SANJEEV S RENIWAL, MUMBAI V. ACIT CEN CIR 38, MUMBAI

ITA 1486/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3647 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2015
• Court: TRIBUNAL
• Department Lawyers: S K MISHRADR
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.1447/MUM/2015 ASSESSMENT YEAR: 2009-10 MR. RAKESH S RENIWAL, 156, MAKER CHAMBER VI, 220 JAMNALAL BAJAJ MARG, NARIMAN POINT, MUMBAI-400021 / VS. ACIT, CENTRAL CIRCLE-38, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO . AAFPA4201N ITA NO.1485/MUM/2015 ASSESSMENT YEAR: 2009-10 MR. RAJEEV S RENIWAL, 156, MAKER CHAMBER VI, 220 JAMNALAL BAJAJ MARG, NARIMAN POINT, MUMBAI-400021 / VS. ACIT, CENTRAL CIRCLE-38, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO.ADMPR3334D ITA NO.1486/MUM/2015 ASSESSMENT YEAR: 2009-10 MR. SANJEEV S RENIWAL, 156, MAKER CHAMBER VI, 220 JAMNALAL BAJAJ MARG, NARIMAN POINT, MUMBAI-400021 / VS. ACIT, CENTRAL CIRCLE-38, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO.ACQPR2461Q ITA NO.1447, 1485 & 1486/MUM/2015 RAKESH S. RENIWAL & ORS. 2 $ % & / ASSESSEE BY SHRI REEPAL G. TRALSHAWALA $ % & / REVENUE BY SHRI S.K. MISHRA-DR / DATE OF HEARING 09/08/2016 & / DATE OF ORDER: 09/08/2016 & / O R D E R THESE THREE APPEALS ARE BY THE DIFFERENT ASSESSEE, AGGRIEVED BY THE IMPUGNED ORDERS ALL DATED 14/11/20 14 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. 2. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEALS IS WITH RESPECT TO CONFIRMING THE ADDITION MADE U/S 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) READ WITH RULE 8D(2)(III) OF THE RULES AND CONSEQUENT ADDITIO N MADE IN THE RESPECTIVE APPEAL. 2.1. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSEE, SHRI REEPAL G. TRALASHWALA, TOOK ME TO VA RIOUS PAGES OF THE PAPER BOOK, WHILE EXPLAINING, THE CLAI M OF THE ASSESSEE. IT WAS EXPLAINED THAT THE ASSESSEE (ASSES SMENT YEAR 2009-10) MADE SUO-MOTO DISALLOWANCE OF RS.1,05,271/- AND FURTHER RS.6,47,197/- U/S 14A OF THE ACT (PAGE-2 OF THE PAPER BOOK). MY ATTENTION WAS IN VITED TO THE COMPUTATION OF TOTAL INCOME AND THE FINDING CON TAINED IN PARA 4.3.3 OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL). IT WAS EXPLAINED THAT THE ASSESSING OFFIC ER HAS TAKEN THE TOTAL INVESTMENT WHILE MAKING THE DISALLO WANCE, WHEREAS, THE ASSESSEE HAS MADE MUCH MORE DISALLOWAN CE ITA NO.1447, 1485 & 1486/MUM/2015 RAKESH S. RENIWAL & ORS. 3 THAN WHICH WAS NEEDED. THE LD. DR, SHRI S. K. MISHR A, THOUGH DEFENDED THE ADDITION BUT DID NOT CONTROVERT THE FACTUAL MATRIX AVAILABLE ON RECORD. 2.2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, IN THE CASE OF MR. SANJEEV S. RENIWAL, (ASSE SSMENT YEAR 2009-10) ARE THAT THE ASSESSEE AN INDIVIDUAL, DERIVING INCOME FROM LETTING OUT OF HOUSE PROPERTY AND ALSO INCOME FROM BUSINESS AND PROFESSION/CAPITAL GAIN. THE BUSI NESS INCOME IS IN THE NATURE OF INTEREST INCOME ON LOANS , DECLARED INCOME OF RS.35,57,665/- IN E-RETURN FILED ON 28/08/2009. IT IS NOTED THAT WHILE CALCULATING DISALLOWANCE U/S 14A, THE ASSESSEE WORKED OUT THE AVERAGE VALUE OF INVESTMENT OF THOSE SHARES ON WHIC H DIVIDEND WAS EARNED. THE INVESTMENT HELD BY THE ASS ESSEE ARE QUOTED/UNQUOTED INVESTMENT AND ALSO OTHER INVESTMENT. THE OTHER INVESTMENT MAINLY INCLUDES LI C PREMIUM, GOLD JEWELLERY, ETC. DURING THE YEAR, THE ASSESSEE RECEIVED DIVIDEND ONLY FROM QUOTED INVESTM ENT AND THE UNQUOTED INVESTMENT WAS HELD MAINLY IN GROU P COMPANIES WITH AN INTENTION OF CONTROLLING INTEREST . IT IS NOTED THAT THE ASSESSEE DULY FURNISHED THE DETAILS BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL). THE LD. ASSESS ING OFFICER COMPLETED THE ASSESSMENT BY RECALCULATING T HE DISALLOWANCE AND MADE FURTHER ADDITION/DISALLOWANCE (OVER AND ABOVE DISALLOWANCE SUO-MOTO MADE BY THE ITA NO.1447, 1485 & 1486/MUM/2015 RAKESH S. RENIWAL & ORS. 4 ASSESSEE AMOUNTING TO RS.1,89,064/-) OF RS.9,50,556 /- U/S 14A OF THE ACT R.W.R. 8D(2)(III) OF THE RULES. I FIND THAT THE ASSESSEE HAS ALREADY MADE VOLUNTARY DISALLOWANC E OF RS.6,47,197/- AND SUO-MOTO DISALLOWED ADMINISTRATIV E EXPENSES OF RS.1,05,271/-. OUT OF THE TOTAL EXPENS ES CLAIMED IN PROFIT & LOSS ACCOUNT OF RS.2,25,510/- (PAGE- 10 OF THE BALANCE SHEET) THUS THERE REMAINS NO FURT HER SCOPE OF FURTHER DISALLOWANCE U/S 14A OF THE ACT R. W.R. 8D(2)(III) OF THE RULES. FURTHER IT IS NOTED THAT I N PARA 3.3.3 OF THE IMPUGNED ORDER, THE LD. COMMISSIONER O F INCOME TAX (APPEAL) HAS NOTED THAT THE ASSESSEE WAS HAVING OWN INTEREST FREE FUNDS, WHICH WERE SUFFICIE NT TO MEET THE INVESTMENT. FROM PERUSAL OF THE BALANCE SH EET, IT IS OBSERVED THAT THE ASSESSEE WAS HAVING OWN FUNDS OF RS.9.74 CRORES BESIDES BORROWED FUNDS OF RS.1.54 LA KHS, WHEREAS, THE INVESTMENT IS RS.2.42 CRORES, MEANING THEREBY, INTEREST FREE FUNDS AVAILABLE WITH THE ASS ESSEE WERE 9.74 CRORES, WHICH ARE SUFFICIENT TO COVER THE INVESTMENT OF 2.42 CRORES IN SHARES YIELDING TAX FR EE INCOME AND HENCE NO PART OF THE INTEREST CAN BE SAI D TO BE ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME OVER A ND ABOVE BUT HAS ALREADY BEEN DISALLOWED BY THE ASSESS EE IN COMPUTATION OF INCOME. THUS, THERE IS A MERIT IN TH E APPEAL OF THE ASSESSEE, THEREFORE, CONSIDERING THE TOTALITY OF UNCONTROVERTED FACTS, NO FURTHER DISALLOWANCE WA S REQUIRED TO BE MADE. THIS APPEAL OF THE ASSESSEE I S, THEREFORE, ALLOWED. ITA NO.1447, 1485 & 1486/MUM/2015 RAKESH S. RENIWAL & ORS. 5 3. SO FAR AS, THE APPEAL IN ITA NO.1485/MUM/2015 (RAJEEV S. RENIWAL) AND ITA NO.1447/MUM/2015 (RAKESH S. RENIWAL) IS CONCERNED, THE LD. COUNSEL CLAIMED THAT FACTS ARE IDENTICAL TO THE ABOVE APPEAL. THIS FACTUAL MATRIX WAS NOT CONTROVER TED BY THE LD. DR. 3.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE CA SE OF MR. RAKESH S. RENIWAL, THE TOTAL INCOME OF RS.31,18, 710/- WAS DECLARED IN HIS RETURN ON 28/08/2009. THE ASSES SEE IS ALSO DERIVING INCOME FROM RENTING OF HOUSE PROPE RTY, BUSINESS AND PROFESSION AND CAPITAL GAINS. THE BUSI NESS INCOME IS IN THE NATURE OF INTEREST INCOME ON LOANS GRANTED AND FROM COMMISSION AND BROKERAGE. THE ASSESSEE IS HAVING SUFFICIENT OWN FUNDS OUT OF WHIC H THE INVESTMENT WAS MADE. THE ASSESSEE MADE DISALLOWANCE OF RS.1,56,937/- U/S 14A OF THE ACT WHICH IS AS EXPEND ITURE UNDER THE HEAD SHARE DE-MAT CHARGES AND STT WAS DISALLOWED AS USUAL. HOWEVER, THE LD. ASSESSING OFF ICER COMPLETED THE ASSESSMENT DISALLOWING RS.10,97,190/- U/S 14A OF THE ACT READ WITH RULE 8D. I FIND THAT THE DISALLOWANCE WAS MECHANICALLY MADE BECAUSE AS PER T HE PROVISIONS OF SECTION 14A, THE ASSESSING OFFICER IS EXPECTED TO RE-COMPUTE THE AMOUNT OF DISALLOWANCE U /S 14A OF THE ACT ONLY IN A SITUATION WHERE HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE ACCOUNTS/CLAIM OF THE ASSESSEE. MY VIEW FIND SUPPORT FROM THE DECISION I N CIT ITA NO.1447, 1485 & 1486/MUM/2015 RAKESH S. RENIWAL & ORS. 6 VS HERO CYCLES LTD. 323 ITR 158 (P & H), RELIANCE U TILITIES AND POWER LTD. 313 ITR 340 (BOM.), DCIT VS JINDAL P HOTO LTD. (DEL. TRIB.) AND SHIVA INDUSTRIES & HOLDINGS L TD. VS ACIT (2011) 59 DTR 182. THE HON'BLE JURISDICTIONAL HIGH COURT IN RELIANCE UTILITIES & POWER LTD. CATEGORICA LLY HELD THAT IF INTEREST FREE FUNDS ARE AVAILABLE WITH THE ASSESSEE, WHICH ARE SUFFICIENT TO MEET THE INVESTMENT AND AT THE SAME TIME ASSESSEE RAISED A LOAN, IT CAN BE PRESUME D THAT THE INVESTMENT WAS MADE FROM THE AVAILABLE INTEREST FREE FUNDS. SINCE, THE ASSESSEE WAS HAVING SUFFICIENT FU NDS FOR MAKING THE INVESTMENT AND HAD MADE REASONABLE SUO- MOTO DISALLOWANCE, CONSIDERING THE TOTALITY OF FACT S, IN MY VIEW, NO FURTHER DISALLOWANCE WAS REQUIRED TO BE MA DE. IDENTICAL IS THE SITUATION IN THE CASE OF RAJEEV S. RENIWAL. THE LD. ASSESSING OFFICER IS DIRECTED TO RESTRICT T HE DISALLOWANCE WHICH HAS ALREADY BEEN MADE BY THE ASSESSEE, THEREFORE, BOTH THESE APPEALS ARE ALLOWED . FINALLY, ALL THESE THREE APPEALS OF THE RESPECTIVE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 09/08/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 09/08/2016 ITA NO.1447, 1485 & 1486/MUM/2015 RAKESH S. RENIWAL & ORS. 7 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * / THE CIT, MUMBAI. 4. ) ) * / CIT- , MUMBAI 5. +,- ' , ) '#$ ' / , / DR, ITAT, MUMBAI 6. -0 1$ / GUARD FILE. & / BY ORDER, (+# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI