MAHESH VRAJLAL BABARIA, MUMBAI V. ADDL CIT 14(3), MUMBAI

ITA 1406/MUM/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9914 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.1406/M/2013 ASSESSMENT YEAR: 2009-10 SHRI MAHESH VRAJLAL BABARIA, 98, MANSOOR BUILDING, PRINCESS STREET, MUMBAI 400 002 PAN: AEQPB 4249C VS. ADDL. CIT 14(3), EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400021 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : MS. DINKLE HARIA, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 29.06.2017 DATE OF PRONOUNCEMENT : 14.07.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 27.12.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED THE RETURN FOR A.Y. 2009-10 DECLARING INCOME OF RS.1,04,15,780/-. THE ASSESSEE IS AN INDIVIDUAL DERIVED THE INCOME UNDER THE HEAD BUSINE SS, HOUSE PROPERTY, CAPITAL GAIN AND INCOME FROM OTHER SOURCES. DURING THE ASS ESSMENT PROCEEDING, THE ASSESSEE DERIVED THE DIVIDEND INCOME OF RS.23,39,46 1/- WHICH WAS CLAIMED EXEMPT UNDER SECTION 10(34). THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) RELIED UPON THE ASSESSMENT ORDER PASSED IN A.Y. 2008-09 AND FOLLOWING THAT ORDER HE HAS CALCULATED THE DISALLOW ANCE UNDER SECTION 14A WHICH READS AS UNDER: ITA NO.1406/M/2013 SHRI MAHESH VRAJLAL BABARIA 2 (I) EXPENSES DIRECTLY ATTRIBUTABLE 0 (II) INTEREST EXPENDITURE NOT DIRECTLY RELATED 1,14,46,213 A VALUE OF INVESTMENT AS ON 31.3.2008 15,77,93,932 VALUE OF INVESTMENT AS ON 31.3.2009 15,20,00,291 AVERAGE 15,48,97,111 B TOTAL OF ASSETS AS ON 31.3.2008 24,50,55,290 TOTAL OF ASSETS AS ON 31.3.2009 27,90,14,971 AVERAGE 26,20,35,130 C AXB/C= 1,14,46,213 X 15,48,97,111 26,20,35,130 67,66,212 (III) 0.5% OF AVERAGE INVESTMENT 7,74,486 TOTAL DISALLWOANCE U/S 14A 75,40,698 3. MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT(A) HAS UPHELD THE ORDER OF THE AO. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING BEFORE US, THE LD. A.R. SUBMITTED THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO.7421/M/2011 FOR ASSESSMENT Y EAR 2008-09 WHEREIN THE SIMILAR DISALLOWANCE UNDER SECTION 14A READ WITH RU LE 8D WAS MADE AND IT WAS RESTORED TO AO, THEREFORE, THIS MATTER ALSO MAY BE RESTORED TO AO. 5. ON THE OTHER HAND, THE LD. D.R., RELIED UPON THE ORDER OF REVENUE AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT T HIS ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO.7421/M/2011 FOR ASSESSMENT YEAR 2008-09 WHEREIN THE TRIBUNAL HAS SET ASIDE THE ORDER WITH A DIRECTION WHICH WAS GIVEN IN ITA NO.7421/M/2011 WHICH READS AS UNDER: 12. VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED TH E DISALLOWANCE OF RS.70,01,260/- U/S 14A R.W.R.8D. THE ASSESSEE IN THIS CASE IS ENGA GED IN THE CAR RENTAL BUSINESS. THE ITA NO.1406/M/2013 SHRI MAHESH VRAJLAL BABARIA 3 CONTENTION OF LD. AR HAS BEEN THAT LOAN WAS TAKEN F OR THE CAR RENTAL BUSINESS, WHEREAS THE ASSESSEE HAD INVESTED HIS OWN MONEY FOR INVESTMENT FOR EARNING EXEMPT INCOME. THE FACTS AS WELL AS CONTENTION RAIS ED BY THE ASSESSEE ARE IDENTICAL TO THAT OF THE FACTS RAISED IN ITA NO.7422/MUM/2011 IN ASSESSEES FAMILY MEMBERS CASE AS DISCUSSED ABOVE AND HAS BEEN RESTORED TO TH E FILE OF AO FOR A FRESH DECISION AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE AS PER LAW. ON THE SAME FOOTING, AND FOLLOWING THE ABOVE FINDING, WE RESTOR E THIS ISSUE TO THE FILE OF AO FOR FRESH APPLICATION OF MIND AND ADJUDICATION ACCORDIN GLY. THE GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSE. 7. WE FIND THAT THE DIRECTION GIVEN IN PARA 7.4 OF ITA NO.7422/M/2011 HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.7421/M/2011 FOR A.Y. 2008-09 IS RELEVANT TO THE PRESENT CASE AND IS REPRODUCED AS UNDER: 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 FRE E FUNDS WERE AVAILABLE WITH THE ASSESSEE FOR INVESTMENT PURPOSES SO FAR DISALLOWANC E RELATING TO INTEREST EXPENDITURE IS CONCERNED. THE AO WILL ALSO CONSIDER THE ISSUE RELATING TO DISALLOWANCE OF ADMINISTRATIVE EXPENSES, IF ANY, IN CURRED INCLUDING THE ALLOCATION OUT OF INDIRECT COMMON EXPENSES FOR EARNING OF EXEM PT INCOME AND TO DECIDE THE ISSUE ACCORDINGLY FOLLOWING THE ABOVE GUIDELINES/OB SERVATIONS. NEEDLESS TO SAY THAT THE A.O. WILL PROVIDE PROPER OPPORTUNITY TO THE ASS ESSEE TO FILE THE NECESSARY DOCUMENTS AND ACCOUNTS ETC. INCLUDING FUND FLOW STA TEMENT, IF ANY AS PER LAW. THE AO THEREAFTER, WILL DULY EXAMINE THE EXPLANATION/ D OCUMENTS SO PRODUCED BY THE ASSESSEE IN THIS RESPECT AND GIVE A SPECIFIC FINDIN G IN THIS RESPECT BY WAY OF A SPEAKING ORDER. THE GROUND TAKEN BY ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 8. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE, WE RESTORE THIS MATTER TO THE FILE OF AO. 9. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.07.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 14.07.2017. * KISHORE, SR. P.S. ITA NO.1406/M/2013 SHRI MAHESH VRAJLAL BABARIA 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.