT(A)'s order has upheld the
addition. He further submitted that the Assessing Officer while passing the
consequential order in response to first appeal order, did not give any
opportunity to the assessee and moreover, impugned order is in conflict with
earlier CIT(A)'s order and it was prayed that the Assessing Officer should
be directed to calculate reasonable amount of disallowance and in respect of
reasonable amount, our attention was invited to one decision of Delhi Bench
order in I.T.A.Nos.3463 & 4697/Del/2011 reported in 43 taxman.com 109
wherein it held that 0.05% of average investment was a reasonable amount
of disallowance in the cases where Rule 8D was not applicable. Our specific
attention was invited to para 22 of this order.
3. In respect of other appeal No.4764/Del/2013, the Ld. A.R. submitted
that this was the appeal filed against penalty imposed u/s 271(1)(c) of the
Act in connection with the disallowance upheld by Ld. CIT(A) u/s 14A of
the Act and therefore, it was a consequential appeal.
4. Ld. D.R. on the other hand heavily relied upon the orders of
authorities below.
5. We have heard rival parties and have gone through the material placed
on record. We find that it is undisputed fact that Rule 8D is not applicable in
the present year and, therefore, for making disallowance u/s 14A, the
Assessing Officer has to take a reasonable amount keeping in view the facts
and circumstances of the case. Earlier there was a direction of CIT(A) in his
order dated 27.09.2010 to calculate a reasonable amount of disallowance
3 ITA Nos.150 & 4764/Del/2013
against the proportionate disallowance made by Assessing Officer. The
Assessing Officer vide order dated 20.03.2012 had again disallowed the
same amount holding that in view of the non application of Rule 8D, the
proportionate amount with respect to receipt of the exempt income was a
reasonable basis for working out the disallowance. However, we feel that
this is not a reasonable method of arriving at the disallowance u/s 14A. The
Assessing Officer should have arrived at the amount of disallowance by
pointing out specific items of expenditure which in his opinion had related to
earning of exempt income or in the alternative, the assessee should have
calculated the disallowance on the basis of Rule 8D which though was not
applicable but should have been used as a guiding force to arrive at the
disallowance. The assessee before Ld. CIT(A) had submitted the calculation
of disallowance as per Rule 8D of the I. T. Rules, which Ld. CIT(A) has also
noted in his order. The argument of Ld. A.R. to arrive at reasonable amount
as per ITAT decision in I.T.A.No.3463, @ 0.05% on average investment is
not applicable as in that case, the Assessing Officer on the basis of facts and
figures had held that 0.05% was reasonable estimate of expenditure. We are
of the opinion that though Rule 8D is not applicable in the present case yet
the Assessing Officer should have been guided by the provisions of Rule 8D.
Therefore, we restrict the addition u/s 14A to the extent of Rs.1,18,244/- as
noted by Ld. CIT(A) as disallowance u/s 14A as per provisions of Rule 8D.
6. In view of above, the appeal of the assessee is partly allowed.
7. As regards the appeal filed by the assessee against imposition of
penalty u/s 271(1)(c), we are of the opinion that Section 271(1)(c) can be
enforced against a person if that person had furnished inaccurate particulars
of his income or had concealed his income. Mere non admission of a claim
made by the assessee, cannot be the criteria for imposition of penalty u/s
4 ITA Nos.150 & 4764/Del/2013
271(1)(c) of the Act specifically in the present set of circumstances where
disallowance has been calculated on the basis of estimate only and not on the
basis of any furnishing of wrong / inaccurate particulars of income. The
Hon'ble Supreme Court in the case of Reliance Petro Products has held as
under:
"Merely because the assessee claimed which has not been
accepted by he Revenue, penalty under section 271(1)(c) is not
attracted. If the contention of the Revenue is accepted, the assessee
would be liable for penalty under section 271(1)(c) in every case
where the claim made by the assessee is not accepted by the Assessing
Officer for any reason-That is clearly not the intendment of
legislature."
8. In view of the above, penalty imposed and upheld by Ld. CIT(A) is
directed to be deleted and the appeal filed by the assessee in I.T.A.No.
4764/Del/2013 is allowed.
9. In view of the above, I.T.A.No. 150/Del/2013 is partly allowed
whereas I.T.A.No. 4764/Del/2013 is allowed.
10. Order pronounced in the open court on 25th July, 2014.
Sd./- Sd./-
(I. C. SUDHIR ) (T.S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
th
Date: 25 July, 2014
Sp
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
True copy.
By Order
(ITAT, New Delhi).
5 ITA Nos.150 & 4764/Del/2013
Date of hearing
Date of Dictation
Date of Typing
Date of order signed by
both the Members &
pronouncement.
Date of order uploaded on net
& sent to the Bench concerned.
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