2015 (11) TMI 541 - AT - Income Tax

Tribunal directs AO to re-examine disallowance under Section 14A, emphasizing procedural compliance.

ACIT Circle-16 (1) New Delhi Versus Tulip Star Hotels Ltd.

The Tribunal allowed the Revenue's appeal for statistical purposes, directing the AO to re-examine the disallowance under Section 14A and the professional ... Disallowance u/s 14A - CIT(A) deleted the addition accepting additional evidence - Held that:- the instant case, the assessment year involved is prior to AY 2008-09, and the ld. AO has expressed his dissatisfaction with the correctness of the claim of the assessee with regards to the expenditure incurred against exempted income, we are of the opinion that the findings in the case of Maxopp Investment Ltd. vs. CIT (2011 (11) TMI 267 - Delhi High Court) are squarely applicable. Respectfully, following the findings, we remit the matter back to the file of ld. AO and direct to determine the amount of expenditure incurred towards earning exempted income, on the basis of a reasonable and acceptable method of apportionment. Foe acceptance of additional evidence in view of the judgements of the jurisdictional High Court in the case of Manish Buildwell (2010 (12) TMI 760 - ITAT - Delhi (E)) and Modern Charitable foundation (2011 (5) TMI 204 - Delhi High Court), we are of the opinion that the AO should be given opportunity to verify the additional evidence furnished by the assessee before the ld CIT(A). Accordingly, we direct the ld CIT(A) to forward all the additional evidence to the ld. AO. Decided in favour of revenue for statistical purposes. Issues Involved:1. Disallowance of Rs. 11,79,500/- under Section 14A of the Income Tax Act as per Rule 8D.2. Admission of fresh evidence under Rule 46A by the CIT(A).3. Deletion of disallowance of professional fee expense of Rs. 1,96,85,000/-.Detailed Analysis:1. Disallowance under Section 14A:The Revenue challenged the CIT(A)'s decision to set aside the issue of disallowance of Rs. 11,79,500/- under Section 14A to the AO for further examination. The CIT(A) had directed the AO to call for details of expenditure related to earning dividend income and investments and disallow any such expenditure. The Revenue argued that the CIT(A) did not have the authority to set aside the matter for adjudication. However, both parties agreed that the issue was covered by the jurisdictional High Court's judgment in Maxopp Investment Ltd. vs. CIT, which held that Rule 8D is inapplicable for assessment years prior to 2008-09. The Tribunal concluded that the AO should determine the expenditure incurred in relation to exempted income using a reasonable and acceptable method of apportionment, following the Maxopp Investment Ltd. judgment. Consequently, the Tribunal remitted the matter back to the AO for fresh determination, rendering the Revenue's ground merely academic. The ground was allowed for statistical purposes.2. Admission of Fresh Evidence under Rule 46A:The Revenue contended that the CIT(A) admitted additional evidence regarding professional fee expenses without providing the AO a reasonable opportunity to examine these under Rule 46A(3). The AO had objected to the admission of additional evidence, arguing that the assessee failed to provide necessary documents during the assessment proceedings and that the additional evidence appeared to be manipulated. The Tribunal reviewed relevant case laws and concluded that the CIT(A) did not comply with Rule 46A(3), which mandates giving the AO a reasonable opportunity to examine the evidence. The Tribunal cited the Delhi High Court's judgment in CIT vs. Manish Buildwell Pvt. Ltd., emphasizing the necessity of allowing the AO to verify additional evidence. The Tribunal directed the CIT(A) to forward all additional evidence to the AO for verification, thus allowing the ground for statistical purposes.3. Deletion of Disallowance of Professional Fee Expenses:The issue of professional fee expenses of Rs. 1,96,85,000/- was linked to the second ground, as it involved additional evidence. The Tribunal noted that the AO should be given an opportunity to verify the additional evidence submitted by the assessee before the CIT(A). Following the direction for ground No. 2, the Tribunal remitted the issue of professional fee expenses back to the AO for fresh examination in light of the additional evidence. The ground was allowed for statistical purposes.Conclusion:The Tribunal allowed the Revenue's appeal for statistical purposes, directing the AO to re-examine the disallowance under Section 14A and the professional fee expenses after verifying the additional evidence. The Tribunal emphasized compliance with procedural requirements under Rule 46A, ensuring the AO's opportunity to examine and rebut additional evidence submitted by the assessee. The order was pronounced on 14/10/2015.