Pr. Commissioner Of Income Tax – 6 v. Mis Modi Rubber Ltd

$~3*IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 260/2019 PR. COMMISSIONER OF INCOME TAX – 6 ..... Appellant Through:Mr. Ruchir Bhatia, Advocate. versus MIS MODI RUBBER LTD. Through: ..... RespondentMr. Rohit Jain, Advocate with Mr.Aniket D. Agrawal, Advocate. CORAM:HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULA O R D E R%02.09.2019 1. Revenue has preferred the present appeal against the order dated15.04.2018 in ITA No. 1952/Del/2014 in respect of assessment year 2009- 10. 2. The Tribunal has concluded that the decision of the learned CIT (A) thatthe dissatisfaction of the learned AO was not discernible while invokingSection 14 A of the Income Tax Act and needs a re-look in light of thedecision of this Court in India Bulls Financial Services Private Limited v.Deputy Commissioner of Income Tax 2017 395 ITR 242 (Delhi).Theoperative part of the impugned order reads as follows:- 5.7 In view of the above decision of the Hon'ble Delhi HighCourt, we are of the opinion that in the instant case, the decisionof the learned CIT(A) that dissatisfaction of the learned AO is not discernible, need a re-look and thus the issue needs to be re-examined by the learned CIT(A) and accordingly, we restore theissue to the file of the Ld. CIT(A) for deciding afresh in view ofthe decision of the Hon'ble High Court in the case of India BullsFinancial Services Pvt. Ltd. (supra). The Ld. CIT(A), first mayadjudicate the issue of requirement of satisfaction as toincorrectness of the claim of the assessee of having incurred noexpenses towards exempt income. If he finds that the pre-requisiteofsatisfactioniscleared,thenhemaydecidequalification of disallowance under three parts of Rule 8D(2) inaccordance with law. It is needless to mention that the assesseeshall be afforded adequate opportunity of being heard. Theground of' appeal of the Revenue is accordingly allowed forstatistical purposes. 3. Learned counsel for the Respondent submits that the Supreme Court hadan occasion to examine Section 14 A of the Act in Godrej & BoyceManufacturing Co. Ltd v. Deputy Commissioner of Income Tax & Anr,[2017] 394 ITR 449 (SC). The relevant paras read under as:- “37. We do not see how in the aforesaid fact situation a differentview could have been taken for the Assessment Year 2002-2003.Sub-sections (2) and (3) of Section 14A of the Act read withRule8DoftheRulesmerelyprescribeaformulafordetermination of expenditure incurred in relation to incomewhich does not form part of the total income under the Act in asituation where the Assessing Officer is not satisfied with theclaim of the assessee. Whether such determination is to be madeon application of the formula prescribed under Rule 8D or in thebest judgment of the Assessing Officer, what the law postulatesis the requirement of a satisfaction in the Assessing Officer thathaving regard to the accounts of the assessee, as placed beforehim, it is not possible to generate the requisite satisfaction withregard to the correctness of the claim of the assessee. It is onlythereafter that the provisions of Section 14A(2) and (3) read withRule 8D of the Rules or a best judgment determination, as earlierprevailing, would become applicable. 38. In the present case, we do not find any mention of the reasonswhich had prevailed upon the Assessing Officer, while dealingwith the Assessment Year 2002-2003, to hold that the claims ofthe Assessee that no expenditure was incurred to earn thedividend income cannot be accepted and why the orders of theTribunal for the earlier Assessment Years were not acceptable tothe Assessing Officer, particularly, in the absence of any new factor change of circumstances. Neither any basis has been disclosedestablishingareasonablenexusbetweentheexpendituredisallowed and the dividend income received. That any part ofthe borrowings of the assessee had been diverted to earn tax freeincome despite the availability of surplus or interest free fundsavailable (Rs. 270.51 crores as on 1.4.2001 and Rs. 280.64 croresas on 31.3.2002) remains unproved by any material whatsoever.While it is true that the principle of res judicata would not applytoassessmentproceedingsundertheAct,theneedforconsistency and certainty and existence of strong and compellingreasons for a departure from a settled position has to be spelt outwhich conspicuously is absent in the present case. In this regardwe may remind ourselves of what has been observed by thisCourt in Radhasoami Satsang vs. Commissioner of Income-Tax[6]. “We are aware of the fact that strictly speaking res judicata doesnot apply to income tax proceedings. Again, each assessmentyear being a unit, what is decided in one year may not apply inthe following year but where a fundamental aspect permeatingthrough the different assessment years has been found as a factone way or the other and parties have allowed that position to besustained by not challenging the order, it would not be at allappropriate to allow the position to be changed in a subsequentyear.” 4. In our view, there is no justification for filing of the present appeal since,all that the ITAT has done is to remand thematterbackto the CIT(Appeals) to have a re-look on the aspect whether the dissatisfaction of thelearned AO is discernible from its order or not terms of Section 14 A of the Act. 5. We dispose of the present appeal with a direction to the learned CIT(Appeals), to examine the issues in terms of the order passed by the ITATwhile taking into consideration the law as laid down in India BullsFinancialServicesPrivateLimited(supra)andGodrej&BoyceManufacturing Co. Ltd (supra) and such other decisions as may be relevantin law. VIPIN SANGHI, J SEPTEMBER 02, 2019/ss SANJEEV NARULA, J