TMI Blog2019 (1) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... e investments were funded out of own funds rather than out of borrowed funds and therefore, no interest disallowance was called for under the circumstances. Viewed from any angle, we find no infirmity in the impugned decision of Ld. first appellate authority in directing AO to deleted additional disallowance of ₹ 388.66 Lacs while arriving at income under normal provisions as well as u/s 115JB. Penalty u/s 271(1)(c) - disallowance u/s 40(a)(ia) - Held that:- Upon perusal, we find that the impugned penalty was levied by AO vide order dated 28/03/2013 on aggregate quantum additions of ₹ 13.21 Crores which comprised-off of wrong claim of business loss of ₹ 11.40 Crores and disallowance u/s 40(a)(ia) for ₹ 1.81 Crores. Upon appeal by the assessee before this Tribunal, both these issues have been remanded back to the file of CIT(A) with certain directions. Since, quantum additions against which the penalty has been levied has been set aside to CIT(A), it would be logical to set aside the consequential penalty levied against the same to the same authority. Therefore, the matter of penalty stand restored back to the file of CIT(A) for re-adjudication in the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation plausible one and keeping in view the quantum of delay and in the interest of justice, we condone the delay in both the years in terms of ratio of judgment of Hon ble Apex Court rendered in Collector, Land Acquisition Vs. Mst. Katiji Others [167 ITR 471]. The sole ground taken in the cross-objections for AY 2012-13 read as under: - 1. The Commissioner of Income Tax (Appeals) - 9, Mumbai [hereinafter 'the CIT(A)'] erred in not appreciating that AO's action of invoking Rule 8D of the Income Tax Rules, 1962 for making disallowance u/s 14A of the Income Tax Act, 1962 without recording his dis-satisfaction with respect to books of accounts of the Appellant and claim of the Appellant is contrary to provisions of law; hence, the disallowance made by the AO shall be deleted. 2.1 Facts germane to the issue are that the assessee being resident corporate entity engaged as share brokers and dealers in shares, securities and derivative instruments was assessed in scrutiny assessment u/s 143(3) on 27/03/2015 by Ld. Additional Commissioner of Income Tax, Range 4(1), Mumbai [AO] wherein the loss of the assessee was determined at ₹ 253.52 Lacs under normal provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the same with partial success before Ld.CIT(A) vide impugned order dated 10/10/2016 wherein the assessee, inter-alia, placed reliance on the decision of this tribunal rendered in assessee s own case for AY 2010-11, ITA No. 7199/Mum/2013 and drew attention to the fact that suo-moto disallowance offered by the assessee in that year was accepted by the Tribunal. It was further pointed out that the Tribunal in AY 2008-09 also accepted the suo-moto disallowance of 5% of exempt income offered by the assessee and the facts were identical in the impugned AY. A plea was also raised that satisfaction as envisaged by the provisions of Section 14A was not recorded by Ld. AO before proceeding to apply Rule 8D and therefore, the disallowance as arrived at by Ld. AO could not be sustained. Reliance was placed on several judicial pronouncements for the contention that when own funds were sufficient to cover the investments, interest disallowance was unjustified. An alternative plea was also raised that while computing the disallowance, only those investments which yielded any exempt income during the year were to be considered. 3.2 After due consideration, Ld. CIT(A) observed that assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the assessee has made suo-moto disallowance u/s 14A for ₹ 3.09 Lacs against exempt income, the computation of which has been provided at para 2.2.1 of the impugned order. Upon perusal of the same, we find that the assessee has allocated proportionate salary of an employee amounting to ₹ 2 Lacs out of total employee cost of ₹ 61.49 Crores. Various other expenses have been allocated in this proportion while arriving at aggregate disallowance u/s 14A. The aforesaid computations, in our opinion, could not be said to be without any sound or scientific basis since the basis of allocation was logical and a reasonable one and based on accounts of the assessee. The Ld. AO, disregarding the same, proceeded to compute disallowance u/s 14A without recording requisite satisfaction as to how the aforesaid estimated disallowance made by the assessee was not correct having regard to the accounts of the assessee. The provisions of Rule 8D, in our opinion, could not be applied mechanically and straightway without considering the computations made by the assessee but the application of the aforesaid Rule, first, had to cross the barrier of requisite satisfaction by Ld. AO as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ₹ 280.64 crores as on 31.3.2002) remains unproved by any material whatsoever. While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC). We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 39. In the above circumstances, we are of the view that the second question formulated must go in favour of the assessee and it must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds and therefore, no interest disallowance was called for under the circumstances. Viewed from any angle, we find no infirmity in the impugned decision of Ld. first appellate authority in directing Ld. AO to deleted additional disallowance of ₹ 388.66 Lacs while arriving at income under normal provisions as well as u/s 115JB. Resultantly, the revenue s appeal stands dismissed whereas the assessee s cross-objections succeeds. Cross Objections for AY 2011-12 7. In this AY, the assessee has earned exempt dividend income of ₹ 40.70 Lacs against which the assessee has offered suo-moto disallowance of ₹ 9.23 Lacs. Disregarding the same, Ld. AO has computed aggregate disallowance of ₹ 13.36 Crores as per Rule 8D which comprised-off of direct expense disallowance u/r 8D(2)(i) for ₹ 9.23 Lacs, interest disallowance u/r 8D(2)(ii) for ₹ 11.53 Crores and expenses disallowance u/r 8D(2)(iii) for ₹ 1.73 Crores. Before first appellate authority, the assessee raised multiple contentions, which have already been extracted in the impugned order. The Ld. CIT(A), making similar observations, noted that own interest free funds in the shape of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits against the same was not recognized on the basis of prudence principle. The Ld. AO disallowed the same by holding that derivative contracts were not accounted for in the books at the inception thereof at the time of purchases and they could not be considered to be stock-in-trade for the assessee and the loss, at the best, could be unascertained liability or a provision for loss which may or may not happen at the time of settlement of the contract at the future date. Therefore, such loss of ₹ 175.59 Lacs as claimed by the assessee was not an allowable expenditure. The Ld. CIT(A) deleted the same by following the decision of this Tribunal rendered in assessee s own case for AYs 2005-06 to 2008-09 2010-11, against which the revenue is in further appeal before us. 9.2 Although Ld. DR reiterated the stand of Ld. AO, however, nothing contrary could be brought on record. The Ld. AR submitted that the issues squarely stood covered in assessee s favor by the earlier decision of this Tribunal. 9.3 Upon perusal, we find that Ld. first appellate authority has deleted the addition by following the consistent stand of this Tribunal in assessee s own case for several earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X
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