Bhalchandra Ashok Murkute, Pune V. Assistant Commissioner of Income-tax, Circle -2, Pune

ITA 1444/PUN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2833 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 14-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: DEEPKA SASAR
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1444/PUN/2018 / ASSESSMENT YEAR : 2013-14 BHALCHANDRA ASHOK MURKUTE, S.NO.259, BHAGYASHREE, BALAJI PARK, BANER, PUNE 411045. PAN : AREPM7320A. . / APPELLANT V/S THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 2, PUNE. . / RESPONDENT ASSESSEE BY : SHRI DEEPKA SASAR. REVENUE BY : SHRI M.K. VERMA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A) 3, PUNE DATED 15.05.2018 FOR THE ASSESSMENT YEAR 2013-14. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN THE BU SINESS OF TRANSPORTATION AND HAVING AGRICULTURAL INCOME. ASSESSEE FILE D HIS RETURN OF INCOME FOR A.Y. 2013-14 ON 29.07.2013 DECLARING TOTAL INCOME AT RS.23,74,225/-. THE CASE WAS SELECTED FOR SCRUT INY AND / DATE OF HEARING : 12.03.2019 / DATE OF PRONOUNCEMENT: 07.06.2019 2 ITA NO.1444/PUN/2018 THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT V IDE ORDER DATED 14.03.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.25,66,970/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.15.05.2018 (IN A PPEAL NO.PN/CIT(A)-3/CIR-2,PN/67/2016-17) DISMISSED THE APPEAL O F ASSESSEE AND ENHANCED THE ASSESSED INCOME. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISE D THE FOLLOWING GROUNDS : 1. THE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANC E OF AGRICULTURAL INCOME MADE BY THE LD. ASSESSING OFFIC ER. 2. THE LD. CIT (A) ERRED IN ENHANCING THE AGRICULTURA L INCOME BY RS.2,00,210/- AS INCOME OF ASSESSEE. 3. THE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOW ANCE U/S 14A OF THE INCOME TAX ACT, 1961 MADE BY THE LD. ASSESSING OFFICER OF RS.1,42,741/-. 3. FIRST GROUND IS WITH RESPECT TO ENHANCING THE AGRICULTURAL INCOM E. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO ON PERUSING THE COMPUTATION OF INCOME NOTICED THAT ASSESSEE HAD SHO WN AGRICULTURAL INCOME OF RS.2,50,210/-. ASSESSEE WAS ASKED T O SUBMIT THE DOCUMENTS IN SUPPORT OF HIS AGRICULTURAL INCOME. ASSES SEE STATED THAT IT HAD SOLD FLOWERS AND HE SUBMITTED SOME BILLS SHOWING THE SALE OF FLOWERS TO TRIMURTI PUSHP BHANDAR. ASSESSEE ALSO SUBMIT TED THE COPY OF 7/12 EXTRACT OF AGRICULTURAL LAND. AO NOTICED THAT THE BILLS SUBMITTED WERE PHOTO COPIES. HE FURTHER NOTICED THAT IN 7/12 EXTRACT THE ENTRY OF CROP CULTIVATED WAS OF RICE AND NOWHERE THE CULTIVATION OF FLOWERS WAS MENTIONED. AO THEREFORE DID NOT ACCEPT THE CONTENTION OF ASSESSEE. HE THEREAFTER DISALLOWED RS.50,000/- FROM AGRICULT URAL 3 ITA NO.1444/PUN/2018 INCOME AND ADDED IT TO THE TOTAL INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DID NOT ACCEPT THE CONTENTION OF ASSESSEE. HE WAS ALSO OF THE VIEW THAT THE ENTIRE AMOUNT OF RS.2,50,210/- THAT WAS SHOWN BY THE ASSESSEE AS AGRIC ULTURAL INCOME SHOULD BE TREATED AS INCOME FROM NON-AGRICULTURAL S OURCES. HE ACCORDINGLY HELD THE ENTIRE AMOUNT OF RS.2,50,210/- AS IN COME FROM NON-AGRICULTURAL SOURCES. AGGRIEVED BY THE ORDER OF LD.CI T(A), ASSESSEE IS NOW BEFORE US. 4. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE OWNS 15 ACRES OF LAND AND THE DETAILS OF WHICH WERE REPRODUCED BY LD.CIT(A ) AT PAGES 6 AND 7 OF THE ORDER. HE ALSO POINTED TO THE COPIES OF THE BILLS WHICH SHOWED SALE OF FLOWERS AND WHICH WERE FURNISHED BEFORE TH E AO AND WHICH ARE ALSO PLACED AT PAGE 53 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT BEFORE THE LOWER AUTHORITIES THE ASSESSE E SUBMITTED THAT THEY CAN SUMMON THE AUTHORIZED PERSON OF TRIMURTI PUSHP BHANDAR TO WHOM THE ASSESSEE HAD SOLD FLOWERS TO ASCERTAIN THE GE NUINENESS OF BILLS OF AGRICULTURAL INCOME BUT THE AUTHORITIES DID NOT SUMMO N THEM. WITH RESPECT TO NON-NOTING OF CULTIVATION OF FLOWERS IN 7/ 12 EXTRACT, IT WAS THE SUBMISSION OF ASSESSEE THAT THE CROP NOTING WAS DONE BY TAHSILDAR IN THE MONTH OF JULY / AUGUST EVERY YEAR AND THE FLOWERS WERE GROWN SUBSEQUENTLY AND THEREFORE THERE WAS NO N OTING OF FLOWERS GROWN ON THE LAND. HE FURTHER SUBMITTED THAT THE FLOWER BILLS WERE ISSUED BY TRIMURTI PUSHP BHANDAR AND THE ASSESSEE CAN NOT BE MADE RESPONSIBLE FOR HAVING NO ENTRY IN 7/12 EXTRACT ON WHICH THERE WILL BE NO CONTROL OF ASSESSEE AND THE ASSESSEE HAS DISCHARGED HIS DUTY OF 4 ITA NO.1444/PUN/2018 PROVING THE GENUINENESS OF THE TRANSACTION. HE THEREFOR E SUBMITTED THAT ASSESSEE HAS PROVED THE GENUINENESS OF THE TRAN SACTION BY FURNISHING THE BILLS OF THE PURCHASER AND THE DISALLOWANCE MA DE BY THE AO IS ON THE BASIS OF PRESUMPTION. HE THEREFORE SUBMITTED THAT THE ADDITION MADE BY THE AO AND ENHANCED BY THE LD.CIT(A) BE DELETED. LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO ADDITION OF AGRICULTURAL INCOME ON ACCOUNT OF SALE OF FLOWERS. IT IS AN U NDISPUTED FACT THAT ASSESSEE OWNS 15 ACRES OF LAND AND ON WHICH H E CLAIMED THAT HE HAD GROWN FLOWERS WHICH HAS BEEN SOLD BY THE ASSESSE E TO TRIMURTI PUSHP BHANDAR. IN SUPPORT OF HIS CLAIM OF SALES OF FLOWERS TO TRIMURTI PUSHP BHANDAR, THE ASSESSEE HAD FURNISHED SAMPLE COPIES OF THE BILLS ISSUED BY THE SAID TRIMURTI PUSHP BHANDAR, WHICH ARE PLACE D AT PAGE NO.53 OF THE PAPER BOOK. THE PERUSAL OF THE SAID BILLS PLACE D AT PAGE 53 OF THE PAPER BOOK REVEALS THAT THESE BILLS CONTAIN PR E-PRINTED SERIAL NUMBER, THE ADDRESS, PHONE NUMBERS AND THE BILLS ARE ALSO DATED. THESE BILLS ALSO REVEALS THE SELLER OF THE FLOWERS TO BE T HE ASSESSEE, THE QUANTITY OF FLOWERS SOLD, THE TYPE OF FLOWERS, THE RATE AND THE TOTAL AMOUNT. THE COPY OF THE SALE OF BILLS HAVE NOT BEEN FOUN D TO BE BOGUS OR THE PURCHASER TO BE NON-EXISTENT. FURTHER, THE SUBMISSION OF LD .A.R. THAT THE ENTRY IN 7/12 EXTRACT ARE MADE BY TAHSILDAR IN THE MONTH OF JULY / AUGUST AND THE FLOWERS ARE GROWN AFTER AUGUST H AVE NOT BEEN FOUND TO BE INCORRECT. CONSIDERING THE TOTALITY OF THE AFORE SAID FACTS, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN DISCARDING THE CLAIM OF ASSESSEE WITHOUT HE BEING IN POSSESSION OF ANY ADVERS E MATERIAL TO 5 ITA NO.1444/PUN/2018 PROVE THE CONTRARY. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT THE ASSESSEE HAVING EARNED AGRICULTURAL INCOME NEEDS TO BE A CCEPTED. WE THEREFORE SET ASIDE THE ADDITION MADE BY THE AO AND ENH ANCED BY LD.CIT(A). THUS, THE GROUND NOS.1 AND 2 OF THE ASSESSEE ARE ALLOWED. 6. 3 RD GROUND IS WITH RESPECT TO DISALLOWANCE OF RS.1,42,741/- U/S 14A OF THE ACT. 6.1. AO ON PERUSING THE BALANCE-SHEET OF THE ASSESSEE N OTICED THAT ASSESSEE HAD INVESTED IN DIFFERENT PARTNERSHIP FIRMS AND TH E SHARE OF PROFITS RECEIVED BY THE ASSESSEE FROM THESE FIRMS WOULD H AVE BEEN EXEMPT U/S 10(2A) OF THE ACT. THE ASSESSEE WAS THEREFOR E ASKED TO EXPLAIN AS TO WHY DISALLOWANCE U/S 14A R.W.R. 8D OF INCOM E TAX RULES NOT BE MADE. TO THE QUERY OF AO, ASSESSEE INTER-ALIA STA TED THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. T HE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE TO THE AO. AO THEREAFTER CONCLUDED THAT THE PROVISIONS OF SEC.14A OF T HE ACT ARE APPLICABLE TO ASSESSEE. HE THEREAFTER, ON THE BASIS OF M ETHOD PRESCRIBED UNDER RULE 8D OF I.T. RULES, WORKED OUT THE D ISALLOWANCE AT RS.1,42,741/- AND MADE ITS ADDITION. AGGRIEVED BY THE ORDE R OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD T HE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 7. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT NO DISALLOWANCE I S CALLED FOR AS ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. LD.A.R. FU RTHER POINTING TO THE CAPITAL ACCOUNT WHICH IS PLACED AT PAG E 4 OF THE PAPER 6 ITA NO.1444/PUN/2018 BOOK SUBMITTED THAT THE DRAWINGS MADE BY THE ASSESSEE HAS NOT BEEN CONSIDERED AS EXPENSE IN THE PROFIT AND LOSS ACCOUNT. H E FURTHER POINTING TO THE PROFIT AND LOSS ACCOUNT, WHICH IS PLACED AT PAGE 3 OF THE PAPER BOOK SUBMITTED THAT THE EXPENSES ARE INCURRED FO R THE PURPOSE OF BUSINESS WHICH ARE APPROXIMATELY RS.10 LAKHS. HE THEREFOR E SUBMITTED THAT NO DISALLOWANCE U/S 14A OF THE ACT IS CALLED FOR IN THE PRESENT CAS E. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF AO AND LD.CIT(A) AND SUBMITTED THAT NO DISALLOWANCE ON ACCOUNT OF INTEREST UNDER RULE 8D(2)(II) OF I.T. RULES HAS TO BE MADE BUT AO HAS MADE DIS ALLOWANCE ONLY ON ACCOUNT OF ADMINISTRATIVE EXPENSES UNDER RULE 8D (2)(III) OF I.T. RULES. HE THUS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISALLOWANCE OF RS.1,42,741/- U/S 14A R.W.R. 8D(2)(III) OF I.T. RULES. WE FIND THAT AO HAD NOTED THAT ASSESSEE HAS EXEMPT INCOME FROM PART NERSHIP FIRMS. HE THEREAFTER WORKED OUT THE DISALLOWANCE OF EXPENSES U/ S 14A R.W. RULE 8D(2)(III) ON ACCOUNT OF ADMINISTRATIVE EXPENSES AS PER FORMULA PRESCRIBED THEREIN. THE APPLICABILITY OF SEC.14A OF THE ACT IS NOT IN DISPUTE. IT IS ALSO A FACT THAT AO HAS NOT MADE ANY DISA LLOWANCE ON ACCOUNT OF INTEREST UNDER RULE 8D(2)(II) R.W.S 14A OF THE ACT AND THE DISALLOWANCE HAS ONLY MADE ON ACCOUNT OF ADMINISTRATIVE EX PENSES. BEFORE US, ASSESSEE HAS NOT POINTED OUT AS TO WHY THE PROVISIONS OF SEC.14A R.W. RULE 8D(2)(III) ARE NOT APPLICABLE TO THE PRESENT FA CTS. WE THEREFORE FIND NO ERROR IN THE ORDER OF LD.CIT(A). THUS, THE GROUND NO.3 OF ASSESSEE IS DISMISSED. 7 ITA NO.1444/PUN/2018 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED ON7TH DAY OF JUNE, 2019. SD/- SD/ - ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER PUNE; DATED : 7 TH JUNE, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-3, PUNE. PR. CIT 2, PUNE. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &' , / ITAT, PUNE.