TMI Blog2018 (3) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of CIT(A) are relevant. Considering the same, we are of the view that this issue also should be decided in favour of the assessee Set off of the disallowed sum against the contingency disclosed by the assessee in the return of income towards discrepancies/additions if any - Held that:- It is settled issue that the contingent disclosure is available for set off against the disallowance u/s. 14 of the Act. However, in the present case, the question of set off does not arise as we have already granted relief to the assessee on legal issue relating to the recording of satisfaction before invoking the provisions of section 14A of the Act r.w. Rule 8D(2) of the I.T. Rules. The Ground No.2/Additional Ground No.2(a) becomes academic. Reduction of returned loss offered by the assessee during the search & seizure proceedings - additional groud admission - Held that:- We examined the objections raised by the Ld. DR for the Revenue and find there is need for investigation into the seized material and other documents that were discovered during the search and seizure operation and the reasons that led to the disclosure of ₹ 1.91 crores in general and ₹ 60 lakhs in part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance u / s . 14A ( Refer Para 3 . 8 of the order u / s . 250 ). 2 . confirming disallowance of Rs . 17,817 /- being contribution to Group Gratuity Scheme . 4. Assessee has also raised an additional ground, which is legal in nature, and the same is extracted here as under : Ld . CIT ( A ) failed to appreciate the fact that disallowance u / s . 14A made by the AO in the assessment order passed u / s . 153C r . w . s . 143 ( 3 ) of the Act is not sustainable in the non - abated assessment as there was no incriminating material found during search ignoring the decision in the case of All Cargo Global Logistics Ltd . Vs . DCIT 147 TTJ 513 ( Mum ) ( SB ) and the decision of Bombay High Court reported at 58 Taxmann . com 78 of CIT - II, Thane Vs . Continental Warehousing Corporation ( Nhava Sheva ) Ltd . 5. Before us, and at the outset, Ld. AR for the assessee submitted that validity of the additions raised in the additional ground, which is legal and goes into the root of the search assessment u/s.153C of the Act, needs to be adjudicated first. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bone of contention in the regular assessment, the same addition is repeated by the AO in the search assessment made u/s.153C of the Act. Further, referring to the additional ground which is legal in nature, Ld. AR for the assessee submitted that such additions are not legally sustainable in this case of a non-abated assessment when there is no seized material or incriminating material to backup the same. In this regard, Ld. AR brought our attention to various decisions to support his arguments. The decision of Special Bench in the case of All Cargo Global Logistics Ltd. 147 TTJ 513 (Mum) (SB) and the decision of jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. reported in 58 taxmann.com 78 were heavily relied by the Ld. AR for the assessee. He also relied on the Pune Bench decision in of the group cases, i.e. the case of Serum Institute of India Ltd. for the A.Y. 2008-09 vide ITA No. 1183 and 1537/PUN/2015, order dated 28-11-2017 and submitted that the present additional ground raised by the assessee should be allowed deleting the addition made by the AO u/s.14A of the Act in the non-abated assessment. 9. Ld. DR for the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments made u/s.153C of the Act. According to the Ld. AR for the assessee, the addition is made without having any the support of any incriminating material. 14. Before us, on merits, Ld. AR for the assessee submitted that the said Group Gratuity Scheme has not been approved till date. Notwithstanding the same, Ld. AR submitted that the AO is not empowered to assume jurisdiction u/s.153C of the Act in this case of non-abated assessment. It is a settled legal position in the matter. 15. We find the arguments of Ld. AR are sustainable legally. As such, nothing contrary is brought to our notice by the Ld. DR for the Revenue. Further, perusal of the orders of the Revenue does not indicate the existence of any incriminating material linking to the said claim of the assessee. We find the contents of Para No.7 of the AO and Para Nos. 3.11 and 3.12 of the order of CIT(A) are relevant. Considering the same, we are of the view that this issue also should be decided in favour of the assessee. Accordingly, Ground No.2 raised by the assessee is allowed. 16. In the result, appeal of the assessee is partly allowed. ITA No . 246 and 247 / PUN / 2016 ( A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 248 / PUN / 2016 ( A . Yr . 2009 - 10 ) 24. Assessee raised the following grounds of appeal in this appeal : On the facts and circumstances of the case and in law, the Ld . CIT ( A ) erred in : 1 . confirming the disallowance of a sum of Rs . 51,61,884 /- u / s . 14A by applying Rule 8D . 2 . not granting set off of the amount offered towards contingency of Rs . 60,00,000 /- against disallowance u / s . 14A ( Refer Para 6 . 26 of CIT ( Appeals ) s order . 3 . confirming disallowance of Rs . 40,772 /- being contribution to Group Gratuity Scheme . 4 . confirming the disallowance of PMS ( Portfolio Management Scheme ) Fees of Rs . 17,15,457 /- from the sale consideration of shares while computing capital gains . Similar grounds have been raised by the assessee for A . Yrs . 2010 - 11 and 2011 - 12 . 25. Assessee has also raised an additional ground and the same is extracted as under : Additional Ground of appeal No . 2 ( b ) - Alternatively, the Ld . CIT ( A ) ought to have granted r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 14A of the Act. 29. Ld. DR for the Revenue relied on the orders of the AO/CIT(A). 