Sections 14A, 253 – In cross-objections, assessee can raise a ground for the first time, which was not taken up by him even in an appeal before the CIT(A)

5. ITO vs. Centrum Capital Limited
(Mumbai) Shamim Yahya (A.M.) and Pavan Kumar
Gadale (J.M.) ITA No. 497/Mum/2019 and CO arising
out of ITA No. 497/Mum/2019 A.Y.: 2013-14 Date of order: 5^th October,
2020 Counsel for Revenue / Assessee: Lalit Dehiya / Jitendra Jain

Sections
14A, 253 – In cross-objections, assessee can raise a ground for the first time,
which was not taken up by him even in an appeal before the CIT(A)

FACTS

The assessee
in his return of income considered a sum of Rs. 22,82,187 to be disallowable
u/s 14A. The amount of exempt income earned by the assessee was Rs. 44,250. The
A.O., while assessing the total income of the assessee, disallowed a sum of Rs.
10,91,61,614 u/s 14A.

Aggrieved,
the assessee preferred an appeal to the CIT(A) who referred to the decision of
the Delhi High Court in the case of Joint Investment P. Ltd. vs. CIT (59
taxmann.com 295) for the proposition that disallowance u/s 14A cannot
exceed the exempt income. He held that the disallowance in this case will not
exceed the suo motu disallowance done by the assessee which was more
than the exempt income. He held that since the total exempt income earned by
the appellant was only Rs. 44,250, therefore, respectfully following the
judgment of the Mumbai Bench of the Tribunal in
the case of Future Corporate Resources Ltd. (Supra), the
disallowance u/s 14A r/w/r 8D is restricted to Rs. 44,250 only. He, however, held that because while filing the return of
income the appellant had itself disallowed a sum of Rs. 22,82,187 which is more
than the tax-free income earned by the appellant, therefore no further
disallowance can be made. Hence, disallowance of Rs. 10,91,61,614 made by the
A.O. u/s 14A r/w/r 8D is deleted and the appeal of the assessee on this ground
is allowed.

Aggrieved by
the decision of the CIT(A), Revenue preferred an appeal contending that the
CIT(A) erred in restricting the disallowance u/s 14A to Rs. 22,82,187 being the
amount suo motu disallowed by the assessee.

The assessee
filed a cross-objection contending that the CIT(A) ought to have restricted the
disallowance to the exempt income of Rs. 44,250 instead of observing that the
disallowance should be restricted to Rs. 22,82,187 being the suo motu
disallowance done by the assessee.

HELD

The Tribunal held
that there is no infirmity in the order of the CIT appeals which is duly
supported by the order of the Delhi High Court referred above. It observed that
the jurisdictional High Court in the case of CIT vs. Delight Enterprises
(in ITA No. 110/2009) has expounded a similar proposition. The Tribunal
dismissed the appeal filed by the Revenue.

As regards
the CO filed by the assessee, the DR by referring to order 9 rule 13 of the CPC
objected to the ground being taken in the cross-objection which was not even
before the CIT appeals. The Tribunal noted that order 9 rule 13 of the CPC
deals with setting aside decree ex parte and held that such a reference
does not help the case of the Revenue.

The Tribunal
noted that as rightly observed by the ITAT bench in the aforesaid case of Tata
Industries Ltd. vs. ITO (2016) 181 TTJ 600 (Mum.), no tax can be
collected except as per the mandate of the law. If the assessee has erroneously
offered more income for taxation, the same cannot be a bar to the assessee in
seeking remedy before the appellate forum.

The Tribunal
observed that the Supreme Court in the case of

i)    Goetze (India) Ltd. vs. CIT (2006) 284
ITR 323 (SC) has held that nothing in that order would prevent the ITAT
in admitting an additional claim which was raised for the first time without a
revised return;

ii)   CIT vs. V. MR. P. Firm [1965] 56 ITR
67(SC) has held that if a particular income is not taxable under the
Act, it cannot be taxed on the basis of estoppel or any other equitable
doctrine;

iii)  Shelly Products 129 taxman 271 (SC)
supports the proposition that if the assessee has erroneously paid more tax
than he was legally required to do, he is entitled to claim the refund, as
otherwise it would be violative of Article 265 of the Constitution.

The Tribunal
mentioned that the CBDT Circular 14 (XL-35) of 1953 dated 11^th
April, 1955 states that officers of the Department must not take advantage of
the ignorance of the assessee as to his rights.

The Tribunal
held that

i)    in the background of the aforesaid Supreme
Court decisions, it does not find any merit whatsoever in the objection of CIT DR in accepting and adjudicating the ground raised by a
cross-objection by the assessee.

ii)   as regards the merits of the issue raised in
the cross-objection, the Tribunal held that the same stands covered by the very
decisions relied upon by the CIT (Appeals) himself as referred above, that the
disallowance u/s 14A cannot exceed the exempt income;

iii)  the disallowance in this case should not
exceed the exempt income earned as referred above;

iv)  in view of the CBDT Circular No. 14 as
referred above, the ground raised by the assessee is cogent.

The Tribunal
directed the A.O. to grant the necessary relief to the assessee and the
cross-objections filed by the assessee were allowed.