Santosh Chandulal Mandlecha, Nashik V. Income-tax Officer, Nashik

ITA 1007/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3026 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 21-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.1007/PUN/2017 / ASSESSMENT YEAR : 2013-14 SANTOSH CHANDULAL MANDLECHA, D-1/2, MIDC, EXCLO POINT, AMBAD, NASHIK 422 010 PAN : ABTPM0294Q . /APPELLANT VS. ITO, WARD-1(3), NASHIK . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 17.05.2018 / DATE OF PRONOUNCEMENT: 25.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-1, NASHIK, DATED 02-03-2017 FOR THE ASSESSMENT YEAR 20 13-14. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN THE APPEAL : 1. ON THE BASIS OF FACTS AND THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE CIT(A)-1, NASHIK IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS.2,03,621/- BY INVOKING THE PROVISIONS OF S ECTION 14A OF THE ACT READ WITH RULE 8D. 2. ON THE BASIS OF FACTS AND THE CIRCUMSTANCES OF T HE CASE AND AS PER LAW, THE CIT(A)-1, NASHIK IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS.2,03,621/- BY INVOKING THE PROVISIONS OF S ECTION 14A UNDER THE ASSUMPTION THAT THE APPELLANT HAS USED THE INTEREST BEARING FUNDS FOR MAKING INVESTMENT IN TAX FREE SECURITIES PARTICULARLY WHEN THE SAID INVESTMENT IS NOT MADE BY THE APPELLANT OUT OF INTEREST BEARING FUNDS AND MORE PARTICULARLY WHEN NON-APPLICABILITY OF THE PROVISION OF SECTION 14A W AS ACCEPTED IN THE ASSESSMENT ORDER PURSUANT U/S.143(3) FOR A.Y. 2011-12. 3. ON THE BASIS OF FACTS AND THE CIRCUMSTANCES OF T HE CASE AND AS PER LAW, THE CIT(A)-1, NASHIK IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS.2,03,621/- BY INVOKING THE PROVISIONS OF S ECTION 14A EVEN IN RESPECT OF ITA NO.1007/PUN/2017 SANTOSH CHANDULAL MANDLECHA 2 INVESTMENTS ON WHICH NO ANY INCOME IS EARNED BY THE APPELLANT DURING THE YEAR UNDER REVIEW. 4. THE APPELLANT CRAVES FOR ADDITION TO, DELETION, ALTERATION, MODIFICATION, CHANGE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BEFORE ME, THERE IS NONE TO REPRESENT THE ASSESS EE DESPITE SERVICE OF NOTICE. ACKNOWLEDGEMENT IS PLACED ON RECORD. HOWE VER, CONSIDERING THE SMALLNESS OF THE ISSUE, I PROCEED TO DECIDE THE SOL ITARY ISSUE OF DISALLOWANCE U/S.14A OF THE ACT WITH THE ASSISTANCE OF LD. DR FO R THE REVENUE AND THE MATERIAL AVAILABLE ON RECORD. 4. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF MANUFA CTURING, SUPPLYING AND REPAIRING OF ELECTRONIC EQUIPMENTS UNDER THE NAME A ND STYLE OF M/S. RELIANCE ELECTRONICS. ASSESSEE FILED THE RETURN OF INCOME ON 30-09-2013 DECLARING TOTAL INCOME OF RS.22,40,010/-. ON THE BASIS OF INFORMAT ION SUPPLIED BY THE ASSESSEE, THE AO FOUND THAT THE TOTAL TURNOVER OF THE ASSESSE E IS RS.3,00,49,010 AND THE ASSESSEE DECLARED NET PROFIT @ 4.29% WHICH WORKS OU T TO RS.12,87,957/-. AO FURTHER NOTICED THAT, DURING THE YEAR UNDER CONSIDE RATION, THE ASSESSEE EARNED EXEMPT INCOME AND MADE INVESTMENT. ASSESSEE CLAIME D INTEREST EXPENDITURE IN HIS PROFIT AND LOSS ACCOUNT WITHOUT APPORTIONING T HE EXPENSES INCURRED FOR EARNING THE SAID EXEMPT INCOME. AT THE END OF ASSE SSMENT PROCEEDINGS U/S.143(3) OF THE ACT, THE AO MADE ADDITION OF INTE REST INCOME OF RS.2,03,621/- BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE ACT. 5. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) R ELYING ON VARIOUS JUDGMENTS OF HIGH COURT AND THE DECISIONS OF VARIOU S BENCHES OF THE TRIBUNAL UPHELD THE ACTION OF THE AO. 6. AFTER HEARING THE LD. DR FOR THE REVENUE AND THE PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, I FIND THAT THIS SOLITARY ISSU E RAISED BY THE ASSESSEE IS ITA NO.1007/PUN/2017 SANTOSH CHANDULAL MANDLECHA 3 SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. IT IS AN UNDISPUTED FACT THAT THE EXEMPT INCOME IS ONLY RS.1,693/- WHEREAS THE DISALL OWANCE MADE BY THE AO IS TO THE TUNE OF RS.2,03,621/-. ON THE FACES OF IT A ND CONSIDERING THE SETTLED LEGAL PROPOSITIONS, I FIND THE DISALLOWANCE MADE BY THE A O IS NOT LEGALLY SUSTAINABLE. VARIOUS DECISIONS ARE IN EXISTENCE FOR THE PROPOSIT ION THAT DISALLOWANCE IF ANY U/S.14A OF THE ACT SHOULD NOT EXCEED THE EXEMPT INC OME WHICH FORM PART OF THE TOTAL INCOME. CONSIDERING THESE FACTS AND RELYING ON THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER L TD. (SUPRA), JUDGMENT IN THE CASE OF CIT VS. HDFC BANK LTD., 366 ITR 505 AND THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE SAID CASE CHEMINVEST LIMITE D VS. CIT 347 ITR 272 (DEL.), I FIND IT IS OBVIOUS INFERENCE THAT ASSESSE E HAS ADEQUATE INTEREST FREE FUNDS AND ASSESSEE ALSO EARNED PROFITS IN THE CURRE NT YEAR. ALL THESE INTEREST FREE FUNDS ARE SUFFICIENT ENOUGH TO TAKE CARE OF TH E EXEMPT INCOME YIELDING INVESTMENTS CONSIDERING THE PRINCIPLE OF PRESUMPTIO N, LAID DOWN BY THE JURISDICTIONAL HONBLE BOMBAY HIGH COURT IN THE CAS E OF RELIANCE UTILITIES AND POWER LTD., (SUPRA). THEREFORE, IN MY VIEW, THE OR DER OF THE CIT(A) ON THIS ISSUE REQUIRES REVERSAL ON THIS ISSUE. ACCORDINGLY , I DIRECT THE AO TO RE-COMPUTE THE DISALLOWANCE MADE BY THE AO AFTER GRANTING REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. FURTHER, THE AO SHALL CONSI DER THE ABOVE CITED LEGAL PROPOSITION IN THE SET-ASIDE PROCEEDINGS. THUS, TH E GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE S. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2018. SD/- (D.KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 25 TH MAY, 2018. SATISH ITA NO.1007/PUN/2017 SANTOSH CHANDULAL MANDLECHA 4 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1, NASHIK 4. / THE CIT - 1, NASHIK 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE