AAA DIAMONDS P.LTD, MUMBAI V. ITO 12(1)(1), MUMBAI

ITA 1195/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0196 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 20-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SATYANARAYANA RAJU
• Assessee Lawyers: RAJESHMAL LODHA
• Keywords: Opportunity of being heard; Earning of tax free income

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.1195/MUM/2017 : ASST.YEAR 2012-2013 M/S. AAA DIAMONDS PRIVATE LIMITED A-901, LEMONT APARTMENT RANI SATI MARG, OFF WESTERN EXPRESS HIGHWAY, MALAD (EAST) MUMBAI 400 097. PAN : AAFCA0994F. / VS. THE INCOME TAX OFFICER WARD 2(1)(1) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI RAJESHMAL LODHA /RESPONDENT BY : SHRI B.SATYANARAYANA RAJU (SR.DR) / DATE OF HEARING : 16.05.2017 / DATE OF PRONOUNCEMENT : 03.07.2017 / O R D E R THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A) DATED 04.11.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-2013. 2. THE ISSUE RAISED READ AS UNDER:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RENT PAID OF RS.1,20,000. 2. THE LEARNED CIT(A) HAS TOTALLY IGNORED THE SUBMISSIONS MADE BY APPELLANT VIDE PARA 3 OF STATEMENT OF FACTS SUBMITTING MAINLY THAT RENT WAS PAID FOR THE REGISTERED OFFICE OF THE COMPANY AND THEREFORE THE SAME WAS INCURRED FOR THE BUSINESS. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF EXPENSES PAID OF RS.31,323 U/S 14A. ITA NO.1195/MUM/2017. M/S.AAA DIAMONDS PRIVATE LIMITED. 2 3. APROPOS DISALLOWANCE OF RENT; ON THIS ISSUE THE ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT ASSESSEE IS AN INVESTMENT COMPANY AND DEALS IN SHARE AND SECURITIES AND OTHER INVESTMENTS. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE SUBMISSION OF THE ASSESSEE. HE WAS OF THE OPINION THAT ASSESSEE HAS RECEIVED ONLY INTEREST AND DIVIDEND INCOME AND THE SAME ARE NOT TAXABLE UNDER THE HEAD BUSINESS OR PROFESSION. HE PROCEEDED TO DISALLOW THE RENTAL EXPENDITURE OF RS.1,20,000 CLAIMED BY THE ASSESSEE. 4. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADDITION. 5. AGAINST THIS ORDER, ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT ASSESSEE HAS CLAIMED THAT IT IS ENGAGED IN THE BUSINESS OF MAKING INVESTMENT. THE ASSESSEE HAS INCURRED RENTAL EXPENDITURE. IT IS NOT REVENUES CASE THAT THE EXPENDITURE IS BOGUS. THE VIEW OF THE AUTHORITIES BELOW THAT ASSESSEE SHOULD HAVE ENGAGED ITS BUSINESS WITHOUT PAYING ANY RENT, IS BASED UPON CONJECTURE AND SURMISES. IT IS SETTLED LAW THAT REVENUE SHOULD NOT ENTER INTO THE SHOES OF THE BUSINESSMAN. REVENUE AUTHORITIES CANNOT DIRECT THAT ASSESSEE SHOULD CONDUCT THE BUSINESS WITHOUT PAYING ANY RENT. HENCE, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. MOREOVER, IT HAS BEEN SUBMITTED THAT RENT HAS BEEN PAID FOR THE REGISTERED OFFICE OF THE ASSESSEE-COMPANY, WHICH FURTHER SUPPORTS THE CASE OF THE ASSESSEE. ITA NO.1195/MUM/2017. M/S.AAA DIAMONDS PRIVATE LIMITED. 3 7. APROPOS DISALLOWANCE OF EXPENSES U/S 14A. 7.1 ON THIS ISSUE, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE MUST HAVE INCURRED EXPENDITURE IN RELATION TO INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME. HE DID NOT ACCEPT THE ASSESSEES CONTENTION ACCORDINGLY, THE A.O. PROCEEDED TO APPLY RULE 8D AND MADE DISALLOWANCE OF RS.31,323. 7.2 UPON ASSESSEES APPEAL, THE LEARNED CIT(A) CONFIRMED THE ASSESSING OFFICERS ACTION. THE REVENUE AUTHORITIES DID NOT CONSIDER AT ALL THE SUBMISSION THAT BORROWED FUNDS WERE NOT USED TO EARN EXEMPT INCOME. ASSESSEES RELIANCE UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE RELIANCE UTILITIES AND POWER LIMITED [(2009) 313 ITR 340 (BOM.)], WAS ALSO NOT DEALT WITH. 8. IN THESE CIRCUMSTANCES, IN MY CONSIDERED OPINION, THE AUTHORITIES BELOW HAVE NOT PROPERLY ADJUDICATED THE ISSUE. THEY HAVE ALSO NOT DEALT WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT REFERRED BY THE ASSESSEE. HENCE, I REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE ISSUE AFRESH AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 03 RD DAY OF JULY, 2017. SD/- ( SHAMIM YAHYA ) ACCOUNTANT MEMBER MUMBAI; DATED : 03 RD JULY, 2017. DEVDAS* ITA NO.1195/MUM/2017. M/S.AAA DIAMONDS PRIVATE LIMITED. 4 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.