Shri Naraindas Maru, Surat V. The ACIT.,Circle-3, Surat

ITA 138/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6618 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: PRAKASH D SHAHAR
• Keywords: Unexplained cash credit; Principle of natural justice; Proportionate interest; Additional evidence
• Section: 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM &SHRI A N PAHUJA,AM ITA NO.138/AHD/2009 (ASSESSMENT YEAR:-2005-06) SHRI NARAINDAS MARU, 42/43, SIDDHI SHERI, UMARAONAGAR, BHATAR ROAD, SURAT V/S ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-3,ROOM NO. 208,AAYKAR BHAVAN, MAJURA GATE, SURAT PAN: AAQPM 9106 P [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI PRAKASH D SHAH,AR REVENUE BY:- SHRI S P TALATI, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 27- 11-2008 OF THE LD. CIT(APPEALS)-II, SURAT FOR THE ASSESSMENT YEAR 2005-06, RAISES THE FOLLOWING GROUNDS:- [1] THE LEARNED CIT(A)-II, SURAT ERRED IN CONFIRMING TH E DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS.28,700/- ON SALE O F EQUITY SHARES. [2] THE LEARNED CIT(A)-II, SURAT ERRED IN CONFIRMIN G THE ADDITION OF RS.5,65,000/- BEING ADVANCE RECEIVED FROM SMT. YASH ODADEVI MARU UNDER SECTION 68 AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE APPELLANT. REJECTING APPELLANTS CLAIM AND WITH OUT TAKING INTO CONSIDERATION THAT THE ADVANCE WAS RECEIVED BY ACCO UNT PAYEE CHEQUES AND WAS DULY REFLECTED IN THE BOOKS OF SAID SMT. YASHODADEVI MARU. [3] THE LEARNED CIT(A)-II, SURAT ERRED IN CONFIRMIN G THE DISALLOWANCE OF EXPENDITURE OF RS.1,43,000/-[ACTUALLY RS.1,07,118] BEING INTEREST PAID ON ADVANCES UNDER SECTION 14A OF THE INCOME TA X ACT. [4] THE APPELLANT CRAVES TO ADD, ALTER AND VARY ANY GROUND OF APPEAL. 2. AT THE OUTSET, THE LEARNED AR ON BEHALF OF THE A SSESSEE DID NOT PRESS GROUND NO.1 IN THE APPEAL NOR THE ISSUE RAIS ED IN THE SAID GROUND WAS PRESSED BEFORE THE LD. CIT(A). THEREFORE , GROUND NO.1 IS DISMISSED. ITA N O.138/AHD/2009 2 2 3. ADVERTING NOW TO GROUND NO.2 IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOM E OF RS.10,75,461/- FILED ON 09-08-2005 BY THE ASSESSEE , ENGAGED IN THE TRADING OF SHARES, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME- TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT ], WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 29-08- 2006. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE OBTA INED UNSECURED LOANS FROM VARIOUS PARTIES. TO A QUERY BY THE AO, S EEKING CONFIRMATION, PAN, COPY OF RETURN OF INCOME FILED B Y THE CREDITORS AND RELEVANT PORTION OF BANK PASS BOOK IN ORDER TO ESTABLISH THEIR CREDITWORTHINESS AND TO VERIFY WHETHER FUNDS WERE A VAILABLE AT THE TIME OF ADVANCING OF LOANS, THE ASSESSEE FURNISHED THE RELEVANT DETAILS OF ALL THE CREDITORS EXCEPT IN THE CASE OF SMT YASHODA DEVI MARU FROM WHOM AN AMOUNT OF RS.5,65,000/- WAS OBTAI NED. SMT YASHODA DEVI MARU APPEARS TO BE WIFE OF THE ASSESSE E. DESPITE SHOW CAUSE NOTICE VIDE ORDER SHEET ENTRY DATED 20-0 9-2007, 12-10- 2007 AND 23-10-2007, THE ASSESSEE DID NOT ESTABLISH THE GENUINENESS OF THE SAID CASH CREDIT. SINCE THE ASS ESSEE FAILED TO DISCHARGE THE ONUS LAID DOWN UPON HIM IN ESTABLISHI NG CREDITWORTHINESS OF THE SAID CREDITOR AND GENUINENE SS OF THE TRANSACTIONS WHILE YASHODA DEVI MARU HAD SHOWN INCO ME OF ONLY RS.82,240/-FOR THE A.Y. 2004-05 , RELYING UPON DEC ISIONS IN SHANKAR INDUSTRIES VS. CIT (1978) 114 ITR 689 (CAL.), C. KA NT & CO. VS. CIT (1980) 126 ITR 63 (CAL.),PRAKASH TEXTILE AGENCY VS. CIT (1980) 121 ITR 890 (CAL.);ORIENTAL WIRE INDUSTRIES P. LTD. V. CIT (1981) 131 ITR 688 (CAL.); CIT V. UNITED COMMERCIAL & INDUSTRIAL C O. P. LTD. (1991) 187 ITR 596, 599 (CAL.);M.A. UNNEERI KUTTY V. CIT ( 1992) 198 ITR 147, 150 (KER.), (1993) 201 ITR (ST.) 23 (SC); CIT V. PRECISION FINANCE PVT. LTD. (1994) 208 IR 465, 470 (CAL.); CI T VS. BAISHNAY CHARAN MOHANTY (1995) 212 ITR 199, 201 (ORISSA ); J ALAN TIMBERS VS. CIT (1997) 223 ITR 11, 17 (GAUH) AND SUMATI DAY AL VS. CIT 214 ITA N O.138/AHD/2009 3 3 ITR 801 (1995), THE AO ADDED THE AMOUNT OF RS.5, 65,000/- U/S.68 OF THE ACT. 4. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITIO N IN THE FOLLOWING TERMS:- 5 IN THE WRITTEN SUBMISSION, THE AR HAS POINTED OU T THE OBSERVATIONS OF THE AO IN PARA-5.1 OF THE ASSESSMENT ORDER, WHER E THE AO HAS OBSERVED THAT THE TOTAL INCOME DISCLOSED BY SMT YAS HODADEVI MARU FOR THE AY 2004-05 WAS RS.82,240. THE AR HAS SUBMITTED THAT THIS INFORMATION COULD HAVE COME ONLY FROM THE INFORMATION FURNISHED BY THE ASSESSEE. THE ASSESSEE HAD FURNISHED A COMPUTATION OF INCOME OF S MT YASHODADEVI MARU WHICH CONTAINED HER PAN, WHICH WAS A CLEAR PRO OF OF THE LENDER'S IDENTITY. THE COMPUTATION OF INCOME SHOWED THE SOUR CES FROM WHICH THE LENDER HAD EARNED HER INCOME. IT WAS FROM THE INTER EST ON LOANS AND ADVANCES OF RS 75,000 WHICH CLEARLY INDICATED THAT SHE MUST HAVE ADVANCED RS.9-10 LAKHS TO EARN SUCH INTEREST. IT HA S BEEN SUBMITTED BY THE AR THAT DUE TO UNAVOIDABLE CIRCUMSTANCES, HER B ANK STATEMENT COULD NOT BE FILED ALONG WITH THE OTHER DETAILS, AND THE SAME HAS NOW BEEN FILED ALONG WITH THE WRITTEN SUBMISSION. THE FACT THAT TH E LOAN WAS RECEIVED BY MEANS OF ACCOUNT-PAYEE CHEQUE(S), AND THE FACT THAT SAME HAD BEEN SHOWN IN THE BALANCE SHEETS OF THE LENDER, CLEARLY SHOWED HER CREDITWORTHINESS, AS ALSO THE GENUINENESS OF THE TR ANSACTIONS. A LOAN OF RS.5 LAKH WAS FIRST GIVEN BY SMT. MARU ON 02-08-200 1 BY CHEQUE NO 20766 DRAWN ON BANK OF BARODA, TO ONE SHRI VENUGOPAL BANG WHICH CONTINUED UPTO 21-05-2004, WHEN SHE RECEIVED BACK THE AMOUNT ALONG WITH INTEREST WHICH TOTALLED RS.5,65,000, VIDE CHEQUE NO 701218 D RAWN ON CITY BANK. THIS CHEQUE WAS DEPOSITED BY SMT YASHODADEVI MARU I N HER SAVINGS BANK ACCOUNT WITH THE STATE BANK OF BAORDA, FROM WHERE S HE ISSUED THE CHEQUE NO. 207663 IN FAVOUR OF THE ASSESSEE. ALL THESE TRA NSACTIONS WERE REFLECTED IN THE RESPECTIVE BANK ACCOUNTS. DECISION 6. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. IT HAS NOT BEEN EXPLAINED BY THE AR AS TO WHY NO EVIDENCE OR ANY EXPLANATION REGARDING THE SAID CREDIT HAD BEEN FURNISHED BEFORE THE AO, EVEN THOUG H THE SAME HAD BEEN REQUISITIONED VIDE ORDER-SHEET ENTRIES DATED 20-09- 2007, 12-10-2007 AND 23-10-2007. IN HIS WRITTEN SUBMISSION, THE AR HAS N OT PROVIDED ANY EXPLANATION REGARDING SUCH REPEATED FAILURE ON THE PART OF THE ASSESSEE. HE HAS ONLY VERY BRIEFLY STATED THAT THE BANK STATE MENT OF THE LENDER COULD NOT BE FURNISHED BEFORE THE AO BECAUSE OF SOME UNAV OIDABLE REASONS, WHICH ARE NOT EXPLAINED, AND IS THEREFORE NOT POSSI BLE TO ACCEPT. THE EVIDENCE NOW FURNISHED CANNOT BE ADMITTED IN VIEW O F THE STRINGENT PROVISIONS OF RULE 46A OF THE IT RULES, ESPECIALLY WHEN THE FACTS OF THE CASE CLEARLY SHOW THAT THE ASSESSEE'S CASE WAS NOT COVERED BY ANY OF THE EXCEPTIONS PROVIDED UNDER THE SAID RULE. THE PRINCI PLE OF NATURAL JUSTICE CANNOT BE STRETCHED TO SUCH AN EXTENT SO AS TO COND ONE THE REPEATED NON- ITA N O.138/AHD/2009 4 4 COMPLIANCE BY THE TAXPAYER TO THE STATUTORY NOTICES AND THE LETTERS ISSUED BY THE GOVERNMENT AUTHORITIES, WHICH LEADS TO THE A BSOLUTELY AVOIDABLE WASTAGE OF RESOURCES OF THE GOVERNMENT, WHICH IS ES SENTIALLY IN NATURE OF NATIONAL WASTAGE. TOTAL DISREGARD OF STATUTORY REQU IREMENTS AND RESPONSIBILITIES CANNOT BE COVERED UP BY WHAT IS CA LLED THE 'PRINCIPLE OF NATURAL JUSTICE'. WHEN THE AO HAD PROVIDED REPEATED OPPORTUNITIES AND THAT TOO IN WRITING, IT HAS TO BE ACCEPTED BY THE A PPELLATE AUTHORITIES THAT THE PRINCIPLE OF NATURAL JUSTICE HAD BEEN MET. THER EFORE, I DO NOT ACCEPT ANY OF THE EVIDENCE NOW FURNISHED BY THE AR, AND CO NSEQUENTLY UPHOLD THE ACTION TAKEN BY THE AO AND CONFIRM THE ADDITION OF RS.5,65,000 UNDER THE PROVISIONS OF SECTION 68 OF THE IT ACT. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE LEARNED CIT(A) CONTENDED THAT THE LD. CIT(A) SHOULD HAVE A DMITTED ADDITIONAL EVIDENCE. HE POINTED OUT THAT SMT. YAS HODADEVI MARU WAS ASSESSED TO INCOME TAX AND WEALTH TAX SINCE LAST 3 2 YEARS I.E. FROM 1974-75 ONWARDS AND COPY OF HER CAPITAL A/C, BANK ACCOUNT AND BALANCESHEETS FOR THE AYS 2001-02, 2002-03, 2003-04 AND 2004-05 REVEAL HE R CAPACITY TO LEND RS.5,65,000/- . IN THESE CIRCUMSTANCES, THE LD. AR ADDED THAT THERE WAS NO JUSTIFICATION FOR THE ADDITION U/S. 68 OF THE ACT. