ACIT, Jaipur V. SHRI BIMAL ROY SONI, Jaipur

ITA 105/JPR/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5206 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 31-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Assessee Lawyers: MANISH AGARWAL CA DHK
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 143(3); 14A; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 105 & 687/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 & 09-10. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE-1, JAIPUR. CUKE VS. SHRI BIMAL ROY SONI, 38, KANOTA BAGH, JLN MARG, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AFPPS 1588 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : MS. ROSHANTA MEENA (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13.05.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13/06/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE TWO APPEALS FILED BY THE REVENUE PERTAINING T O THE ASSESSMENT YEARS 2008-09 AND 09-10 AGAINST THE ORDERS PASSED BY LD. CIT (APPEALS)-I, JAIPUR DATED 04.11.2011 AND 16.05.2012 RESPECTIVELY. IN BOTH TH E APPEALS COMMON GROUNDS HAVE BEEN RAISED, THEREFORE, BOTH THE APPEALS ARE T AKEN UP TOGETHER FOR HEARING AND ARE BEING DISPOSED OFF BY WAY OF A CONSOLIDATED ORD ER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP REVENUES APPEAL FOR ASSESSMENT YEAR 2008-09 BEARING ITA NO. 105/JP/2012 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT (A) IS JUSTIFIED IN I) DELETING THE DISALLOWANCE OF RS. 44,89,436/- BY HOL DING THAT THE CASE OF THE ASSESSEE IS NOT COVERED BY THE PROVISIO NS OF SECTION 14A OF I.T. ACT DESPITE THE FACT THAT THE ASSESSEE HAS DEPLOYED INTEREST BEARING FUNDS IN GENERATION OF INCOME WHIC H DO NOT FORM PART OF TAXABLE INCOME. 2 ITA NO. 105 & 687/JP/2012 ACIT VS. SHRI BIMAL ROY SONI. II) DELETING THE ADDITION OF RS. 1,35,341/- MADE BY THE AO ON ACCOUNT OF EXPENSES CLAIMED AGAINST INCOME RECEIVED FROM THE BCCI, WHEN NO SUCH DOCUMENTARY EVIDENCE WAS FILED B EFORE THE AO. 3. BRIEFLY STATED THE FACTS ARE THAT IN PURSUANCE T O THE DIRECTION OF THE LD. CIT, THE AO FRAMED ASSESSMENT UNDER SECTION 143(3) OF TH E IT ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 13.12.2010 . WHILE FRAMING THE ASSESSMENT, THE AO MADE DISALLOWANCE OF RS. 44,89,436/- UNDER SECTION 14A OF THE ACT BY APPLYING THE PROVISIONS OF RULE 8D OF THE IT RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULE) AND ALSO MADE DISALLOWANCE OF RS. 1,35,34 1/- ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE. THE ASSESSEE AGGRIEVED BY THESE TW O DISALLOWANCES, PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER CONSIDERING TH E SUBMISSIONS AND FOLLOWING THE DECISION OF THE TRIBUNAL PERTAINING TO THE A.Y. 200 2-03 DELETED THE DISALLOWANCE MADE BY INVOKING PROVISIONS OF SECTION 14A OF THE A CT AND ALSO DELETED THE DISALLOWANCE OF RS. 1,35,341/-. 4. THE REVENUE AGGRIEVED BY THE ORDER OF LD. CIT (A ), HAS PREFERRED THE PRESENT APPEAL. THE FIRST GROUND IN THE APPEAL IS AGAINST D ELETING THE DISALLOWANCE OF RS. 44,89,436/- AS MADE BY THE AO BY INVOKING THE PROVI SIONS OF SECTION 14A OF THE ACT. 4.1. THE LD. SENIOR D/R VEHEMENTLY ARGUED THAT LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. THE LD. D/R SUBMITTED TH AT THE DECISION OF TRIBUNAL AS RELIED BY THE LD. CIT (A) PERTAINS TO THE EARLIER P ERIOD WHEN RULE 8D WAS NOT INSERTED INTO THE STATUTE BOOK. THE LD. D/R SUBMITTED THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSMENT UNDER APPEAL IS 2008-0 9. THEREFORE, THE RULE 8D OF THE IT RULES WOULD HAVE ITS APPLICATION. THE LD. D/R S UBMITTED THAT THE DECISION WHICH IS 3 ITA NO. 105 & 687/JP/2012 ACIT VS. SHRI BIMAL ROY SONI. RELIED BY THE LD. CIT (A) PERTAINS TO THE A.Y. 2002 -03. THEREFORE, THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. 4.2. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT (A) AND REITERATED THE SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS. THE LD. COUNSEL SUBMITTED THAT EVEN IF IT IS PRESUMED T HAT THERE IS APPLICATION OF RULE 8D BUT THE DISALLOWANCE UNDER RULE 8D CANNOT EXCEED TH E EXEMPT INCOME EARNED DURING THE YEAR UNDER APPEAL. THE LD. COUNSEL FURTH ER SUBMITTED THAT EVEN OTHERWISE ALSO THE AO HAS TO GIVE A FINDING IN RESPECT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE, BUT NO SUCH FINDING IS GIVEN BY THE AO. HE HAS STRAIGHT AWAY APPLIED THE PROVISIONS OF RULE 8D. HE SUBMITTED THAT SATISFACT ION UNDER SECTION 14A(2) IS SINE QUA NON FOR INVOKING THE PROVISIONS OF RULE 8D. IN THE ABSENCE OF SUCH SATISFACTION, APPLICATION OF PROVISIONS OF RULE 8D IS NOT JUSTIFI ED. HE FURTHER SUBMITTED THAT THE INVESTMENT AS MADE BY THE ASSESSEE IS FOR THE PURPO SE OF HAVING CONTROLLING INTEREST IN SUCH BUSINESS ENTITY. HE SUBMITTED, IN CASE WHER E THE INVESTMENT IS MADE FOR THE PURPOSE OF HAVING CONTROLLING INTEREST, PROVISIONS OF SECTION 14A WOULD NOT BE APPLICABLE. IN SUPPORT OF THIS CONTENTION, LD.COUN SEL HAS RELIED UPON VARIOUS CASE LAWS INCLUDING THE JUDGMENT OF THE HONBLE APEX COU RT RENDERED IN THE CASE OF S.A. BUILDERS VS. CIT, 288 ITR 1 (SC). APART FROM THE JU DGMENT OF THE HONBLE SUPREME COURT, THE LD. COUNSEL HAS PLACED RELIANCE ON THE V ARIOUS DECISIONS OF COORDINATE BENCH AS UNDER :- J.M. FINANCIAL LTD. VS. ADDL. CIT (ITA NO. 4521/M/2012) GARWARE WALL ROPES LTD. VS. ACIT (ITA NO. 5408/MUM/2012 ) 4 ITA NO. 105 & 687/JP/2012 ACIT VS. SHRI BIMAL ROY SONI. EIH ASSOCIATED HOTELS LTD. VS.DCIT (ITA NO. 1503/MDS/2012) ITO VS. PIONEER RADIO TRAINING SERVICES PVT. LTD. (ITA NO. 4448/DEL/2013) 4.