ACIT, CIR-35, KOLKATA, Kolkata V. Smt Madhu Devi Saraf, Kolkata

ITA 1131/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0687 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 27-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDRAM BHATTACHARJEE
• Assessee Lawyers: PARAS NTAH KESHARI
• Keywords: Deemed owner of house property; Business income; Business expenditure; Earning of tax free income; Source of fund; Fair market value
• Section: 143(3); 14A

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1131/KOL/2015 ASSESSMENT YEAR:2011-12 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-35, AAYAKAR BHAWAN, POORVA, 8 TH FLOOR, 110, SHANTIPALLI, KOLAKTA-107 / V/S . SMT. MADHU DEVI SARAF, 31, SHAKESPEARE SARANI,JASMINE TOWER, 4 TH FLOOR, ROOM NO. 405, A- B,KOLKATA-17 [ PAN NO.ALIPS 0989 F ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI ARINDRAM BHATTACHARJEE, ADDL. CIT-DR /BY RESPONDENT SRI PARAS NTAH KESHARI, FCA /DATE OF HEARING 23-10-2017 /DATE OF PRONOUNCEMENT 26-12-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA DATED 12.06.2015. ASSESSM ENT WAS FRAMED BY JCIT, RANGE-35, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 24.11.2014 FOR ASSE SSMENT YEAR 2011-128. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER:- (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S. 14A READ WITH RULE 8D WITHOUT APPRECIATING THE ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 2 VERDICT OF THE JURISDICTIONAL HIGH COURT IN THE CAS E OF DHANUKA & SONS VS. CIT (20110) ITR 319 (CAL HC) WHICH IS SQUARELY APPLICAB LE IN THE PRESENT CASE. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF EXPENSES OF RS.15,00,6 32/- CLAIMED ON EARNING OF INTEREST INCOME ON WHICH NO EXPENSE IS ADMISSIBLE. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN RESTRICTING THE DEEMED HOUSE PROPERTY INCOME AT R.4 ,20,000/- WITHOUT ANY LOGIC OR ON THE BASIS OF ANY DOCUMENTS INSTEAD OF R S.8,40,000/- DETERMINING ON THE BASIS OF REPORT OF DEPARTMENTAL INSPECTOR. (IV) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY GROUND BEFORE OR AT ANY TIME OF HEARING. SHRI ARINRAM BHATTACHARJEE, LD. DEPARTMENTAL REPRES ENTATIVE APPEARED ON BEHALF OF REVENUE AND SHRI PARAS NATH KEHARI, LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE. 2. FIRST ISSUE RAISED BY REVENUE IN GROUND NO.(I) I S THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER FOR RS. 74,75,470/- U/S 14A R.W.R. RULE 8D OF THE INCOME TAX RULE, 1962. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN IND IVIDUAL DERIVED HER INCOME FROM INVESTMENT IN SHARES, DEBENTURES, GOVERNMENT SECURI TIES ETC. THE ASSESSEE DURING THE YEAR HAS EARNED DIVIDEND INCOME AND INTEREST ON PUB LIC PROVIDENT FUND FOR 1,69,53,044.23 AND 4,77,417/- WHICH ARE EXEMPTED INCOME. THE ASSESSEE IN RELATION TO SUCH INCOME HAS MADE THE DISALLOWANCE SUO-MOTU FOR 15 LAKH UNDER THE PROVISION OF SECTION 14A OF THE ACT. HOWEVER, THE AO OBSERVED THAT THE DISALLOWANCE HAVE NOT BEEN MADE IN PURSUANCE TO THE PROVISION OF RULE 8D OF THE IT RULE, 1962. ACCORDINGLY, AO WORKED OUT THE DISALLOWANCE AS UNDE R:- 1) RULE 8D(2)(II) ON ACCOUNT OF INTEREST OF INT. EXP. 63,26,883/- 2) RULE 8D(2)(III) ON ACCOUNT OF ADMINISTRATIVE E XPENSES 26,48,587/- 89,75,470/- AS THE ASSESSEE HAS ALREADY MADE DISALLOWANCE 15 LACS THEN THE AO DISALLOWED THE REMAINING EXPENSES OF 74,75,570/- AND ADDED TO THE TOTAL INCOME OF ASSESS EE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 4. SECTION 14A ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 3 THE AO HAS MADE ADDITION UNDER RULE 8D(2)(II) & 8D( 2)(III) READ WITH SECTION 14A OF IT ACT OF RS.63,26,883/- AND RS.11,48,587/- RESPECTIVELY. THE WHILE MAKING THE ABOVE ADDITION IS THAT THE APPELLANT COU LD NOT ESTABLISH WHETHER THE IMMEDIATE OR ACTUAL SOURCE OF EACH INVESTMENTS IN S HARES IS FROM THE OWN FUND OR FROM THE BORROWED FUND. 4.1 IN PARA-8 OF THE APPEAL ORDER THE CIT(A)-XX IN APPELLANTS CASE FOR ASSESSMENT YEAR 2010-11 HAS DECIDED THAT SINCE THE NET RESULT OF INTEREST INCOME/ EXPENDITURE WAS POSITIVE INCOME AND FURTHER NO HEAD OF EXPENDITURE WAS ATTRIBUTABLE TO EARNING EXEMPT INCOME, THE GROU ND SEEKING TO STRIKE DOWN DISALLOWANCE U/S.14A WAS TO BE ALLOWED. 4.2 IN PARA 3.2 OF THE ASSESSMENT ORDER IT HAS BEEN POINTED OUT THAT ABOUT RS.52.97 CRORE WAS INVESTED IN ASSETS YIELDING EXEM PT INCOME WHEREAS THE TOTAL ASSETS APPEARING IN THE BALANCE SHEET WAS BOUT RS. 157.31 CORE. THE INTEREST HAS BEEN APPORTIONED FROM THE GROSS INTEREST OF RS. 1,87,89,185/-. A PART OF THE ASSESSEES EXPLANATION ON SECTION 14A HAS BEEN REPR ODUCED IN PARA 3.4 OF THE ORDER. 4.3 THE FACTS OF THE CASE IN THE CURRENT AY 2011-12 IS VERY SIMILAR TO THOSE IN THE PRECEDING AY 2010-11. THE INTEREST EXPENDITURE IS RS.1,87,89,185/- WHEREAS INCOME BY WAY OF INTEREST IS RS.3,99,83,557 /- OVER GROSS CREDIT INTEREST OF RS.5,87,72,742/-. THUS THERE IS NET INTEREST INC OME HAS APPORTIONED THE INTEREST EXPENDITURE FOR THE PURPOSE OF DISALLOWANC E U/S.14A/RULE 8D EVEN THOUGH THERE IS POSITIVE INTEREST INCOME OF RS.3,99 ,83,557/-.THE AO HAS BEEN SWAYED BY THE ASSESSMENT 2011-11 WHICH HAS BEEN REP RODUCED PARTLY IN PARA 2.1.1 OF THE PRESENT ASSESSMENT ORDER. THE CIT(A)-X X HAS ALREADY DECIDED ON SIMILAR FACT IN 2010-11IN FAVOUR OF THE APPELLANT. FOLLOWING THE SAID APPELLATE DECISION IN ASSESSMENT YEAR 2010-11 THE GROUND IN R ESPECT OF RULE 8D(2)(II) & 8D(2)(III) IS ALLOWED. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 5. LD. DR BEFORE US VEHEMENTLY RELIED ON THE ORDER OF AO WHEREAS LD. AR FOR THE ASSESSEE FILED PAPER BOOK WHICH IS RUNNING PAGES FR OM 1 TO 99 AND SUBMITTED THAT THE OWN CAPITAL OF THE ASSESSEE IS EXCEEDING THE AMOUNT OF INVESTMENT MADE IN EQUITY SHARES AS WELL AS IN PUBLIC PF FUND. HE IN SUPPORT OF ASSESSEES CLAIM DREW OUR ATTENTION ON THE AUDITED BALANCE-SHEET OF ASSESSEE WHICH IS PLACED ON PAGE 29 