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDER . 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE FACTS OF THE CASE, THE ASSE SSEE DID NOT ESTABLISH CREDITWORTHINESS OF SMT. YASHODADEVI MARU OR GENUI NENESS OF TRANSACTIONS WITH HER BEFORE THE AO AND ADMITTEDLY, DID NOT FURNISH C OPY OF HER BANK ACCOUNT, WHICH WAS LATER PLACED BEFORE THE LD. CIT(A). IN THE ABSE NCE OF ANY EVIDENCE, ESTABLISHING CREDITWORTHINESS OF THE SAID CREDITOR AND GENUINENESS OF THE TRANSACTIONS, THE AMOUNT OF RS. 5,65,000/- WAS ADDED U/S 68 OF THE ACT . THE LD. CIT(A) UPHELD THE ADDITION WHILE DISCARDING COPY OF THE BANK ACCOUNT OF THE LENDER PLACED BEFORE HIM ON THE GROUND THAT THE ASSESSEE DID NOT ADDUCE ANY REASONS FOR FAILURE ON HIS PART IN SUBMITTING THE SAID BANK STATEMENT BEFORE THE AO DESPITE SUFFICIENT OPPORTUNITY ALLOWED AND ACCOR DINGLY, DECLINED TO ADMIT ADDITIONAL EVIDENCE ,THE RULE 46A OF THE IT RULES,1 962, BEING STRINGENT. WE FIND ITA N O.138/AHD/2009 5 5 FROM THE PAPER BOOK THAT DOCUMENTS PLACED AT SL. NO S. 8 TO 11[PAGE 14 TO 18 OF THE PB] WERE FILED ONLY BEFORE THE LD. CIT(A) AND N OT THE AO. THESE DOCUMENTS REVEAL THAT THE LENDER MRS. YASHODADEVI NARAINDA S MARU APPROACHED HER BANK ON 8.10.2007 FOR A COPY OF HER BANK STATEMENT . A C OPY OF HER BANK STATEMENT FOR THE PERIOD 1.1.2003 TO 18.9.2006 REVEALS THAT AN AM OUNT OF RS. 5,65,000 RECEIVED ON CLEARING OF CHEQUE ON 22.5.2004, WAS GIVEN TO T HE ASSESSEE ON 25.5.2004. THE CHEQUE OF RS.5,65,000/- IS STATED TO HAVE BEEN RECEIVED BY THE LENDER FROM SHRI VENUGOPAL BANG, TO WHOM A LOAN OF RS.5 LAKH I S STATED TO HAVE BEEN GIVEN BY SMT. MARU ON 02-08-2001 BY CHEQUE NO 20766 DRAWN ON BANK OF BARODA. IN THE LIGHT OF THESE FACTS, BEFORE PROCEEDING FURTHER , WE MAY HAVE A LOOK AT THE RELEVANT RULE 46A OF THE IT RULES 1962, WHICH READS AS UNDER: (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASS ESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY:-- (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED;OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVAN T TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE, THE C OMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. (3)THE DEPUTY COMMISSIONER(APPEALS) OR, AS THE CA SE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE INCOME-TAX OFFICER HA S BEEN ALLOWED A REASONABLE OPPORTUNITY- (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROS S-EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR ITA N O.138/AHD/2009 6 6 (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMI NATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTH ER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECT ION 271. ' 6.1. IT IS EVIDENT FROM THE AFORESAID PROVISIONS THAT TH E LD. CIT(A) CAN TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-R. (1) OF R ULE 46A OF THE IT RULES, 1962 FOR ANY OTHER SUBSTANTIAL CAUSE IN TERMS OF SU B-RULE (4) OF THE SAID RULE .IN THE CASE UNDER CONSIDERATION, THE DOCUMENTS PLACED AT SR. NO. 8 TO 11 OF THE PAPER BOOK WERE ADMITTEDLY FILED BEFORE THE LEARNED CIT(A) FOR THE FIRST TIME. UNDISPUTEDLY, THOUGH THE AO HAD PROVIDED SEVERAL OP PORTUNITIES TO THE ASSESSEE TO ESTABLISH THE CREDITWORTHINESS OF THE LENDER A ND GENUINENESS OF TRANSACTION, THE ASSESSEE DID NOT PLACE RELEVANT DOCUMENTS BEFOR E HIM. WE ARE OF THE OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING THESE DOCUMENTS, ESPECIALLY WHEN THE AMOUNT HAS BEEN RECEIVED THOUGH CHEQUE FROM THE BANK ACCOUNT OF LENDER, WHO IS WIFE OF THE ASSESSEE AND SHE IS STATED TO H AVE RECEIVED THE AMOUNT FROM SHRI VENUGOPAL BANG. MOREOVER, THE SUB-RULE(4) OF RULE 46A EMPOWERS HIM TO ADMIT THE ADDITIONAL EVIDENCE IN THE INTEREST OF SU BSTANTIAL JUSTICE. THE POWERS OF THE CIT(A) IN TERMS OF RULE 46A TO ADMIT FRESH EVI DENCE, ENTAILS AN ELEMENT OF DISCRETION WHICH IS REQUIRED TO BE EXERCISED IN A J UDICIOUS MANNER. THE POWERS OF THE CIT(A) TO ADMIT ADDITIONAL EVIDENCE ARE NOT ON LY IN SITUATIONS WHERE THE EVIDENCE COULD NOT BE PRODUCED BEFORE LOWER AUTHORI TIES OWING TO LACK OF ADEQUATE OPPORTUNITY BUT ALSO IN SITUATIONS WHERE T HE FRESH EVIDENCE WOULD ENABLE THE CIT(A) TO DISPOSE OF THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE. OF COURSE, THE POWER IS TO BE EXERCISED JUDICIOUSLY A ND FOR REASONS TO BE RECORDED. IN THE INSTANT CASE, WE FIND FROM THE SUBMISSIONS M ADE BEFORE THE LD. CIT(A) THAT THE SAID FRESH EVIDENCE BEING PRODUCED SEEKS TO CL EAR THE OBSCURITY, THEREBY LEADING TO CORRECT APPRECIATION OF FACTS AND, IN OU R VIEW, THE ADMISSION OF THE SAME IS VERY MUCH WITHIN THE REALM OF THE EXPRESSIO N 'FOR ANY OTHER SUBSTANTIAL CAUSE' MENTIONED IN RULE 46A OF THE I.T.RULES,1962. THEREFORE, THE SAID EVIDENCE ITA N O.138/AHD/2009 7 7 DESERVES TO BE ADMITTED IN THE INTEREST OF SUBSTANT IAL JUSTICE SO AS TO REMOVE THE OBSCURITY IN THE ORDER OF THE LOWER AUTHORITIES ON THIS ISSUE. ACCORDINGLY, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE VACATE THE F INDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE WITH THE DIRECTIONS TO ADMIT THE ADDITIONAL EVIDENCE AND FOLLOW THE MANDATE IN TERMS OF RULE 46A(1) TO ( 4) OF THE IT RULES, 1962 AND THEREAFTER, DISPOSE OF THE MATTER IN ACCORDANCE W ITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. IT MAY BE CLARIF IED THAT THE LD. CIT(A) IS FREE TO UNDERTAKE ANY INDEPENDENT ENQUIRES, IF FOUND NECES SARY AND THEREAFTER, MAY PASS SUCH ORDERS AS HE DEEMS PROPER, IN ACCORDANCE WITH LAW. WITH THESE DIRECTIONS, GROUND NO. 2 RAISED IN THE APPEAL IS D ISPOSED OF AS INDICATED HEREINBEFORE. 7. GROUND NO.3 IN THE APPEAL RELATES TO DISALLOWAN CE OF RS.1,43,000/-[ACTUALLY RS. 1,07,118] U/S 14A OF THE ACT ON ACCOUNT OF INTEREST PAID ON LOANS UTILIZED IN INVESTMENT IN SH ARES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT THE ASSESSEE CLAIMED EXEMPTION OF RS.1,58,710/- ON ACCO UNT OF DIVIDEND INCOME WHILE PAYING INTEREST OF RS.1,43,49 2/- ON HIS BORROWINGS. IN RESPONSE TO SHOWCAUSE NOTICE IN TERM S OF ORDER SHEET ENTRIES DATED 20-09-2007, 12-10-2007 AND 23-10-2007 , PROPOSING TO DISALLOW PROPORTIONATE INTEREST IN VIEW OF THE PRO VISIONS OF SECTION 14A OF THE ACT, THE ASSESSEE, VIDE HIS LETTER 04-10 -2007 REPLIED THAT INVESTMENT IN SHARES WAS MADE TO EARN DIVIDEND AND FOR APPRECIATION IN VALUE AND FOR THAT PURPOSE, LOANS WERE TAKEN FROM HIS WI FE AND OTHER RELATIVES. SINCE INTEREST IS EXPENDED TO GET CAPITAL APPRECIATION AN D TO EARN DIVIDEND THROUGH CAPITAL INVESTMENT, DISALLOWANCE OF INTEREST OF RS .1,43,492/- ON LOANS WOULD BE VERY HARSH, THE ASSESSEE PLEADED .HOWEVER, THE AO D ID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED PROPORTI ONATE INTEREST OF RS.1,07,118/- , HAVING RECOURSE TO PROVISIONS O F SEC. 14A OF THE ACT. 8. ON APPEAL, THE ASSESSEE DID NOT PRESS THIS G ROUND BEFORE THE LD. CIT(A). CONSEQUENTLY, THE LD. CIT(A) DID NOT H AVE ANY OCCASION TO RECORD HIS FINDINGS ON THE ISSUE. ITA N O.138/AHD/2009 8 8 9. BEFORE US, THE LD. AR WHILE PRESSING THE AFORES AID GROUND NO.3 CONTENDED THAT ISSUE MAY BE ADJUDICATED IN THE LIGH T OF DECISION DATED 12.8.2010 OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF GODREJ & BOYCE MFG.CO.LTD. MUMBAI. IN THE ITA NO. 626/2010 . THE LD. DR,ON THE OTHER HAND, DID NOT OPPOSE THESE SUBMISSIONS OF THE LD. AR 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE FACTS NARRATED IN THE ASSESSMENT ORDER, ADMITTEDLY BORROWED FUNDS HAVE BEEN UTILIZED IN THE INVESTMENT OF SHARES, YIELDING DIVIDEND INCOME. ACC ORDINGLY, THE AO DISALLOWED PROPORTIONATE INTEREST ,HAVING RECOURSE TO PROVISIONS OF SEC. 14A OF THE ACT. BEFORE US THE LD. AR DID NOT P OINT OUT ANY INFIRMITY IN THE CALCULATION OF INTEREST. WE FIND T HAT HONBLE BOMBAY HIGH COURT IN THEIR DECISION DATED 12.8.2010 IN CAS E OF GODREJ & BOYCE MFG.CO.LTD. MUMBAI. IN THE ITA NO. 