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE L D. CIT (A) HAS DELETED THE DISALLOWANCE ON THE GROUND THAT IT HAS BEEN HELD BY THE COORDINATE BENCH IN ASSESSEES OWN CASE PERTAINING TO A.Y. 2002-03 THAT PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. SINCE THE FACTS ARE IDENTICAL IN T HE YEAR UNDER APPEAL ALSO, THE CONTENTION OF THE ASSESSEE THROUGHOUT HAS BEEN THAT THE INVESTMENT WHEREFROM IT HAS EARNED EXEMPT INCOME WERE MADE FOR THE PURPOSE OF MAINTAINING THE CONTROLLING INTEREST. THEREFORE, IN VIEW OF THE DECISION OF TH E TRIBUNAL, PROVISIONS OF SECTION 14A WOULD NOT BE APPLICABLE. THE COORDINATE BENCH IN A SSESSEES OWN CASE IN THE ASSESSMENT YEAR 2002-03 HAD DELETED THE ADDITION ON THE BASIS THAT PROVISIONS OF SECTION 14A WOULD NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE AS THE INVESTMENT HAS BEEN MADE SOLELY FOR THE PURPOSE OF HAVING THE CONTROLLING INTEREST. THERE IS NO CHANGE INTO THE FACTS IN THIS YEAR AS WELL. THE RE VENUE HAS NOT BROUGHT TO OUR NOTICE ANY CONTRARY BINDING PRECEDENT. MOREOVER, THE ASSES SEE HAS DIVIDEND INCOME TO THE TUNE OF RS. 756/- AND THE DISALLOWANCE TOWARDS EXPE NDITURE IS MADE AT RS. 44,89,436/-. IN VIEW OF ABOVE, WE DO NOT SEE ANY R EASON TO INTERFERE IN THE ORDER OF THE LD. CIT (A). THE SAME IS HEREBY UPHELD. 5. GROUND NO. 2 IS AGAINST DELETION OF RS. 1,35,341 /- MADE ON ACCOUNT OF EXPENSES CLAIMED AGAINST INCOME RECEIVED FROM THE B CCI. 5 ITA NO. 105 & 687/JP/2012 ACIT VS. SHRI BIMAL ROY SONI. 5.1. THE LD. SENIOR D/R SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT BEFORE THE AO NO EVIDENCE WAS FURNISHED IN SUPPORT OF THE CLAIM OF EXPENDITURE. IT IS INCUMBENT UPON THE ASSESSEE TO GIVE SUPPORTING EVID ENCE IN RESPECT OF THE CLAIM OF EXPENDITURE. IN THE ABSENCE OF SUPPORTING EVIDENCE , EXPENDITURE CANNOT BE ALLOWED. THE LD. D/R SUBMITTED THAT THE LD.CIT (A) WAS GROSS LY ERRED IN DELETING THE DISALLOWANCE. 5.2. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS AND SUPPORTED T HE ORDER OF LD. CIT (A). 5.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THAT LD. CIT (A) HAS DELETED THE DISALLOWANCE BY OBSERVING IN PARA 5.3 OF HIS ORDER AS UNDER :- 5.3. I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE AR. ON PERUSAL OF THE LEDGER ACC OUNT OF THE TRAVELING EXPENSES IN AUGUST, IT IS SEEN THAT RS. 3 5,341/- HAVE BEEN DEBITED FOR TELEPHONE EXPENSES. THE ASSESSEE IS LIK ELY TO HAVE INCURRED SOME EXPENSES ON FOOD AND LOCAL TRAVELING DURING TH E TOUR WITH RESPECT TO HIS MANAGERIAL FUNCTIONS. APART FROM THE TELEPHO NE EXPENSES, THE EXPENDITURE ON TOUR IS CLAIMED AT RS. 1 LAC WHICH I S LESS THAN 10% OF THE TOTAL PAYMENTS MADE BY THE BCCI TO THE ASSESSEE FOR THIS PURPOSE. IT APPEARS TO BE A REASONABLE AMOUNT OF EXPENDITURE THAT IS LIKELY TO HAVE BEEN INCURRED BY THE APPELLANT TO DISCHARGE HI S DUTIES. THEREFORE, THE IMPUGNED DISALLOWANCE OF RS. 1,35,34 1/- IS DIRECTED TO BE DELETED. HOWEVER, THE AO IN THE ASSESSMENT ORDER IN PARA 2 O F HIS ORDER HAS OBSERVED THAT VIDE ORDER SHEET NOTING DATED 30 TH NOVEMBER, 2010, ASSESSEE WAS REQUIRED TO FILE LEDGER OF INCOME FROM CRICKET TOUR WHICH WAS FILED VIDE LETTER DATED 13.12.2010. IT SHOWED THAT NO EXPENDITURE WAS INCURRED BY THE ASSE SSEE FOR EARNING THIS INCOME. FURTHER, NO EVIDENCE WAS FILED IN SUPPORT OF THE DE DUCTION SO CLAIMED. 6 ITA NO. 105 & 687/JP/2012 ACIT VS. SHRI BIMAL ROY SONI. 5.4. WE FIND THAT LD. CIT (A) HAS DELETED THE DISAL LOWANCE MERELY ON THE BASIS OF PRESUMPTION THAT THE ASSESSEE MIGHT HAVE INCURRED C ERTAIN EXPENDITURE. IN OUR CONSIDERED VIEW, THIS APPROACH OF LD. CIT (A) IS NO T JUSTIFIED. SINCE THE ASSESSEE HIMSELF HAS CLAIMED CERTAIN INCOME EARNED FROM OTHE R SOURCES AND CLAIMED SET OFF OF EXPENDITURE INCURRED FOR EARNING SUCH INCOME, IT WA S INCUMBENT UPON THE ASSESSEE TO FURNISH SUPPORTING EVIDENCE QUA ITS CLAIM FOR EX PENDITURE. THEREFORE, ON THIS ISSUE, WE HEREBY SET ASIDE THE ORDER OF LD.CIT (A) AND SUSTAIN THE DISALLOWANCE MADE BY THE AO. THIS GROUND OF THE REVENUES APPEAL IS A LLOWED. 6. NOW WE TAKE UP THE APPEAL IN ITA NO. 687/JP/2012 FOR A.Y. 2009-10. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) IS JUSTIFIED IN :- I) HOLDING THAT THE CASE OF THE ASSESSEE IS NOT COVERE D BY THE PROVISIONS OF SECTION 14A OF THE I.T. ACT DESPITE T HE FACT THAT THE ASSESSEE HAS DEPLOYED INTEREST BEARING FUNDS IN GEN ERATION OF INCOME WHICH DO NOT FORM PART OF TAXABLE INCOME AND BY DELETING THE ADDITION OF RS. 52,19,462/- MADE BY TH E AO. THE ONLY ISSUE IS AGAINST DELETION OF ADDITION MADE BY INVOKING THE PROVISIONS OF RULE 8D OF INCOME TAX RULES, 1962. 6.1. WE HAVE ALREADY DECIDED THE SIMILAR ISSUE IN I TA NO. 105/JP/2012 ABOVE ON IDENTICAL FACTS. THE RESPECTIVE PARTIES ADOPTED THE SAME SUBMISSIONS AS MADE IN THE A.Y.2008-09 ON THIS ISSUE. THE FACTS AND CIRCUMSTAN CES ARE IDENTICAL. THERE IS NO CHANGE IN THE FACTS POINTED OUT BY THE REVENUE. THE REFORE, FOLLOWING OUR DECISION IN ITA NO. 105/JP/2012 FOR A.Y. 2008-09, WE HEREBY REJ ECT THE GROUND RAISED BY THE REVENUE IN THIS APPEAL. APPEAL OF THE REVENUE IS D ISMISSED. 7 ITA NO. 105 & 687/JP/2012 ACIT VS. SHRI BIMAL ROY SONI. 7. OVER ALL RESULT, ITA NO. 105/JP/2012 IS PARTLY A LLOWED WHEREAS ITA NO. 687/JP/2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/201 6. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHART ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 13/06/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE-1, JAIPUR. 2. THE RESPONDENT- SHRI BIMAL ROY SONI, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 105 & 687/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR