Darashaw And Company Pvt. Ltd v. The Deputy Commissioner Of Income-Tax

rrpillai IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.1744 OF 2014 Darashaw and Company Pvt. Ltd. ..Petitioner -vs- The Deputy Commissioner of Income-Tax ..Respondents Range 4(1) WITHINCOME TAX APPEAL NO. 807 OF 2014 Darashaw and Company Pvt. Ltd. ..Petitioner -vs- The Deputy Commissioner of Income-Tax ..Respondents Range 4(1) ........... Mr.S. E. Dastur, Senior Advocate a/w. Mr. Madhur Agarwal i/b. S. R.Rudolph for the Petitioner in WP/1744/2014 and for the Appellant inITXA/807/2014. Mr. A. R. Malhotra a/w. Mr. N. A. Kazi for the Respondent inITXA/807/2014. Mr. Suresh Kumar for the Respondent in WP/1744/2014. ........... CORAM : S.C. DHARMADHIKARI A. K. MENON, JJ. DATE : 1[st] September, 2017 P.C.: 1.Rule. By consent rule is made returnable forthwith. 3.The writ petition is directed against order passed by the Income TaxAppellate Tribunal Bench at Mumbai dated 12[th] June, 2013. 4.The facts and circumstances in which this order is challenged canbe briefly set out. The Assessment order was passed for the Assessmentyear 2008-09. The Assessing Officer in the order dated 10th May, 2010considered the returns filed on 29th September, 2008 declaring a totalloss at Rs. 11,44,66,190/- under normal provisions. Tax payable has beencalculated at the rate of Rs.34,60,805/- under section 115JB of theIncome Tax Act, 1961 on book-profit of Rs.3,05,45,502/- This return wasprocessed under section 143(1) on 26[th] September, 2009 determiningrefund of Rs. 66,02,489/-. The case was selected for scrutiny and noticeunder section 143(2) was issued and served on the assessee. Furthernotice under section142(1) was issued. 5.The assessee company is engaged in the business ofshare and debtbroking, trading in Debt securities, Mutual Fund Distribution and otherfinancial services.The assessee also made investments in shares and debtsecurities. The Assessing Officer summarized the issues inter-alia for hisconsideration. One of which was expenditure attributable to earn exempt income. The Assessing Officer observed that the assessee has receiveddividend income of Rs. 44,91,580/-. This claim is exempt under section10(34) of the Income Tax Act, 1961. It was also observed that theassessee has allocated an amount of Rs. 1,75,583/- only in earning thedividend income. The assessee was asked during the course of scrutiny ofassessment proceeding as to why expenditure incurred earning thedividend income should not be disallowed under section 14Ar.w. withRule 8D. The representative of the assessee and present before theAssessing Officer argued and what is material for our purpose is thesubmission of Mr. Dastur, learned Senior Counsel appearing for thepetitioner. He submits that it was without prejudice to the main argument.The main argument was if they were assessing any funds and which wereutilized for making investment in shares and that is how dividend incomewas earned, then, no expenditure should be attributed and apportionedfor this dividend income.This argument was based on the judgment ofthis Court and which has been delivered in ITXA/4117/2010 andCommissioner of Income Tax vs Reliance Utilities and Power Ltd. [2009]313ITR 340. 6.The Tribunal in considering this issue did not agree with theAssessing Officer in the initial order but still came to the conclusion that 6.The Tribunal in considering this issue did not agree with theAssessing Officer in the initial order but still came to the conclusion that there is a submission made by the assessee and based on that the issueneeds to be answered in terms of paragraph 22 of the initial order dated12[th] June, 2013. The Tribunal came to the conclusion that the balancesheet of the assesee as exhibited at page 1 of the paper books supports thecontention of the Counsel that assessee has sufficient and own funds tocover up the investments. Therefore following the Judgment of thejurisdictional High Court namely in the case of Reliance Utilities and PowerLtd. (supra) the dis-allowance as computed by the assessee under Rule 8Dat Rs.39,19,175/- which was over and above the dis-allowance as done bythe Assessing Officer but adjusting that amount of Rs. 1,75,883/-, theTribunal made a dis-allowance. 7.From the record it appears that being aggrieved and dissatisfiedwith this part of the order a Rectification Application was made invokingsection 254(2) of the Income Tax Act, 1961. The RectificationApplications styled asM.A. No. 447 & 448/MUM/2013 were disposed ofon 7[th] March, 2014 but the Tribunal held that there is no mistake whichneeds to be rectified. 8.We have heard Mr. Dastur, learned Senior Counsel appearing forthe petitioner who, as above would submit that there was a patent andobvious error in the initial order of the Tribunal dated 12[th] June, 2013. He would submit that once the word “without prejudice” was employed bythe assessee's representative during the course of argument then its legalconsequences ought to be borne in mind. There is therefore no admission.When such is the submission of the assessee's representative, it cannot beconstrued as a concession of the assessee either. The Tribunal reliedupon it and without assigning any independent reasons, worked out thedis-allowance. That is despite the Tribunal referring to the bindingjudgment of this Court in the case of Reliance Utilities and Power Ltd.(supra). 9.On the other hand Mr. Suresh Kumar would submit that theTribunal has committed no error nor was there any mistake in its initialorder. It is the response to the assessee's own statement or submissionand relying on the balance sheet, as also the contentions raised before it,that the Tribunal held as above. Therefore as and when the assessee hasalso brought an appeal against initial order of the Tribunal before thisCourt all the more we should not entertain this petition. 10.We have considered these submissions and with the assistance ofthe learned Senior Counsel perused the entire petition and that part of theorder of the Tribunal which was covered by the Miscellaneous Application,we find that if the jurisdictional High Court Judgment in the case of Reliance Utilities and Power Ltd.(supra) was held to be binding on theTribunal, why the Tribunal had to fall back on alternative dis-allowancecomputed by the assessee and that too without prejudice has not beenclarified at all. In the initial order as well as in the order on theMiscellaneous Application for rectification the Tribunal has assigned thesame reasons. We do not think that a without prejudice submission andmade strictly in the alternative should have influenced the tribunal tosuch an extent. 10.We have considered these submissions and with the assistance ofthe learned Senior Counsel perused the entire petition and that part of theorder of the Tribunal which was covered by the Miscellaneous Application,we find that if the jurisdictional High Court Judgment in the case of Reliance Utilities and Power Ltd.(supra) was held to be binding on theTribunal, why the Tribunal had to fall back on alternative dis-allowancecomputed by the assessee and that too without prejudice has not beenclarified at all. In the initial order as well as in the order on theMiscellaneous Application for rectification the Tribunal has assigned thesame reasons. We do not think that a without prejudice submission andmade strictly in the alternative should have influenced the tribunal tosuch an extent. 11.In the peculiar facts and circumstances it was for the Tribunal tohave extensivelycarried out the exercise and scrutinise the order of theAssessing Officer, whether the order deserved to be upheld on the issue.That having not been done, we set aside both the initial orders of theTribunal as also orders on the Miscellaneous Application dated 12[th] June,2013 and 7[th] March, 2014 respectively. We restore Income Tax Appealand that particularly of the assessee bearing ITA No.225/MUM/2011 tothe file of the Tribunal and direct the Tribunal that the same shall bedecided on its own merits and in accordance with law. While deciding theappeal afresh Tribunal should allow the assessee to contend that the dis-allowance worked by the Assessing Officer, particularly the assessee'swithout prejudice and alternative submission should not influence its final decision. Equally all contentions of the Revenue should also be consideredwhile disposing of the appeal afresh pursuant to our decision. We clarifythat we have not expressed any opinion on the rival contentions. We alsodirect that the appeal shall be decided uninfluenced by the findings andconclusion in the order which we have set aside. 12.In the light of the above conclusion the assessee's Appeal no. 807 of2014 does not survive and stands disposed of accordingly. (A. K. MENON, J.) (S.C. DHARMADHIKARI, J.)