The Haryana State Co-Operative Supply ... vs Assessee

The Haryana State Co-operative Vs. The D.C.I.T., Supply & Marketing Federation Ltd., Panchkula Circle, Sector 5, Panchkula. Panchkula. PAN: AAAJH0022R (Appellant) (Respondent)

Appellant by : Shri Aman Parti Respondent by : Smt.Jyoti Kumari, CIT DR

Date of hearing : 08.06.2015 Date of Pronouncement : 16.06.2015

PER BHAVNESH SAINI, J.M. :

This appeal filed by the assessee is directed against the

order of the learned Commissioner of Income Tax (Appeals),

Panchkula dated 7.5.2013 for assessment year 2007-08.

2. The brief facts of the case are that the assessee has

filed return of income declaring income of Rs.80,62,76,210/-

on 31.10.2007. The assessment in this case was completed

under section 143(3) of the Act on 24.12.2009 wherein the

Assessing Officer disallowed the deduction claimed under

section 80P)(2)(d) amounting to Rs.2,91,55,456/-. The

assessee filed appeal against the said assessment order 2

before the learned CIT (Appeals), Panchku!a, who vide his

order dated 4.6.2010 upheld the order of the Assessing

Officer restricting the deduction under section 80P(2)(d) of

the Act. Against the said order of the learned CIT (Appeals),

an appeal was filed before the Tribunal. The Tribunal vide

its order dated 18.2.2011 in ITA No.1081/Chd/2010 and ITA

No.1095/Chd/2010 remanded back the matter to the

Assessing Officer for the purpose of determining the quantum

of deduction available to the assessee under section

80P(2)(d) of Act.

3. The Assessing Officer in pursuance to the order of

the Tribunal remanding the matter back, disallowed the

deduction claimed under section 80P(2)(d) of the Act

amounting to Rs.1,18,81,092/- (20% of the gross dividend

and interest earned) assuming the same to be the expenditure

incurred by the assessee for earning the dividend and

interest income from co-operative institutions. Being

aggrieved by the above disallowance the assessee preferred

an appeal before the learned CIT (Appeals), Panchkula, who

after considering the provisions of section 14A of the Act as

well as section 57 of the Act vide order dated 24.05.2012

directed the Assessing Officer to compute the quantum of

deduction admissible to the assessee under section 80P(2)(d)

of the Act by taking into consideration only the expenses

incurred by way of commission /remuneration paid to the

banker or any other person for realizing such dividend and

expenditure incurred wholly and exclusively for earning of 3

the dividend and interest income. The learned CIT (Appeals)

vide her order held as under:-

"T heref ore the Ld. AO is directed to co mpu te the d e d u c t i o n i n v i e w t h e e x p e n s e s i n c u r r e d b y wa y o f commission/ remuneration paid to the banker or any other person for realizing such dividend and expenditure incurred wh o l l y and exclusively for e a r n i n g s u c h i n c o me . "

4. The Assessing Officer while giving appeal effect to

the order of the learned CIT (Appeals) vide his order dated

24.1.2013 applied the provisions of section 14A of the Act.

The assessee feeling aggrieved against these findings of the

Assessing Officer preferred appeal before the learned CIT

(Appeals) against the order of the Assessing Officer dated

24.1.2013. The assessee contended before the learned CIT

(Appeals) that the provisions of section 14A of the Act could

not be applied while computing the deduction under section

80P(2)(d) of the Act.

5. The learned CIT (Appeals), however, dismissed the

appeal of the assessee being not maintainable against the

appeal effect order passed by the Assessing Officer. His

findings in the impugned order in paras 4.1 and 5 are

reproduced as under :

"4.1 The appellant has moved an appeal against appeal effect order by the A.O. The appellant is aggrieved with computation of disallowance U/s 14A read with Rule 8D. The right course for the appellant is to move a rectification application U/s 154 before the Assessing Officer. No appeal lies against Appeal Effect Order passed 4

wrongly U/s 250/154 of the Income Tax Act by the Assessing Officer. Therefore the appeal is dismissed. The appellant may apply to the Assessing Officer for rectification U/s 154 of the Income Tax Act, 1961.

5. In result, the appeal is dismissed."

5. The learned counsel for assessee submitted that as

per the directions of the learned CIT (Appeals), it was

brought to the knowledge of the Assessing Officer that

neither any commission/remuneration was paid to any

banker or any other person for realizing such dividend, nor

any administrative, office expenses, etc. have been incurred

for earning of the dividend and interest income. The learned

counsel for assessee submitted that the Assessing Officer

while giving appeal effect applied the provisions of section

14A of the Act in complete defiance of the order passed by

the learned CIT (Appeals) because the learned CIT (Appeals)

directed the Assessing Officer to compute the deduction

available to the assessee by taking into consideration only

the expenses incurred by way of commission/remuneration

paid to the bankers or to any other person for realizing such

dividend income. The learned counsel for assessee submitted

that the assessee is aggrieved against the action of the

Assessing Officer in giving the appeal effect because the

Assessing Officer exceeded his jurisdiction by applying the

provisions of section 14A of the Act. Therefore, the appeal

of the assessee was maintainable and the appeal lies against

the order of the Assessing Officer giving appeal effect. In

support of his contention he relied upon the following

decisions :

5

i) The decision of Hon'ble Andhra Pradesh High Court

in the case of Bakelite Hylam Ltd. Vs. CIT, 37 Taxman

210, in which in para 4 it was held as under :

"4. Two issues arise for consideration as indicated by the question referred to this Court. The first question is, whether the assessee can appeal against a modification order passed by the ITO giving effect to the order of the appellate authority ? In other words, could it be said that the modification order partakes the nature of the order under section 143 of the Act so as to subject itself to an appeal under section 246 of the Act Now, the revenue's contention is that the order/orders passed by the ITO giving effect to the appellate decisions cannot be described as assessment order in the sense they are understood under section 143. It is, therefore, submitted that no appeal lies. We are afraid, the contention urged by the revenue is not tenable. An order of assessment is one in which there is computation of income or computation of tax or both. That computation of income and tax can be made by the ITO not only in regular assessment made under section 143 but also in orders passed from time to time giving effect to the decisions of the appellate authorities. The order passed by the ITO giving effect to the decision of the appellate authority is as much an assessment order as the one passed by him by way of regular assessment under section 143. We are fortified in this view by the decision of the Calcutta High Court in Kooka Sidhwa & Co. v. CIT [1964] 54 ITR 54 and the decision of the Punjab High Court in Gopi Lal v. CIT [1967] 65 ITR 477. We, therefore, hold that an assessee has a right to appeal against a modification order as if it were an assessment order itself, and the appellate authority is bound to entertain an appeal and decide it on merits."

ii) The decision of Hon'ble Bombay High Court in the

case of Caltex Oil Refining (India) Ltd. Vs. CIT, 73

Taxman 231, in which in para 12 it was held as under : 6

"12. In the light of these decisions and for the r e a s o n s g i v e n a b o v e , we a r e o f t h e o p i n i o n t h a t t h e i m p u g n e d o r d e r o f t h e a s s e s s me n t p a s s e d b y t h e IT O pursuant to the directions of the appellate authorities wi t h a vie w to giving effect to the directions contained therein is an order of a s s e s s me n t wi t h i n t h e m e a n i n g o f s e c t i o n 1 4 3 o r section 144 of the Act and an appeal lies under section 2246(c) against such an order."

6. The learned counsel for assessee, therefore,

submitted that the order of the learned CIT (Appeals) may be

set aside.

7. On the other hand, the learned D.R for the Revenue

relied upon the impugned order.

8. On consideration of the rival submissions, we are of

the view that the order of the learned CIT (Appeals) cannot be

sustained in law. The learned CIT (Appeals) earlier directed

the Assessing Officer to compute the deduction in view of the

expenses incurred by way of commission/remuneration paid

to bankers or to any other person for realizing such dividend

income. Apparently, the learned CIT (Appeals) has not issued

any direction to the Assessing Officer for applying the

provisions of section 14A of the Act. Therefore, if the

Assessing Officer has applied the provisions of section 14A of

the Act as per the contention of the learned counsel for

assessee, it should be considered as appeal effect given in

defiance of the order of the learned CIT (Appeals). Thus the

appeal effect order passed by the Assessing Officer is 7

appealable and appeal lies against his order before the

learned CIT (Appeals). The decisions relied upon by the

learned counsel for assessee in the case of Bakelite Hylam

Ltd. (supra) and in the case of Caltex Oil Refining (India)

Ltd. (supra) clearly support the contention of learned counsel

for assessee. The learned CIT (Appeals) was, therefore, not

justified in holding that no appeal lies against the appeal

effect order passed wrongly under section 250/154 of the Act

by the Assessing Officer. The appeal effect order passed by

the Assessing Officer in contravention of the order of the

learned CIT (Appeals) is appealable order and appeal lies

against the order of the Assessing Officer before the learned

CIT (Appeals). The order of the learned CIT (Appeals) is thus

set aside and consequently the matter in issue is restored to

the file of the learned CIT (Appeals), Panchkula with

direction to redecide the appeal of the assessee on merits by

giving reasonable sufficient opportunity of being heard to the

assessee.

9. In the result, the appeal of the assessee is allowed

for statistical purposes.

Order pronounced in the open court on this 16th

day of June, 2015.

Sd/- Sd/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 16 t h June, 2015 *Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh 8