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TMI Blog2018 (3) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 1.91 crores in general and 60 lakhs in particular for the year under consideration. In our view, this exercise falls in the zone of investigation of facts. Accordingly, the conditions mentioned by the Supreme Court in the case of NTPC Ltd. (1996 (12) TMI 7 - SUPREME Court) do not allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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. Therefore, Ld. AR started narrating the facts relevant to the additional ground. Assessee filed the return of income originally on 01-11-2006 and the assessment was completed u/s.143(3) of the Act vide order dated 25-03-2008. Therefore, the present assessment made u/s.153C of the Act constitutes a 'non-abated' assessment. Further, coming to the details of the additions, we find the contents of Para No.5 of the assessment order deals with the disallowance u/s.14A of the Act when there is no reference to any incriminating documents to support the same. Otherwise, the general facts relating to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) 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 relied on the orders of the AO and the CIT(A). 10. We heard both the parties on the issue of making of disallowance u/s.14A of the Act in the non-abated assessment. It is an undisputed fact that the AO already made an addition under the said provisions during the regular assessment proceedings u/s.143(3) of the Act. This issue now stands remitted by the Tribunal to the file of AO. Further, it is an undisputed fact that no seized material exists to support the Revenue to assume jurisdiction validly u/s.153C of the Act for invoking the provisions of section 14A of the Act successfully in this non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 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.Yrs. 2007-08 and 2008-09) 17. Grounds raised by the assessee in the appeal for A.Y. 2007-08 read as under: "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.49,12,715/- u/s.14A by stating that issue of disallowance u/s.14A was not related to search findings but actually pertains to regular assessment. (Refer Para 4.2 of the order u/s.250). 2. confirming disallowance of Rs.28,434/- being contribution to Group Gratuity Scheme." Similar grounds have been raised by the assessee for A.Y. 2008-09 too. 18. Ground No.1 relates to the issue of disallowance u/s.14A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal ground and the same is extracted as under : "Additional Ground of appeal No.2(b) - Alternatively, the Ld.CIT(A) ought to have granted relief by reducing the total income assessed by Rs.60,00,000/- being the contingency offered to tax in return of income as no evidence was found during the course of search and/or in assessment proceedings regarding undisclosed income. With this as additional ground, the original ground No.2 may please be read as ground No. 2(a)." Similar additional ground has been raised by the assessee for the A.Yrs. 2010-11 and 2011-12. 26. From the above, it is evident that the Ground Nos. 1 and 2 relates to disallowance u/s.14A of the Act. While Ground No.1 relates to correctness of making of and the Ground No.2 relates to allowability of the benefit of set off against the contingency of ₹ 60 lakhs disclosed by the assessee in the return of income in compliance of additional income offered by the assessee in search proceedings. 27. In connection with Ground No.1, Ld. Counsel for the assessee submitted that AO failed to record satisfaction which is required while invoking the provisions of section 14A of the Act r.w. Rule 8D of the I.T. Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication 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 operational paras are extracted here as under : "34. We have heard the rival contentions and perused the record. The Assessing Officer while passing the assessment order in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 appeal No.3 raised by the Revenue is thus, dismissed." 32. From the above, we are of the view that the satisfaction recorded by the AO in Para No.5.1 is extremely based on the suspicion and surmises. The satisfaction arrived at by the AO with reference to the entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see brought our attention to the decision of the Pune Bench of the Tribunal in the case of Serum Institute of India Ltd. Vs. DCIT in ITA Nos. 985 and 986/PUN/2015 and ITA Nos. 1535 & 1536/PUN/2015, order dated 28-11-2017. Contents of Para No.28 to 41 of the order of the Tribunal are relevant. 36. After hearing both the sides on this issue and on perusal of the said order of the Tribunal, we find (1) the similar issue came up for adjudication both in the case of Adurjee & Brothers Pvt. Ltd. and Serum Institute of India Ltd. In the facts of Serum Institute of India Ltd. (supra), we find the assessee disclosed contingency of ₹ 1 crore and there is a demand for set off of the same towards the discrepancies/omissions if any. We also find the case of Adurjee & Brothers Pvt. Ltd. (supra) is relevant for the finding of the Tribunal where the disallowance u/s.14A of the Act was allowed to be set off against the contingency disclosure which is similar to the present case. Contents of Para No.12 of the order of the Tribunal in the case of Adurjee & Brothers Pvt. Ltd. Vs. DCIT in ITA No.1067/PN/2014, order dated 10-08-2016 are relevant in this regard and the same are extracted here as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly objected to the admission of the said additional ground raised by the assessee during the second appeal proceedings. According to him, the adjudication of this ground requires investigation into certain facts. Detailing the said investigation, Ld. DR submitted that there is need to examine the manner of disclosure of ₹ 60 lakhs given by the assessee for the year under consideration in the name of the assessee. Further, for reduction of the returned loss by ₹ 60 lakhs, it requires investigation into the seized material and books of account, if there exists any discrepancy which requires set off against the said contingency of ₹ 60 lakhs. According to the Ld. DR, the additional ground should not be admitted when adjudication of the same calls for investigation into facts at the level of the AO. For this proposal, she relied on the Supreme Court judgment in the case of NTPC Ltd. Vs. CIT 243 ITR 83 (SC). 41. We heard both the parties on the issue of admission of the additional ground, and if it is admitted whether adjudication of the same demands investigation into the primary facts. We examined the objections raised by the Ld. DR for the Revenue and find there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing both the sides on this issue, we perused the order of the Tribunal in assessee's own case for A.Y. 2007-08. We find the Tribunal in Para Nos. 12 and 12.1 of the order has decided this issue in favour of the assessee relying on the order of Tribunal in the case of KRA Holding and Trading Investment Pvt. Ltd. (supra). We proceed to extract the operational para No.12.1 and the same reads as under : "12.1 Respectfully following the decision of the Tribunal in the case of KRA Holding and Trading Investment Pvt. Ltd. (supra) we hold that the 'PMS' fees paid by the assessee is an allowable deduction from the capital gains." 60. Considering the settled nature of the issue, we are of the opinion that the ground raised by the assessee needs to be allowed. Accordingly, Ground No.6 raised by the assessee is allowed." 48. Considering the fact that nothing contrary is brought to our notice, we find the claim of the assessee with regard to payment of PMS fees paid by the assessee is an allowable deduction from the capital gains. Therefore, we direct the AO to examine the facts of the present case and apply the ratio laid down by the Tribunal in the case of Serum Institute of India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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