Hemant Arun Badhe, Pune V. Income-tax Officer, Ward - 3(1), Pune

ITA 1204/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4902 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 10-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P S SHINGTE
• Keywords: Principle of natural justice; Earning of tax free income
• Section: 14A

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 1204 /P U N/201 8 / ASSESS MENT YEAR : 20 14 - 15 HEMANT ARUN BADHE 1228C, SHIVAJINAGAR, PUNE 411004 . / APPELLANT PAN: AA SPB3565H VS. THE INCOME TAX OFFICER , WARD 3 ( 1 ) , PUNE . / RESPONDENT / APPELLANT BY : SHRI P.S. SHIN GTE / RESPONDENT BY : S HRI RAJESH GAWALI / DATE OF HEARING : 1 4 . 0 1 .201 9 / DATE OF PRONOUNCEMENT: 08 . 0 2 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 3 , PUNE , DATED 19 . 0 4 .20 1 8 RELATING TO ASSESSMENT YEAR 20 14 - 15 AGAINST ORDER PASSED UNDER SECTION 14 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DISMISSING THE APPEAL EX - PARTE, WITHOUT GIVING PROPER OPPORTUNITY OF HEARING, THE ACT BEING IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, IT IS PRAYED THAT APPEAL MAY KINDLY BE RESTORE D BACK FOR RECONSIDERATION BY LEARNED CIT(A). WITHOUT PREJUDICE TO ABOVE GROUND FOLLOWING GROUND IS TAKEN ON MERIT; ITA NO. 1204 /P U N/20 1 8 HEMANT ARUN BADHE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LOWER AUTHORITIES HAVE ERRED IN NOT RECORDING ANY SATISFACTION AS REQU IRED U/S 14A(2) AND THEREFORE THE ACTION OF INVOKING RULE 8D IS INCORRECT AND THEREFORE NO ADDITION IS JUSTIFIED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LOWER AUTHORITIES HAVE ERRED IN MAKING A DISALLOWANCE OF RS.3,77,089/ - CO NSISTING OF RS.3,03,828/ - ON ACCOUNT OF INTEREST AND RS.68,261/ - ON ACCOUNT OF EXPENSES BY INVOKING PROVISIONS OF SECTION 14A READ WITH RULE 8D(2). 3. THE FIRST GROUND OF APPEAL IS NOT PRESSED AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 4. THE ISSUE IN GROUND OF APPEAL NO.2 IS AGAINST SATISFACTION RECORDED UNDER SECTION 14A OF THE ACT. 5. THE CASE OF ASSESSEE IS THAT THE ASSESSING OFFICER HAS FAILED TO RECORD ANY SATISFACTION BEFORE INVOKING PROVISIONS OF SECTION 14A OF THE ACT. HOWEVER, WE FIND T HAT IN PARA 3 OF ASSESSMENT ORDER, THE ASSESSING OFFICER HAS VERY CLEARLY NOTED THAT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS REQUESTED TO FURNISH EXPLANATION IN RESPECT OF LARGE INTEREST EXPENSES RELATABLE TO EXEMPT INCOME UNDER SECTION 14A OF THE ACT, AS PER AIR INFORMATION AND OTHER DETAILS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID SATISFACTION IS WITH REGARD TO AIR INFORMATION AND OTHER DETAILS. I FIND NO MERIT IN THE PLEA OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AS THE ASSESSING OFFICER HAS CLEARLY RECORDED SATISFACTION AND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD NOT BE MADE IN RESPECT OF EXEMPT INCOME VIS - - VIS LARGE INTEREST EXPENS ES CLAIMED BY ASSESSEE. HENCE, GROUND OF APPEAL NO.2 RAISED BY ASSESSEE IS DISMISSED. 6. NOW, COMING TO GROUND OF APPEAL NO.3 RAISED BY ASSESSEE A GAINST THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE ITA NO. 1204 /P U N/20 1 8 HEMANT ARUN BADHE 3 INCOME TAX RULES, 1962 (IN SHORT THE RULES) OF 3,03,828/ - AND 8D(2)(III) OF THE RULES OF 68,261/ - . 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE THE TRIBUNAL POINTED OUT THAT THERE IS NO MERIT IN THE AFORESAID DISALLOWANCE AS THE ASSESSEE HAD SUFFI CIENT FUNDS I.E. AGAINST INVESTMENT OF 1.36 CRORES, CAPITAL BALANCE AVAILABLE WITH THE ASSESSEE WAS ABOUT 2 CRORES. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, OBJECTED TO THE SUBMISSIONS OF ASSESSEE ON THE GROUND THA T IN ADDITION TO THE TAX FREE ASSETS, THE ASSESSEE HAS ALSO MADE INVESTMENT IN FLAT AT BANER AND OTHER INVESTMENTS AND IT CANNOT BE SAID THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO MAKE INVESTMENTS, INCOME FROM WHICH WAS EXEMPT FROM T AX. 9. ON PERUSAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, THE ISSUE WHICH IS RAISED BY FIRST PART OF GROUND OF APPEAL NO.3 IS AGAINST DISALLOWANCE MADE UNDER RULE 8D(2)(II) OF THE RULES. THE SAID RULE PROVIDES THAT WHERE THE INTEREST EXPENDITURE HAS BEEN INCURRED BY ASSESSEE, THEN SUCH INTEREST EXPENDITURE WHICH IS RELATABLE TO INVESTMENTS MADE, ON WHICH TAX FREE INCOME HAS BEEN EARNED IS NOT TO BE ALLOWED AS DEDUCTION IN THE HANDS OF ASSESSEE. HOWEVER, THE CLAIM OF ASSES SEE BEFORE THE TRIBUNAL WAS THAT HE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH HIM. I PERUSED THE BALANCE SHEET PLACED AT PAGE 7 OF PAPER BOOK, WHEREIN THE OPENING CAPITAL BALANCE OF ASSESSEE WAS 2.34 CRORES AND THE CLOSING BALANCE IS ABOUT 2 CRORES. THE TOTAL INVESTMENTS WHICH HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER ELIGIBLE FOR THE SAID DISALLOWANCE WERE TOTALED TO 1,36,52,300/ - . IN VIEW OF THE AVAILABILITY OF INTEREST FREE FUNDS WI TH THE ASSESSEE AND IN VIEW OF ITA NO. 1204 /P U N/20 1 8 HEMANT ARUN BADHE 4 THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. REPORTED IN 366 ITR 505 (BOM), I HOLD THAT NO DISALLOWANCE IS WARRANTED IN THE HANDS OF ASSESSEE ON ACCOUNT OF INTEREST EXPENDITURE UNDER THE RULE 8D(2)(II) OF THE RULES. IN RESPECT OF DISALLOWANCE OF 68,261/ - MADE ON ACCOUNT OF ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III) OF THE RULES , THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NOT RAISED ANY SUBMISSIONS, HENCE THE SAME IS CONFIRMED IN THE HANDS OF ASSESSEE. THUS, GROUND OF APPEAL N O.3 IS PARTLY ALLOWED. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, PARTLY ALLOWED. 10 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 8 TH DAY OF FEBR UARY , 201 9 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 8 TH FEBR UARY , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RES PONDENT; 3. ( ) / THE CIT(A) - 3 , PUNE ; 4. THE PR. CIT - 2 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE