Commissioner Of Income Tax, Faridabad v. M/S Lakhani Marketing Inc., Faridabad

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA,TT,2014 (O&M)Date of decision: 28.10.2014 Commissioner of Income Tax, Faridabad ..... Appellant VERSUS M/s Lakhani Marketing Inc., Faridabad .. Respondent CORAMHON8BLE MR. JUSTICE RAJIVE BHALLAHON8BLE MR. JUSTICE AMIT RAWAL Present'Mr.Tejender K.Joshi, Advocate, for the appellant, KOK oK RAJIVE BHALLA, J. (ORAL) ;;aCM2752CII2014 Allowed as prayed for. ITA;T/a2014 The revenue is before us challenging order dated14.06.2013, passed by the Income Tax Appellate Tribunal, DelhiBench 'D' New Delhi, (hereinafter referred to as the ‘ITAT"),dismissing an appeal filed by the revenue to challenge order dated29.03.2011, passed by the Commissioner of Income Tax (Appeals),Faridabad (hereinafter referred to as the 'CIT(A)’. Counsel for the revenue submits that the followingsubstantial questions of law arise for adjudication: - “1. Whether on the facts and in the circumstances of thecase, the Tribunal was correct in law in upholding the decision of Ld. CII(A) in deleting the disallowance ofRs.26,50,236/- which was made by the AO u/s 40(a)(ia)even when the assessee voluntarily admitted during thecourse of assessment proceedings that the TDS was notdeducted on these payments. 2. Whether on the facts and in the circumstances of thecase, the Tribunal was correct in law in upholding thedecision of Ld. CII(A) in deleting the disallowance ofRs.23,46,941/- which was made by the Assessing Officerby invoking section 14A of the Income Tax Act, 1961particularly when the investment in shares of M/s LakhaniIndia Ltd. which yield dividend income are not formingpart of the total income by virtue of section 10(33) of theIncome Tax Act and hence since dividend did not form thepart of total income and when the financial burden incurredby the assessee for acquiring shares should have beenproportionately disallowed by invoking section 14A of theIncome Tax Act?” Counsel tor the revenue submits that as the assessee didnot inform the assessing officer that he had deducted and depositedTDS, the CIT(A) erred in allowing an application for additionalevidence and accepting documents adduced by the assessee to provethat he had deducted and deposited TDS. As regards question No.2,it is argued that deletion of disallowance of Rs.23,46,941/- 1scontrary to Section 14(A) of the Income Tax Act, 1961 (hereinafterreferred to as the 'Act’) as dividend does not form an integral part ofthe assessee's income and, therefore, expenditure incurred by the assessee for acquiring shares should have been proportionatelydisallowed under Section 14(A) of the Act. We have heard counsel for the appellant-revenue andperused orders passed by the ITAT and the CIT(A). The assessing officer, passed an order against therespondent/assessee alleging failure to deduct and deposit TDS. Theassessee filed an appeal and during appellate proceedings, filed anapplication for additional evidence appending therewith evidence toprove that requisite TDS had been deducted and deposited. Theassessee also filed form 16-A in support of this assertion. The CIT(A) accepted the additional evidence and set aside the order passedby the assessing officer. The argument that additional evidencecould not have been allowed at the appellate stage, disregards the factthat the revenue did not controvert the assessee's assertion regardingdeduction and deposit of TDS nor did it contest the correctness ofform 16-A. A relevant extract from the order passed by the ITAT,would place the aforesaid conclusion in its correct perspective: - “6. On the first issue of disallowance u/s 40A(ia) the Ld,Commissioner of Income Tax (Appeals) has given a clearfinding of fact that the assessee had in fact deducted TDSfrom the payments of commission and service charges toShri J.C.Arora by treating the same as salary and that theamount has been remitted to the government. On thisfactual findings, which are not controverted by the Ld. “6. On the first issue of disallowance u/s 40A(ia) the Ld,Commissioner of Income Tax (Appeals) has given a clearfinding of fact that the assessee had in fact deducted TDSfrom the payments of commission and service charges toShri J.C.Arora by treating the same as salary and that theamount has been remitted to the government. On thisfactual findings, which are not controverted by the Ld. D.R., we have no other alternative but to up hold the orderof the First Appellate Authority and dismiss ground no.1 ofthe revenue.” Consequently, we answer the first question against the TEVENUE, As regards the second question, counsel for the appellantis unable to distinguish judgment passed by this Court in ITA-970-2008, *Commissioner of Income Tax, Faridabad Vs. M/s LakhaniMarketing Incl., Faridabad, decided on 02.04.2014, in the case of theassessee where a Similar question has been answered against therevenue. Consequently, we answer question No.2 also against therevenue and dismiss the appeal accordingly. | RAJIVE BHALLA |JUDGE 28.10.2014 ~Shamsher S.Sabharwal |} AMIT RAWAL JUDGE