626/2010 WHILE A DJUDICATING A SIMILAR ISSUE IN THE CONTEXT OF PROVISIONS OF SEC. 14A OF THE ACT AN D RULE 8D OF THE IT RULES,1962 CONCLUDED THAT RULE 8D, INSERTED W.E.F 24.3.2008 C ANNOT BE REGARDED AS RETROSPECTIVE BECAUSE IT ENACTS AN ARTIFICIAL METHO D OF ESTIMATING EXPENDITURE RELATABLE TO TAX-FREE INCOME. IT APPLIES ONLY W.E.F AY 2008-09. FOR THE ASSESSMENT YEARS WHERE RULE 8D DOES NOT APPLY, THE AO WILL HAV E TO DETERMINE THE QUANTUM OF DISALLOWABLE EXPENDITURE BY A REASONABLE METHOD HAVING REGARD TO ALL FACTS AND CIRCUMSTANCES, THE HONBLE HIGH COURT CONCLUDED . SINCE THE GROUND WAS UNDENIABLY NOT PRESSED BEFORE THE LEARNED CIT(A), B UT THE ISSUE HAS BEEN AGAIN AGITATED BEFORE US, IN OUR CONSIDERED OPINION, THE ASSESSEE, DESPITE HAVING NOT PRESSED THE ISSUE BEFORE THE AUTHORITIES BELOW CAN STILL RAISE AND AGITATE THE SAME BEFORE THE TRIBUNAL AND THE ASSESSEE MAY NOT, JUSTI FIABLY BE PRECLUDED FROM THE SAME. IN TAKING THIS VIEW, WE ARE SUPPORTED BY THE VIEW TAKEN IN THE DECISIONS IN VIJAY KUMAR JAIN VS. CIT (1975) 99 ITR 349 (P&H) AN D J.K. OIL MILLS CO. LTD. VS. CIT 1976 CTR (ALL) 133 : (1976) 105 ITR 53 (ALL). H OWEVER, AS THE ISSUE HAS NOT BEEN DECIDED BY THE LEARNED CIT(A) ON MERITS, WE C ONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTOR E THE MATTER TO HIS FILE FOR DECIDING THE ISSUE RAISED IN THE GROUND NO.3 IN THE APPEAL ON MERITS IN ITA N O.138/AHD/2009 9 9 ACCORDANCE WITH LAW ,IN THE LIGHT OF VARIOUS JUDICI AL PRONOUNCEMENTS, INCLUDING THE DECISION DATED 6.7.2010 OF THE HONBLE SUPREME COURT IN CIT V. WALFORT SHARE & STOCK BROKERS (P.) LTD.,326 ITR 1,DECISION OF HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG.CO.LTD. MUMBAI (SUPRA) AND DECISION DATED 17.6.2010 OF THE HONBLE KERALA HIGH COURT IN THE C ASE OF CIT VS. SMT. LEENA RAMACHANDRAN IN ITA.NO. 1784 OF 2009, A FTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLES S TO SAY THAT WHILE REDECIDING THE ISSUE, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF T HE ACT. WITH THESE OBSERVATIONS, GROUND NO.3 IN THE APPEAL OF THE ASSESSEE IS DISPO SED OF. 11. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TE RMS OF THE RESIDUARY GROUND NO. 4 IN THE APPEAL, ACCORDINGLY, THIS GROUND IS DISMISS ED. 12. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT F OR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE COURT TODAY ON 13-05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 13 -05-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI NARAINDAS MARU, 42/43, SIDDHI SHERI, UMARAO NAGAR, BHATAR ROAD, SURAT 2. THE ACIT, CIRCLE-3, SURAT 3. CIT CONCERNED 4. CIT(A)-II, SURAT 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD