TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 1381
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....ner of Income Tax (Appeals), Kolkata-27 [hereinafter referred to as the Ld. CIT(Appeals)]. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) has erred in making the ex-parte order in haste without giving a reasonable opportunity of being heard to the appellant, which is against the principle of natural justice. 2. That on the facts and in the circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals), Kolkata 27, is bad in law and is not based on correct appreciation of facts of the case of the assessee. 3. That on the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeals), Kolkata - 27 has erred in upholding addition of Rs. 14,94,650/- made by The Assistant Commissioner of Income Tax, Central Circle 4(2), Kolkata vide its order u/s 143(3) dated 16-12-2019. 4. That the appellant craves right to add, alter or modify any of the ground of appeal before or at any time during the course of hearing of the appeal." 3. Brief facts of the case are that the assessee filed its original return of income for the A.Y. 2017-18 on 28.10.2017 and had declared loss of Rs. 3,75,711/-. The case of the ....
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....Ltd. vs. CIT 12/02/2018 SC', where the Hon'ble Apex Court clearly analyzed section 14A(1) and held that "In the first instance, it needs to be recognised that as per section 14A(1) of the Act, deduction of that expenditure is not to be allowed which has been incurred by the assessee "in relation to income which does not form part of the total income under this Act". Axiomatically, it is that expenditure alone which has been incurred in relation to the income which is includible in total income that has to be disallowed." 6.2.2. Additionally, it is noteworthy to mention that the judicial pronouncement of the Apex Court relied by the assessee in the cases of 'Pr. CIT, Patiala Vs. State Bank of Patiala' is an isolated case law and the facts are not identical to the assessee. Further, the case of 'CIT (Central-1) Vs. Chettinad Logistics Pvt. Ltd.' which was relied by the Assessee in its support, is also based on non-identical issue as compared to the present case of the assessee as there was no 'dividend income' earned by the assessee in the subjected AY which was liable to be exempted. However, in the present case, a dividend income of Rs. 3,75,000/- ....
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.... 5,350/-, a sum of Rs. 32,75,872.91 was worked out as the net disallowance and a show cause notice was issued to the assessee as to why the disallowance should not be made. The assessee disputed the inclusion of legal and professional charges for calculating the disallowance and further submitted that the disallowance of Rs. 15,00,000/- calculated on the basis of 1% on the average investment should be restricted to Rs. 3,75,000/- being the amount of dividend received during the year under consideration. The Ld. AO excluded the amount related to legal and professional charges and worked out the disallowance at Rs. 14,94,650/- after excluding Rs. 5,350/- suo moto disallowed by the assessee. 7.1. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who confirmed the disallowance. The relevant extract of the order of the Ld. CIT(A) is as under: "6.2. Discussion and decision: 6.2.1. I have perused the assessment order as well as the submission of the assessee. On examining the same. It is noted that the assessee had earned dividend income of Rs. 3.75,000/- against the investment of Rs. 15,00,00,000/- in preferential shares of LUX Industries Ltd. I....
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....u/s 14A of the Act is confirmed. Therefore, this ground of appeal raised by the assessee is dismissed." 7.2. Before us, the assessee made submissions that the assessee was precluded from representing his case before the Ld. CIT(A). It was stated that the return was filed relying on the decision of Hon'ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT. The submission in this regard is as under: "Your Honour, in the present case, the appellant filed a return on 28.10.2017. Relying on the decision of Hon'ble Delhi High Court in the case of Cheminvest Ltd. V CIT wherein it was held that Sec 14A does not apply to shares bought for strategic purposes and various other judicial decisions, the appellant believed that disallowance under Section 14A read with Rule 8D should apply only to non-strategic investments held by the appellant company. Based on this view, the appellant made a disallowance of Rs. 5,350/- in its computation of total income. The details of calculation of disallowance made by the appellant is as follows:- Particulars Amount Amount Total Non-Strategic Investments 53,50,000 Kamala Tea Ltd 2,00,000 Bala Techna Synthetics Ltd 1,00....
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....d in [2019] 103 taxmann.com 326 (SC) & PCIT-2 v.v Caraf Builders & Constructions (P) Ltd, reported in [2019] 112 taxmann.com 322 (SC). In the Oil Industry Development Board case, the Supreme Court upheld the same principle, ruling that Section 14A disallowance cannot be invoked if no exempt income is reported in the relevant financial year whereas in Caraf Builders & Construction (P) Ltd, the Hon'ble Apex Court held that upper disallowance cannot exceed exempt income of the relevant year. This position of law was also upheld in various other rulings across multiple High Courts. At this juncture it is also important to mention that observations of the LD CIT(A)-27, Kolkata that case of PR CIT, Patiala Vs State Bank of Patiala is an isolated case law is totally incorrect. Furthermore, the Learned CIT(A)-27's observation that the facts in Pr. CIT v. State Bank of Patiala and CIT (Central-1) are non-identical is unfounded. The principle of exempt income applies in both these cases, irrespective of the form it takes in each case." 7.3. With regard to the finding of the Ld. CIT(A) that the decision of State Bank of Patiala (supra) was an isolated case, the assessee submitted that in....