TMI Blog2018 (4) TMI 1770X X X X Extracts X X X X X X X X Extracts X X X X ..... h the omissions and commissions before the AO proceeded to tax the said buffer disclosure of ₹ 60 lakhs. As such, AO did not examine this aspect of the issue. CIT(A)/A) are of the opinion that the assessed income may not be less than the returned income. Therefore, with similar directions to the AO, we remand the issue to the file of AO. Accordingly, this issue is adjudicated pro tanto. Allowability of the claim relating to the Group Gratuity Scheme - HELD THAT:- The issue stands covered against the assessee by the order of Tribunal in its own case for the A.Y₹ 2006-07 to 2011-12 [2018 (3) TMI 425 - ITAT PUNE] held that the order of CIT(A) on this issue is fair and reasonable as the scheme has not been approved till date, as admitted by the Ld. AR for the assessee. Hence, it does not call for any interference on this issue. - Decided against assessee. - ITA No.1685/PUN/2015 Assessment Year : 2012-13 - - - Dated:- 18-4-2018 - Shri D.Karunakara Rao, AM And Shri Vikas Awasthy, JM Assessee by : Shri Rajshekhar S. Abhyankar Revenue by : Shri Achal Sharma ORDER D. Karunakara Rao, This is the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingency and addition u/s.14A. 4.The Confirming disallowance of ₹ 1,16,601/ - being contribution to Group Gratuity Scheme. The appellant craves leave to add, alter, and withdraw any ground of appeal at the time of appeal hearing. 3.Briefly stated relevant facts include that the assessee is a company engaged in the business of stud farm activities and it belongs to Poonawalla group of cases. The cases of Poonawalla Group include two sub-groups (1) includes family members of Shri Cyprus Soli Poonawalla (in short CSP) and the group concerns under his control and management (with M/s. Serum Institute of India Ltd. as the flagship company and (2) other sub-group includes family members of Shri Zavareh Soli Poonawalla (in short ZSP) and the group concerns under his control and management, which is mainly engaged in stud farm activities. There was search u/s.132 of the Act on the assessee s group of cases on 21-06-2011. Search resulted in admission of undisclosed income of ₹ 141.796 crores. Various documents were found and seized by the Department. Assessee filed the return of income on 28-09-2012 declaring income of ₹ 2,51,60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not made adequate disallowance as mandated u/s.14A of the I.T. Act and therefore, the case of the assessee is a fit case for computation of the said disallowance u/s.14A of the I.T. Act. Ld. Counsel for the assessee submitted that, on similar satisfaction, the Tribunal held in favour of the assessee in the assessee s own case. Therefore, the issue stands allowed in favour of the assessee. 7.Ld. DR for the Revenue relied on the orders of the AO and the CIT(A). He also relied on the following judgments on the issue : 1.Devarsons Industries Pvt. Ltd. Vs. ACIT 84 taxmann.com 244 (Gujarat) 2.Indiabulls Financial Services Ltd. Vs. DCIT 76 taxmann.com 268 (Delhi) 8.After hearing both the sides on this issue and on perusing the orders of the Revenue, we find this issue stands decided in favour of the assessee by virtue of order of Tribunal in the assessee s own case for A.Yrs. 2006-07 2011-12. We therefore find to relevant to extract the finding given on this issue in those assessment years : 27. In connection with Ground No.1, Ld. Counsel for the assessee submitted that AO failed to record satisfaction which is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. (emphasis supplied). 31.The above ratio was adopted by the Pune Bench of the Tribunal in the case of Capgemini Technology Services India Limited, (in the matter of iGate Computer Systems Limited, (formerly Patni Computer systems Limited amalgamated with iGate Global Solutions Limited and name changed) Vs. DCIT vide ITA Nos. 216 and 360/PUN/2015, order dated 25-01-2018 and allowed the issue in favour of the assessee. For the sake of completeness, relevant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 is to be made on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. (underline provided by us for emphasis) 36.The ratio laid down by the Hon ble High Court of Delhi in Indiabulls Financial Services Ltd. Vs. DCIT (supra) is thus, not applicable. The ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08, the similar issue was decided in favour of the assessee. In this regard, he referred to Para Nos. 28 to 41 of the order of the Tribunal (supra) and therefore, submitted that this issue also is squarely covered in favour of the assessee. 13.Ld. DR for the Revenue relied on the orders of the AO and the CIT(A). 14.After hearing both the sides on this issue and on perusing the orders of the Revenue, we find this issue also stands decided in favour of the assessee by virtue of order of Tribunal in the case of Serum Institute of India Ltd. Vs. DCIT (supra). We therefore find to relevant to extract the finding given on this issue : 28. Ground no.5 relates to inclusion of income of an amount of ₹ 1 crore which was offered as contingency in the statement u/s.132(4) of the act. Relevant facts are that the assessee was covered u/s.132 of the Act and the same resulted in disclosure of undisclosed income. Details are given in Para nos. 13 and 13.1 (pages 55 to 60) of the order of CIT(A). Accordingly, ₹ 1 crore was offered against the contingencies if any to be set off against the discrepancies/omissions. While filing the return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the assessee had made disclosure of ₹ 75 lakhs voluntarily as additional income under the head Contingencies to cover any other errors, omissions or discrepancies. The submission of the Ld. Counsel for the assessee that the amount of ₹ 75 lakhs was voluntarily offered and there was no detection of any incriminating material or undisclosed income could not be controverted by the Ld. Departmental Representative. We, therefore, find merit in the submission of the Ld. Counsel for the assessee that the amount of ₹ 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 ₹ 18,19,294/- i.e. (₹ 93,24,674 ₹ 75,00,000/-). Grounds of appeal No.1 to 3 by the assessee are accordingly partly allowed. 31.From the above, we find the Tribunal permitted for setting off the disallowance of expenditure u/s.14A of the Act against the said buffer disclosure of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is due and payable, and the authority concerned, on being satisfied, shall grant appropriate relief. 34.In the case of Gujarat Gas Company Ltd. Vs. JCIT (245 ITR 84) the Hon ble Gujarat High Court held that the instruction of the CBDT Circular No.549 (Para No.5.12 dated 31-10-1989 is ultra-vires when the said instruction mandates the AO against making the scrutiny assessments at the figure less than that returned by the assessee. Relevant held portion of this judgment reads as under : Held, that the circular in question refers to assessments which are to be made u/s.143(3) of the Act. The circular directs that in a particular type of cases, i.e. in scrutiny cases u/s.143(3) of the Act, the income can neither be assessed at a figure lower than the returned income nor the loss assessed at a figure higher than the loss nor further refund given except what was due on the basis of the returned income. Thus, by issuance of the circular, the quasijudicial officer is directed to assess cases of particular nature in a particular manner. The Assessing Officer being bound by it had abdicated his function and did not act independently and, therefore, there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or nullified in appropriate proceedings, does not disentitle the assessee to claim refund of the advance tax and tax paid on self assessment because to that extent the assessee had admitted his liability to pay tax in accordance with law. Facts of the present case are therefore, different. In case of hand, the assessment was not rendered null. In fact such assessment, which according to the order of CIT(Appeals) had become final tax liability of the assessee, came lower than that declared by him in the return filed. (1)To sum up, from the above, it is obvious that the fetters imposed by the CBDT, on the AOs, when it comes to assessing the income of assessee lower than the returned income, are held ultra vires. Further, the Hon ble Apex Court also held that the taxes paid by the assessee as a matter of abundant caution, i.e. by way of Advance or Self Assessment Taxes, needs to be refunded after due verification of the claims. (2)Ld. Counsel for the assessee filed various decisions of the Tribunal demonstrating that the contingency disclosure are entitled to refund after due verification. In this regard, Ld. Counsel for the assessee filed written note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early laid down. In these circumstances, any amount which is not assessable as undisclosed income for the block period cannot be assessed as such merely for the reason that the same was declared by the Assessee in the return for block period and there cannot be such estoppel against the statute. It, therefore, follows that if the assessee commits a patent mistake of fact or law while filing his return of undisclosed income under section 158BC, he cannot be assessed on such incorrect income merely on the basis of admission made in the return. 13. . . . . . . . .In such circumstances, when a detailed working made subsequently by the assessee of undisclosed income revealed that the total undisclosed income assessable in the hands of the Assessee was lower than the returned income, we are of the opinion that the same has to be assessed at such lower amount going by the concept of real income especially when the said working was verified and found to be correct by the Assessing Officer. 36. Similar proposition was affirmed by the Hon ble Delhi High Court in the case of CIT Vs. Bharat General Insurance Company Ltd. 81 ITR 303 wherein it is held that when the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that it is incorrect. (p. 20). 11.1 We find that the Tribunal instead of examining the matter from this angle has repeated the order passed in the first round without due application of mind to the issues which called for adjudication. 37.The Nagpur Bench of the Tribunal in the case of DCIT Vs. Sanmukhdas Wadhwani (supra) held categorically that the income not assessable as undisclosed income of the assessee cannot be assessed as such merely because assessee declared the same through a statement in search action. Admission made by the assessee in the return of income is no sacrosanct. AO is under statutory obligation to make assessment of assessee based on the facts of case and as per the provisions of Act. In other words, coming to the facts of the assessee, if the said sum of ₹ 1 crore is not assessable to tax as income of the assessee, the same ought not be assessed even if the assessed income comes to a lower figure qua the returned income. 38.We have considered the above legal scope of the principle relating to the lower figure of assessed income qua the returned income. Further, we have heard the parties and perused the writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by him in the return of income. 40.In the instant case, considering the above settled legal propositions, we proceed to examine availability of facts relating to the present case. In the return of income, assessee merely offered an amount of ₹ 1 crore towards contingency. Meaning thereby that incase the AO makes certain additions basing on same facts or legal issues, the said disclosure amount of ₹ 1 crore should be considered for set off/adjustment etc. In case AO failed to make such additions, the said amount of ₹ 1 crore is not required to be assessed as income of the assessee. It is an admitted fact that the AO made addition u/s.14A of the Act in the assessment u/s.153A of the Act in the absence of any incriminating material. This addition is made over and above the said contingency amount of ₹ 1 crore. However, we find while discussing in the preceding paragraph this disallowance u/s.14A is unsustainable in this assessment as the same does not have strength of any incriminating material. In other words, the AO made an unsustainable addition u/s.14A of the Act and taxed the said amount of ₹ 1 crore-contingency income witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect of the issue. CIT(A)/A) are of the opinion that the assessed income may not be less than the returned income. Therefore, with similar directions to the AO, we remand the issue to the file of AO. Accordingly, this issue is adjudicated pro tanto. 15.Last issue : The fourth issue relates to the allowability of the claim relating to the Group Gratuity Scheme. Before us, Ld. Counsel for the assessee submitted that the issue stands covered against the assessee by the order of Tribunal in its own case for the A.Yrs. 2006-07 to 2011-12 (supra). On hearing both the sides, we proceed to extract the relevant para of the order of Tribunal (supra) here as under : 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 admitted by the Ld. AR for the assessee. Hence, it does not call for any interference on this issue. Accordingly, Ground No.3 raised by the assessee is dismissed. 16.The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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