JIGAR RAJESH BABARIA, MUMBAI V. ACIT 14(3), MUMBAI

ITA 1405/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83531 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 25-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIVYA VAJPAI
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI SANJAY GARG, J M ITA NO. 1405 / MUM/20 13 ( ASSESSMENT YEAR : 200 9 - 10 ) SHRI JIGAR RAJESH BABARIA, 98, MANSOOR BUILDING, PRINCESS STREET, MUMBAI - 400 002 VS. ACIT - 14(3), MUMBAI - 400021 PAN/GIR NO. : A ELP B 7429 K /ASSESSEE BY : SHRI NISHIT GANDHI /REVENUE BY : MS. DIVYA VAJPAI DATE OF HEARING : 25 TH AUGUST , 201 4 DATE OF PRONOUNCEMENT : 25 TH AUGUST , 201 4 O R D E R PER R.C.SHA RMA ( A .M.) : TH IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A ) , DATED 27 - 12 - 2012, FOR THE ASSESSMENT YEAR 200 9 - 10 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2 . THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO DISALLO WANCE OF RS. 12,08,638/ - MADE BY THE AO BY INVOKING PROVISIONS OF SECTION 14A R.W.R.8D OF THE I.T. ACT. 3 . AT THE OUTSET, LEARNED AR FILED COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2008 - 09, WHERE IN EXACTLY SIMILAR ISSUE WAS DEALT BY THE TRIBUNAL VIDE ITS ORDER DATED 10 - 4 - 2014 AND MATTER WAS RESTORED TO THE FILE OF THE AO FOR FRESH APPLICATION OF MIND AND ADJUDICATION ACCORDINGLY. ITA NO.1405/13 2 4 . ON THE OTHER HAND, LEARNED DR RELIED UPON ON THE ORDER OF THE LOW ER AUTHORITIES. 5 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD DERIVED DIVIDEND INCOME OF RS. 53,099/ - WHICH WAS CLAIMED EXEMPT U/S.10(34) OF THE ACT . THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AGAINST DISALLOWANCE U/S. 14A AND RELYING ON PRECEDING YEARS ORDER OF THE CIT(A) DISALLOWED A SUM OF RS. 12,08,638/ - INVOKING SECTION 14A OF THE I.T. ACT 1961 AND RULE 8 D OF THE I.T. RULES, 1962. 6 . BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE DISALLOWANCE BY FOLLOWING HIS EARLIER YEARS ORDER FOR A.Y. 2008 - 09, WHEREIN SIMILAR DISALLOWANCE WAS CONFIRMED BY HIM. 7 . WE FOUND THAT IN THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2008 - 09, THE ASSESSEE HAS APPROACHED TO THE TRIBUNAL AGAINST THE ORDER OF CIT(A), WHEREIN THE TRIBUNAL OBSERVED THAT ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR INVESTMENT AND BUSINESS PURPOSES. THE TRIBUNAL FURTHER OBSERVED THAT THE AO WITHOUT RECORDING ANY DISSATISFACTI ON WITH REGARD TO THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPT INCOME, STRAIGHTWAY APPLIED RULE 8D AGAINST THE MANDATE OF THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. ACCORDINGLY, THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO TO EXAMINE THE ITA NO.1405/13 3 EXPLANATION/DOCUMENTS SO PRODUCED BY THE ASSESSEE IN THIS RESPECT AND GIVE A SPECIFIC FINDING IN THIS RESPECT BY WAY OF A SPEAKING ORDER. THE PRECISE OBSERVATION OF THE TRIBUNAL WAS AS UNDER : - 7.2 IN THE CASE IN HAND THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR INVESTMENT AND BUSINESS PURPOSES. THE LD. AR OF THE ASSESSEE HAS FURTHER SUBMITTED THAT THE ASSESSEE BEING IN TRANSPORT BUSINESS, THE INTEREST WAS PAID TO THE FINANCE COMPANY FOR THE P URCHASE OF TRUCKS WHICH WERE USED FOR TRANSPORT BUSINESS OF THE ASSESSEE. THERE HAD BEEN A DIRECT CORRELATION BETWEEN THE INTEREST EXPENDITURE AND BUSINESS OF THE ASSESSEE. THE INTEREST EXPENDITURE WAS NOT ATTRIBUTABLE TO EXEMPT INCOME. 7.3 HOWEVER, A PE RUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO WITHOUT RECORDING ANY DISSATISFACTION WITH REGARD TO THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPT INCOME, STRAIGHTWAY APPLIED RULE 8D AGAINST THE MANDATE OF THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. THE LD. CIT(A) ALSO FAILED TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE THAT THE ASSESSEE HAD BEEN MAINTAINING SEPARATE ACCOUNTS FOR BUSINESS AND INVESTMENT PURPOSES WHILE CONFIRMING THE DISALLOWANCE. 7.4 IN VIEW OF OUR ABOVE OBSERVATION, WE SET ASIDE THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES AND RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO FIND OUT AS TO WHETHER SUFFICIENT OWN FUNDS/INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSE SSEE FOR INVESTMENT PURPOSES SO FAR DISALLOWANCE RELATING TO INTEREST EXPENDITURE IS CONCERNED. THE AO WILL ALSO CONSIDER THE ISSUE RELATING TO DISALLOWANCE OF ADMINISTRATIVE EXPENSES, IF ANY, INCURRED INCLUDING THE ALLOCATION OUT OF INDIRECT COMMON EXPENS ES FOR EARNING OF EXEMPT INCOME AND TO DECIDE THE ISSUE ACCORDINGLY FOLLOWING THE ABOVE GUIDELINES/OBSERVATIONS. NEEDLESS TO SAY THAT THE A.O. WILL PROVIDE PROPER OPPORTUNITY TO THE ASSESSEE TO FILE THE NECESSARY DOCUMENTS AND ACCOUNTS ETC. INCLUDING FUND FLOW STATEMENT, IF ANY AS PER LAW. THE AO THEREAFTER, WILL DULY EXAMINE THE EXPLANATION/ DOCUMENTS SO PRODUCED BY THE ASSESSEE IN THIS RESPECT AND GIVE A SPECIFIC FINDING IN THIS RESPECT BY WAY OF A SPEAKING ORDER. THE GROUND TAKEN BY ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 8. AS THE FACTS AND CIRCUMSTANCE OF THE CASE DURING THE YEAR UNDER CONSIDERATION ARE PARI MATERIA , RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR IMMEDIATELY PRECEDING YEAR AS REPRODUCED ABOVE, WE RES TORE THE MATTER BACK TO THE FILE OF THE AO FOR ITA NO.1405/13 4 DECIDING AFRESH IN TERMS OF THE DIRECTION GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 10 - 4 - 2014. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25/08/ 201 4 . 25/08/ 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 25/08/ 2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//