OF THE PAPER BOOK. LD. AR FURTHER STATED THAT THE INVESTME NT IN EQUITY SHARES AND PPF WAS MADE IN EARLIER YEAR. IT WAS ALSO SUBMITTED THAT NO SATISFACTION HAS BEEN RECORDED BY THE AO WHILE INVOKING THE PROVISION OF U/S. 14A OF THE ACT. THE LD. AR ALSO SUBMITTED THAT NO INVESTMENT HAS BEEN MADE DURING THE YEAR. I N THE SIMILAR FACTS AND CIRCUMSTANCES THE HON'BLE ITAT IN ASSESSEES OWN CA SE IN ITA NO.2216/KOL/2014 FOR ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 4 A.Y. 2010-11 DATED 16.08.2017 HAS DELETED THE ADDIT ION MADE BY AO. THE RELEVANT OPERATIVE PORTION OF THIS ORDER IS REPRODUCED BELOW :- 7. WITH REGARD TO DISALLOWANCE MADE TOWARDS ADMINI STRATIVE EXPENSES UNDER RULE 8D(2)(III), WE FIND THAT THE ASSESSEE HAD NOT GIVEN ANY SATISFACTION AS TO HOW THE SAID DISALLOWANCE MADE BY THE ASSESSEE IS I NCORRECT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IN TERMS OF ECTION14A( 2) READ WITH RULE 8D(1) OF THE RULE. IN OUR CONSIDERED OPINION, WITHOUT DOING THE SAME, THE LD. AO CANNOT MECHANICALLY RESORT TO RULE 8D OF THE RULES AND IN THE INSTANT CASE, THE DISALLOWANCE MADE BY THE ASSESSEE IN THE SUM OF RS. 5 LACS IS REASONABLE HAVING REGARD TO THE ACCOUNT OF THE ASSESSEE AND ACCORDING LY, THE LD. CIT(A) HAD RIGHTLY DELETED THE FURTHER DISALLOWANCE MADE BY TH E LD. AO IN THIS REGARD. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY, THE GROUND RAISED BY THE REVEN UE ARE DISMISSED. LD. AR RELIED ON THE ORDER OF LD. CIT(A). IN REJOIN DER LD. DR SUBMITTED THAT AS PER THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF M.S DHANUKA & SONS VS. CIT (CENTRAL) IN CIVIL APPEAL NO.633 OF 2004 IT IS THE DUTY OF TH E ASSESSEE TO DEMONSTRATE THE SOURCE OF FUND INVESTED IN THE IMPUGNED EQUITY SHARES AS WELL AS PPF. LD. VEHEMENTLY RELIED ON THE ORDER OF AO. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE T HE ADDITION HAS BEEN MADE BY THE AO U/S 14A R.W.S. 8D AS DETAILED UNDER:- RULE 8D(2(II) 63,26,887 RULE 8D(2)(III) 26,48,587/- FIRST WE TAKE UP THE ADDITION MADE BY THE ASSESSING OFFICER UNDER RULE 8D(2)(II) OF IT RULES, 1962. IT IS UNDISPUTED FACT THAT OWN CAPI TAL OF ASSESSEE EXCEED THE AMOUNT OF INVESTMENT MADE IN THE EQUITY SHARES AS WELL AS PPF . ON THE SAME BASIS THE HON'BLE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE OWN CASE (SUPRA) HAS DELETED THE ADDITION IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR 2010-11. HOWEVER, ON PERUSAL OF THIS TRIBUNALS ORDER WE OBSERVE THAT NO REFERENCE WAS MADE TO THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF M/S DHANUKA & SONS VS. CIT IN ITA NO.633 (CAL)(2004) REPORTED IN 339 ITR 319 WHEREIN IT WAS HELD AS UNDER:- '9.IN THE CASE BEFORE US, THERE IS NO DISPUTE THAT PART OF THE INCOME OF THE ASSESSEE FROM ITS BUSINESS IS FROM DIVIDEND WHICH IS EXEMPT FROM TAX WHEREAS THE ASSESSEE WAS UNABLE TO PRODUCE ANY MATERIAL BEFORE THE AUTHORITI ES BELOW SHOWING THE SOURCE FROM WHICH SUCH SHARES WERE ACQUIRED. ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 5 10. IN OUR OPINION, THE MERE FACT THAT THOSE SHARES WERE OLD ONES AND NOT ACQUIRED RECENTLY IS IMMATERIAL. IT IS FOR THE ASSESSEE TO S HOW THE SOURCE OF ACQUISITION OF THOSE SHARES BY PRODUCTION OF MATERIALS THAT THOSE WERE A CQUIRED FROM THE FUNDS AVAILABLE IN THE HANDS OF THE ASSESSEE AT THE RELEVANT POINT OF TIME WITHOUT TAKING BENEFIT OF ANY LOAN. IF THOSE SHARES WERE PURCHASED FROM THE AMOUNT TAKE N IN LOAN EVEN FOR INSTANCE/ FIVE OR TEN YEARS AGO/ IT IS FOR THE ASSESSEE TO SHOW BY TH E PRODUCTION OF DOCUMENTARY EVIDENCE THAT SUCH LOANED AMOUNT HAD ALREADY BEEN PAID BACK AND FOR THE RELEVANT ASSESSMENT YEAR; NO INTEREST IS PAYABLE BY THE ASSESSEE FOR AC QUIRING THOSE OLD SHARES. IN THE ABSENCE OF ANY SUCH MATERIALS PLACED BY THE ASSESSE E/ IN OUR OPINION/ THE AUTHORITIES BELOW RIGHTLY HELD THAT PROPORTIONATE AMOUNT SHOULD BE DISALLOWED HAVING REGARD TO THE TOTAL INCOME AND THE INCOME FROM THE EXEMPT SOURCE. IN THE ABSENCE OF ANY MATERIAL DISCLOSING THE SOURCE OF ACQUISITION OF SHARES WHIC H IS WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE, THE ASSESSING AUTHORITY TOOK A MOST R EASONABLE APPROACH IN ASSESSMENT. THERE IS NO PRESUMPTION- PROVIDED IN THE INCOME TAX ACT,. 1961 THAT IF THE ASSESSEE HAS INTEREST FREE LOANS, HIS OWN CAPITAL AS SHARE CAPIT AL, RESERVES AND SURPLUSES AND INTEREST BEARING LOANS AND IS EARNING EXEMPT AND TAXABLE INC OME THEN IT SHOULD BE PRESUMED THAT THE EXEMPT INCOME IS OUT OF ITS OWN FUNDS. RUL E 8D(2)(II) OF THE I.T. RULES, 1962 PROVIDES ANY EXPENDITURE BY WAY OF INTEREST WHICH I S NOT DIRECTLY ATTRIBUTABLE PARTICULAR INCOME OR RECEIPT THEN THE INTEREST HAS TO BE CALCU LATED AS PER FORMULA PROVIDED THEREIN. NOW, THE LAW HAS PROVIDED A SPECIFIC METHOD OF CALC ULATION IN RULE 8D(2)(II) OF I.T. RULES, 1961 RELATING TO INTEREST EXPENDITURE ON EXE MPTED INCOME FROM A.Y.2008-09 AND IT IS APPLICABLE DIRECTLY IN THE CASE OF THE ASSESS EE. FROM THE ABOVE JUDGMENT, WE NOTE THAT IT IS THE DUT Y OF ASSESSEE TO JUSTIFY THE SOURCE OF INVESTMENT MAD BY THE ASSESSEE IN THE INVESTMENT / PPF IRRESPECTIVE OF FACT THAT THE OWN FUND OF ASSESSEE EXCEEDS THE IMPUGNED INVESTMEN T IN THE LIGHT OF ABOVE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT (SUPRA). WE FI ND THAT THE ISSUE OF DISALLOWANCE OF INTEREST WILL ACCORDINGLY BE DECIDED AFTER VERIFYIN G THE DETAILS WHETHER THE IMPUGNED INVESTMENT WAS MADE BY THE ASSESSEE OUT OF HER OWN FUND OR BORROWED FUND. THUS, IN THE INTEREST OF JUSTICE AND FAIR PLAY WE ARE INCLIN ED TO RESTORE THE ISSUE BACK TO THE FILE OF AO WITH A DIRECTION TO VERIFY THE SOURCE OF INVE STMENT MADE BY THE ASSESSEE IN THE IMPUGNED EQUITY SHARES / PPF. IN TERMS OF ABOVE, TH IS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 7. NOW COMING TO DISALLOWANCE MADE BY THE AO UNDER RULE 8D(2)(III) OF I.T RULES, 1962. AT THE OUTSIDE, IT WAS OBSERVED THAT A SSESSEE HAS SUM MOTU MADE THE DISALLOWANCE OF 15 LACS AGAINST THE EXEMPTED INCOME EARNED BY IT DU RING THE YEAR. HOWEVER, THE AO HAS INVOKED THE PROVISION OF RULE 8 D(2)(III) WITHOUT RECORDING THE SATISFACTION AS ENVISAGED UNDER THE PROVISION OF SE CTION 14A OF THE ACT. WE ALSO FIND THAT IN SIMILAR FACTS AND CIRCUMSTANCE, THE HON'BLE CO-ORDINATE BENCH OF THIS TRIBUNAL ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 6 IN ASSESSEES OWN CASE IN IMMEDIATE PRECEDING AY 20 10-11 HAS DELETED THE ADDITION BY OBSERVING AS UNDER: 5. DISALLOWANCE OF RS.15,00,632/- THE AO HAS ADDED RS.15,00,632/- OUT OF RS.41,49,216 /- DEBITED AS BUSINESS EXPENSES. THE AO HAS ARGUED THAT THE APPELLANTS INCOME IS MA INLY INTEREST INCOME FROM VARIOUS INSTRUMENTS AND THEREFORE DID NOT NEED SO M UCH OF EXPENSES. GIVING CONSIDERATION TO THE DISALLOWANCE MADE BY THE AO U/ S 14A OF RS.26,48,587/- THE AO MADE THE DISALLOWANCE OF THE BALANCE SUM OF R.15,00 ,632/-. 5.1 IN THE SUBMISSION THE APPELLANT HAS CLAIMED THA T AFTER DISALLOWANCE OF RS.15,00,000/- IN THE RETURN OF INCOME BY THE APPEL LANT THE ONLY AMOUNT THAT REMAINED CLAIMED AS EXPENSE IN THE P & L A/C. COMES TO ABUT RS.26,48,000/-. WHILE MAKING THE ADDITION THE AO LOST SIGHT OF RS.15,00,000/- DISALL OWANCE ALREADY MADE BY THE APPELLANT IN ITS RETURN FOR THE PURPOSE OF SECTION1 4A.THUS, IRRESPECTIVE OF THE MERIT ADVANCED BY THE ASSESSING OFFICER IN PARA 4 OF HIS ORDER THE PROPOSED DISALLOWANCE OF RS.15,00,6432/- AMOUNTS TO DOUBLE ADDITION BY THE S AID AMOUNT AS THE AO DISALLOWED R.26,48,587/- U/S.14A/RULE 8D(2)(III) AND THE APPEL LANT HAD ALREADY MADE ADDITION U/S.14A OF R.15,00,000/-. THIS ADDITION, THEREFORE, CANNOT BE SUSTAINED. THE GROUND IN RESPECT OF THE ABOVE AMOUNT IS ALLOWED. WE RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF TH E TRIBUNAL DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT ON THIS ACCOUNT. AC CORDINGLY, THE GROUND TAKEN BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. NEXT ISSUE RAISED BY REVENUE IN GROUND NO. (II) IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY T HE AO FOR 15,00,632/- ON ACCOUNT OF NO BUSINESS ACTIVITY. 9. THE ASSESSEE, DURING THE YEAR HAS SHOWN INTEREST INCOME UNDER THE HEAD BUSINESS . THE ASSESSEE AGAINST SUCH BUSINESS INCOME HAS CL AIMED AN EXPENSE OF 41,49,219/- ONLY. HOWEVER, THE AO WAS OF THE VIEW T HAT INTEREST INCOME OF THE ASSESSEE SHOULD BE CLASSIFIED UNDER THE HEAD INCOM E FROM OTHER SOURCE. THEREFORE, NO SUCH BUSINESS EXPENSES SHOULD BE ALLOWED IN VIEW OF THE FACT THAT NO BUSINESS ACTIVITY IS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 9.1 THE AO FURTHER OBSERVED THAT THE DISALLOWANCE O F 26,48,587/- HAS ALREADY BEEN MADE UNDER THE PROVISION OF RULE 8D(2)(III) OF IT RULES, 1962. THEREFORE THE BALANCE AMOUNT OF 15,00,632/- (4149219 26485587) NEEDS TO BE DISALL OWED. ACCORDINGLY, THE ASSESSING OFFICER MADE THE DISALLO WANCE OF 15,00,632/- AND ADDED TO THE INCOME OF ASSESSEE. ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 7 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 5. DISALLOWANCE OF RS.15,00,632/- THE AO HAS ADDED RS.15,00,632/- OUT OF RS.41,49,216 /- DEBITED AS BUSINESS EXPENSES. THE AO HAS ARGUED THAT THE APPELLANTS INCOME IS MA INLY INTEREST INCOME FROM VARIOUS INSTRUMENTS AND THEREFORE DID NOT NEED SO M UCH OF EXPENSES. GIVING CONSIDERATION TO THE DISALLOWANCE MADE BY THE AO U/ S 14A OF RS.26,48,587/- THE AO MADE THE DISALLOWANCE OF THE BALANCE SUM OF R.15,00 ,632/-. 5.1 IN THE SUBMISSION THE APPELLANT HAS CLAIMED THA T AFTER DISALLOWANCE OF RS.15,00,000/- IN THE RETURN OF INCOME BY THE APPEL LANT THE ONLY AMOUNT THAT REMAINED CLAIMED AS EXPENSE IN THE P & L A/C. COMES TO ABUT RS.26,48,000/-. WHILE MAKING THE ADDITION THE AO LOST SIGHT OF RS.15,00,000/- DISALL OWANCE ALREADY MADE BY THE APPELLANT IN ITS RETURN FOR THE PURPOSE OF SECTION1 4A.THUS, IRRESPECTIVE OF THE MERIT ADVANCED BY THE ASSESSING OFFICER IN PARA 4 OF HIS ORDER THE PROPOSED DISALLOWANCE OF RS.15,00,6432/- AMOUNTS TO DOUBLE ADDITION BY THE S AID AMOUNT AS THE AO DISALLOWED R.26,48,587/- U/S.14A/RULE 8D(2)(III) AND THE APPEL LANT HAD ALREADY MADE ADDITION U/S.14A OF R.15,00,000/-. THIS ADDITION, THEREFORE, CANNOT BE SUSTAINED. THE GROUND IN RESPECT OF THE ABOVE AMOUNT IS ALLOWED. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 11. BEFORE US BOTH PARTIES RELIED ON THE ORDER OF A UTHORITIES BELOW AS FAVOURABLE TO THEM. 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, IT WAS OBSERVED THAT ASSESSEE HAS CLAIMED TOTAL INCOME BUSINESS EXPENSES IN ITS PROFIT AND LO SS ACCOUNT FOR 41,49,216/- ONLY AND FOLLOWING DISALLOWANCE HAS ALREADY BEEN MADE:- (I) DISALLOWANCE OF 15 LAKH BY THE ASSESSEE U/S.14A OF THE ACT. (II) DISALLOWANCE OF 26,48,587/- BY THE ASSESSING OFFICER UNDER THE PROV ISION OF SECTION 14A OF THE ACT. THUS, TOTAL EXPENSES DISALLOWED BY AO COMES TO 41,48,587/-. THUS, IN OUR CONSIDERED VIEW FURTHER DISALLOWANCE OF 15,00,632/- WILL LEAD TO THE DOUBLE ADDITION IN THE HANDS OF ASSESSEE. MOREOVER, THE AMOUNT OF DISALLOWANCE CANNOT EXCEED THE ACTUAL EXPENSE CLAIMED BY ASSESSEE IN ITS INCOME TAX RETURN. IN THIS VIEW OF THE ABOVE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). WE UPHOLD THE SAME. CONSEQUENTLY, THE GROUND RAISED BY REVENUE IS DISMISSED. ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 8 13. NEXT ISSUE RAISED BY REVENUE IN GROUND NO.(III) IS THAT LD. CIT(A) ERRED IN RESTRICTING THE ADDITION MADE BY THE AO FOR 8.40 LAKH TO 4.20 LAKH ONLY. 14. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE WAS THE OWNER OF FIVE SHOPS BUT NO RENTAL INCOME WAS SH OWN IN RESPECT OF SUCH PROPERTIES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS, THE AO DEPUTED AN INSPECTOR OF DEPARTMENT TO ASCERTAIN THE MARKET VALUE OF RENT OF THIS PROPERTY WHO IN TURN SUBMITTED THAT THE FAIR MARKET VALUE OF RENT IS 20,000 PER MONTH PER SHOP. THUS, THE AO DETERMINED THE FAIR MARKET VALUE OF RENT OF ALL THE SHOPS FOR 12 LAKH PER ANNUM. THE AO AGAINST THE FAIR MARKET VALUE OF RENT HAS AL LOWED DEDUCTION AS ENVISAGED U/S 24(1) OF THE ACT FOR 3.60 LACS AND ADDED THE BALANCE OF 8.40 LACS TO THE TOTAL INCOME OF ASSESSEE UNDER THE HEAD HOUSE PROPERTY. 15. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO GRANTED RELIEF IN PART TO THE ASSESSEE BY OBSERVING AS UNDER:- 6.2 IN MY VIEW THE SHOP IS TO BE TAKEN AS HOUSE PR OPERTY FOR THE PURPOSE OF SEC. 22 OF IT ACT AND THE ANNUAL VALUE IN TERMS OF SEC. 23 OF IT ACT HAS TO BE CHARGED TO TAX. ONCE THE SHOPS ARE RECORDED TO NOT HAVE BEEN LET OU T THE ANNUAL VALUE HAS TO BE DETERMINED IN TERMS OF SEC. 23(1)(A) OF THE IT ACT, WHICH EQUATES THE ANNUAL VALUE TO A SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET OUT FROM YEAR TO YEAR. IN THE SAID SUBMISSION THE AR HAS QUESTIONED THE BA SIS OF ESTIMATE OF RENTAL VALUE AT RS.20,000/- WHICH IN ORAL SUBMISSION HAS BEEN CLAIM ED EXCESSIVE. IMPUGNED ORDER, THEREFORE, RESTRICT THIS ADDITION TO RS.4,20,000/- AND THE BALANCE SUM OF RS.4,20,00/- IS DELETED . THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 16. BEFORE US LD. DR VEHEMENTLY RELIED ON THE ORDE R OF AO AND LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE BEFORE U S SUBMITTED THAT ALL THE SHOPS ARE COMMERCIAL PROPERTIES AND THEREFORE NO ADDITION CAN BE MADE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE RELIED ON THE ORDER OF LD. CIT(A). 17. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED FACT THAT IMPUGNED PROPERTIES ARE COMMERCIAL PROPERTIES AND THE ASSESSEE CONCEDED THE ADDITION MADE BY THE LD. CIT(A) FOR 4.20 LACS AS THE ADDITION OF THE SAME HAS NOT BEEN CHALLENGED. THEREFORE, WE DISMISS THE PLEA OF LD. AR THAT NO ADDITION CAN BE MADE IN RESPECT OF COMMERCIAL PROPERTY UNDER THE HEAD HOUSE PROPERTY . ITA NO.1131/KOL/2015 A.Y. 2 011-12 ACIT, CIR-35, KOL. VS. SMT.MADHU DEV I SARAF PAGE 9 NOW, THE ISSUE BEFORE US ARISES WHETHER LD. CIT(A) WAS JUSTIFIED TO REDUCE HE FAIR MARKET VALUE OF RENT AS SUGGESTED BY THE INSPECTOR OF DEPARTMENT. IN THE GIVEN FACTS AND CIRCUMSTANCES, WE FIND THAT LD. AR HAS NOT BROU GHT ANY DOCUMENTARY EVIDENCE SUGGESTING THAT FAIR MARKET VALUE AS RECOMMENDED BY THE INSPECTOR OF DEPARTMENT IS NOT AS PER PREVAILING MARKET RATE. THUS IN THIS VIE W OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. HENCE, THIS GROUND OF REVENUES APPEAL IS ALLOWED. 18. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWED F OR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 26/12/2017 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 26/12/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIR-35, AAYAKAR BHAWAN, POORVA, 8 TH FLOOR, SHANTI PA LLI, KOLKATA-107 2. /RESPONDENT-SMT/.MADHU DEVI SARAF, 31, SHAKESPEARE SARANIA,JASMINE TOWER, 4 TH FLOOR, ROOM NO.405, A-B, KOLKATA-17 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,