30. We heard both the parties on the issue relating to the issue of recording of satisfaction and perused the above extracted satisfaction recorded by the AO on this issue. We find the legal position was explained by the Hon ble Apex Court and the Para No.37 of the judgment of Hon ble Apex Court in the case of Godrej and Boyce Manufacturing Company Ltd. (supra) are relevant. Hon ble Supreme Court explained the provisions of sub-section (2) and (3) of section 14A of the Act. For the sake of completeness, we proceed the extract the same here as under : 37 . We do not see how in the aforesaid fact situation a different view could have been taken for the assessment year 2002 - 03 . Sub - sections ( 2 ) and ( 3 ) of section 14A of the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee . Whether such determination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance u / s 14A is required to be made by applying Rule 8D . As per the working of disallowance u / s 14A as per Rule 8D, the amount of disallowance comes to Rs . 5,68,32,323 /-. The assessee has already disallowed Rs . 50,00,000 /- in the computation of income . 35 . The requirement of section 14 ( 2 ) of the Act is that the Assessing Officer is to record as to why the disallowance made by the assessee i . e . Rs . 50 lakhs under section 14A of the Act is not correct . The Assessing Officer takes note of the disallowance, considers the explanation of assessee and holds that the contention of assessee cannot be accepted . The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer . We find support from the ratio laid down by the Hon'ble Supreme Court in Godrej Boyce Manufacturing Co . Ltd . Vs . DCIT Anr . ( 2017 ) 394 ITR 449 ( SC ). 37 . We do not see how in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd No.2 raised by the assessee relates to granting of set off of the disallowed sum of ₹ 51,61,884/- against the contingency of ₹ 60 lakhs disclosed by the assessee in the return of income towards discrepancies/additions if any. 34. Background facts include that this is a case where action u/s.132 of the Act was conducted which resulted in the disclosure of additional income. During the proceedings u/s.132(4) of the Act pertaining to this assessee and in the assessment year assessee disclosed additional income of ₹ 60 lakhs towards contingency if any. Assessee filed the return of income offering the said ₹ 60 lakhs in the return of income. Infact, assessee computed the income of year at losses both under normal as well as MAT provisions. AO did not give said set off of benefit of said ₹ 60 lakhs against the disallowance made by him in the search assessment. It is the claim of the assessee that said ₹ 60 lakhs is intended for set off against the disallowance, like the present one made by the AO u/s.14A of the Act. With these background facts, assessee raised Ground No.2 claiming that the disallowance made by the AO in the search assessment shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld . Departmental Representative . We, therefore, find merit in the submission of the Ld . Counsel for the assessee that the amount of Rs . 75 lakhs offered by the assessee as undisclosed income to cover any errors, omissions or discrepancies in computing the taxable income should be set off against the disallowance made u / s . 14A r . w . Rule 8D of the I . T . Act . We, therefore, set aside the order of the CIT ( A ) and direct the AO to restrict the disallowance u / s . 14A r . w . Rule 8D to Rs . 18,19,294 /- i . e . ( Rs . 93,24,674 Rs . 75,00,000 /-). Grounds of appeal No . 1 to 3 by the assessee are accordingly partly allowed . The above decision of the Tribunal allows the set off against the disallowance u/s.14A r.w. Rule 8D(2) 37. From the above, it is settled issue that the contingent disclosure is available for set off against the disallowance u/s.14 of the Act. However, in the present case, the question of set off does not arise as we have already granted relief to the assessee on legal issue relating to the recording of satisfaction before inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground. Accordingly, the additional Ground No.2(b) raised by the assessee is not admitted. Thus, the requirement of going into the allowability of issue becomes academic in nature. Therefore, the additional Ground No.2(b) is dismissed pro tanto. 42. Ground No.3 raised by the assessee relates to the disallowance of ₹ 40,772/- being contribution to Group Gratuity Scheme. 43. It is an undisputed fact that the said scheme has never been approved by the CIT till date. No evidence of such approval was placed before the Revenue authorities or even before us. Thus, this issue is consistently being raised by the assessee over the years before the Tribunal. Before us, Ld. AR for the assessee merely submitted that a direction may be issued to the Assessing authority to allow the claim of the assessee as and when the Scheme gets the approval of CIT in accordance with law. 44. On perusal of the orders of the AO, we find this issue is discussed in Para 10 of the assessment order and Para No.6.21 of the order of CIT(A). On hearing both the parties, we are of the opinion that the order of CIT(A) on this issue is fair and reasonable as the scheme has not been approved till date, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds originally raised by the assessee are identical and they relate to (1) the issue of disallowance u/s.14A without recording proper satisfaction, (2) granting of set off of the said disallowance against the contingency of ₹ 60 lakhs, (3) disallowance of Contribution to the Group Gratuity Scheme, (4) disallowance of PMS fees. Further, the issue of reducing the returned losses to the extent of contingency was the issue raised in the additional ground vide Ground No.2(b) filed by the assessee for the first time before the Tribunal. These issues are exactly similar to the ones already adjudicated by us while dealing with the appeal ITA No.248/PUN/2016 for A.Y. 2009-10. The arguments as well as the counter arguments by the Ld. AR for the assessee and Ld. DR for the Revenue were identical. Therefore, we are of the opinion that the decisions and directions given in A.Yrs. 2009-10 are applicable to these appeals also. Considering the same, we are of the opinion that the grounds raised by the assessee are allowed/dismissed, as the case may be. 51. In the result, both the appeals of the assessee are partly allowed. 52. To sum up, appeals of the assessee for A . Y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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