VIREN R. SHAH, MUMBAI V. ASST CIT (OSD) CIR 3(2), MUMBAI

ITA 1162/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0351 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV K GUBGOTRA LD DR
• Assessee Lawyers: MAYUR R MAKADIA LD
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 147

Judgement Text

ITA NO.1162/MUM/2017 VIREN R. SHAH ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.1162/MUM/2017 ( ASSESSMENT YEAR: 2011-12) VIREN R. SHAH C/O ROOPAM 218/219 CARNAC ROAD, CRAWFORD MARKET MUMBAI-400 002 VS. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3(2) ROOM NO. 1923, 19 TH FLOOR AIR INDIA BUILDING, NARIMAN POINT MUMBAI-400 021 ! ' PAN/GIR NO. AAIPS-7452-E ( !# APPELLANT ) : ( $%!# RESPONDENT ) A SSESSEE BY : MAYUR R. MAKADIA, LD.AR RE VENUE BY : RAJEEV K. GUBGOTRA, LD. DR & DATE OF HEARING : 09/08/2018 '() / DATE OF PRONOUNCEMENT : 12/09/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-51 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-51/DC CC-3(2)/IT-29/15-16 DATED 30/11/2016 QUA CONFIRMATION OF DISALLOWANCE U/S 14A AND CERTAIN IN TEREST ITA NO.1162/MUM/2017 VIREN R. SHAH ASSESSMENT YEAR-2011-12 2 DISALLOWANCE U/S 36(1)(III). THE ASSESSMENT FOR IMP UGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CI RCLE- 3(2), MUMBAI [AO] U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 ON 27/03/2015 WHEREIN THE INCOME OF THE ASSESSEE H AS BEEN ASSESSED AT RS.85.27 LACS AFTER CERTAIN ADDITIONS A S AGAINST RETURNED INCOME OF RS.49.75 LACS FILED BY THE ASSESSEE ON 30/09/2009 WHICH WAS PROCESSED U/S 143(1). THE ASSESSEE BEING RESIDENT INDIVIDUAL WAS ENGAGED IN THE BUSINESS OF RETAIL TRADE OF GARMENTS AND ADVERTISING UNDER PROPRIETORSHIP CONCERNS NAMELY ROOPAM & ROOPAM ADVERTISING RESPECTIVELY. 2.1 FACTS QUA THE DISPUTE ARE THAT DURING REASSESSMENT PROCEEDING S, IT WAS NOTED THAT THE ASSESSEE ADVANCED INTEREST FREE LOANS AND ADVANCES AGGREGATING TO RS.92.87 LACS TO THREE PARTIES AND C LAIMED INTEREST EXPENDITURE OF RS.68.55 LACS IN ONE OF THE PROPRIET ORSHIP CONCERN NAMELY ROOPAM , WHICH CALLED FOR PROPORTIONATE DISALLOWANCE U/S 36(1)(III). THE PROPORTIONATE DISALLOWANCE SO WORKE D OUT AMOUNTED TO RS.13.93 LACS WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE. 2.2 THE SECOND DISALLOWANCE WAS U/S 14A READ WITH RULE 8D, SINCE THE ASSESSEE EARNED EXEMPT INCOME OF RS.5.08 LACS DURIN G THE IMPUGNED AY. THE DISALLOWANCE SO WORKED OUT AMOUNTED TO RS.1 7.79 LACS WHICH COMPRISE-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.17.48 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.0.30 LAC S. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 30/11/2 016 WHEREIN LD. CIT(A), AFTER DUE CONSIDERATION, CONFIRMED DISALLOW ANCE U/S 36(1)(III) WITH RESPECT TO LOAN OF RS.4 LACS GRANTED BY THE ASSESSE E TO HIS SISTER ITA NO.1162/MUM/2017 VIREN R. SHAH ASSESSMENT YEAR-2011-12 3 CONCERN NAMELY ROOPAM PROPERTY PRIVATE LIMITED. THE DISALLOWANCE U/S 14A WAS CONFIRMED SINCE THE PROVISIONS OF SECTION 1 4A, IN THE OPINION OF LD. CIT(A), WERE ATTRACTED TO THE CASE OF THE ASSES SEE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI MAYUR R. MAKADIA, DRAWING OUR ATTENTION TO THE FINANCIAL STATEMENTS O F THE PROPRIETORSHIP CONCERN AS WELL AS PERSONAL BALANCE SHEET OF THE ASSESSEE, CONTESTED THE ADDITIONS AS SUSTAINED BY L D. CIT(A). THE SAME HAS BEEN CONTROVERTED BY LD. DEPARTMENTAL REPRESENT ATIVE [DR], SHRI RAJEEV K.GUBGOTRA. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE FINANCIAL STATEMENTS OF THE ASSESSEE. SO FAR AS THE DISALLOWANCE U/S 36(1)(III) IS CONCERNED, WE FIND THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.68.55 LACS IN HIS PROPRIETORSHIP CONCERN NAMELY ROOPAM. THE PERUSAL OF BALANCE SHEET OF THIS CONCERN REVEAL THAT AS AGAINST TOTAL FUNDS OF RS.868.86 LACS, THE ASSESSEES WORKING CAPITAL STOOD AT RS.77 5.96 LACS I.E. MORE THAN 89% OF TOTAL FUNDS. SECONDLY, THE ASSESSEE DOE S NOT HOLD THE STATED INVESTMENTS IN THIS CONCERN RATHER THE INVESTMENT F ORMS PART OF PERSONAL BALANCE SHEET OF THE ASSESSEE. IN OTHER WORDS, NO PART OF LOAN F UNDS OBTAINED IN ROOPAM HAS BEEN USED FOR MAKING THE STATED INVESTMENTS. THIS BEING THE CASE, THE DISALLOWANCE U/S 36(1)(III ) COULD NOT BE SUSTAINED. ON THE SAME ANALOGY, DISALLOWANCE U/S 14 A ALSO COULD NOT BE SUSTAINED SINCE IT HAS ALREADY BEEN NOTED THAT THE STATED INVESTMENTS DID NOT FORM PART OF FINANCIAL STATEMENTS OF THE CONCER N NAMELY ROOPAM, ITA NO.1162/MUM/2017 VIREN R. SHAH ASSESSMENT YEAR-2011-12 4 RATHER THE SAME WERE PART OF PERSONAL BALANCE SHEET OF THE ASSESSEE AND FUNDED OUT OF ASSESSEES OWN CAPITAL. 6. IN VIEW OF THE STATED POSITION, BOTH THE DISALLO WANCES AS CONFIRMED BY LD. FIRST APPELLATE AUTHORITY COULD NOT BE SUSTA INED. THEREFORE, THE SAME STAND DELETED. 7. RESULTANTLY, THE ASSESSEES APPEAL STANDS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2018. SD/- SD/- (SAKTIJIT DEY) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED : 12.09.2018 SR.PS:-THIRUMALESH ! COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - -) *& / DR, ITAT, MUMBAI 6. , ./0 & GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) *& / ITAT, MUMBAI