Paras Javerilal Jain, Dhule V. Deputy Commissioner of Income-tax,

ITA 1487/PUN/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6169 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-09-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 13-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Gift; Earning of tax free income; Corroborative evidences; Rule 8D; Capital Gains
• Section: 14A; 133(6); 143(1); 251; 208; 68

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, AM . / ITA NO.1487/PUN/2015 / ASSESSMENT YEAR : 2011-12 SHRI PARAS JAVERILAL JAIN, PLOT NO.267, SHAHADA ROAD, DONDAICHA, PIN 425408, TAL : SHINDKHEDA, DIST. DHULE. PAN : AAKPJ8353R. . / APPELLANT V/S THE DY.COMMISSIONER OF INCOME TAX , CIRCLE-3(1), DHULE. . / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO. REVENUE BY : SHRI M.K. VERMA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 1, NASHIK DATED 14.09.2015 FOR THE ASSESSMENT YEAR 2011-12. 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 BUSINESS OF WHOLESALE TRADING OF GUAR REFINED DAL AND TRADIN G IN PLOTS. ASSESSEE ELECTRONICALLY FILED HIS RETURN OF INCOME ON / DATE OF HEARING : 18.10.2018 / DATE OF PRONOUNCEMENT: 11.01.2019 2 ITA NO.1487/PUN/2015 14.09.2011 DECLARING TOTAL INCOME OF RS.10,37,650/- AND AGRICULTURAL INCOME OF RS.1,47,709/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3 ) OF THE VIDE ORDER DATED 26.03.2014 AND THE TOTAL INCOME WAS DE TERMINED AT RS.18,30,421/-. AGGRIEVED BY THE ORDER OF AO, ASSESSE E CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 14.09.201 5 (IN APPEAL NO.NSK/CIT(A)-1/122/2014-15) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON T H E FACTS AND IN THE P REVAILING CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISION OF LAW, IT MAY PLEASE BE HELD THAT THE LEARNED C I T(A) HAS GROSSLY ERRE D IN CONFIRMING THE ADDITION OF RS.6,50,000/- EVEN - THOUGH, ALL THE INGREDIENTS RE Q UIRES TO PROVE THE CREDITS AS PER THE PROVISION OF SECTION 68 OF THE I T ACT, HAVE BEEN FULL-FILLED BY THE APP ELL A NT AND ALSO PROVED THE GEN U INENESS OF SAID GIFT . THEREFORE, FINDING OF THE A.O AND CIT(A) MAY PLEASE B E VACATE D AND ADDITION MA Y PLEASE BE DELETED. 2. ON THE FACTS AND IN THE CI R C U MSTANCES PREVAILING IN THE CASE AND AS PER THE PROVISION OF LAW, IT MAY PLEASE B E H E LD THAT THE LEARN E D CIT(A) HAS GROSSLY E RRED IN CONFIRMING TH E ADDITION OF RS.21,849/- EVEN-THOUGH, PROVISION OF S ECTION 14A IS NOT APP L ICABLE TO THE FACTS OF THE CASE , AS SUFFICIENT OWN FUNDS WERE AVAILAB L E WITH THE AP P EL L ANT FOR MAKING SUCH INVESTMENT AND A.O HAS NOT PROVED ANY NEXUS OF TH E S A ID INVESTM E NT WAS MADE OUT OF THE BORROWED FUND. THE CIT(A) VIOLATI N G THE P RINC I P L ES LAI D DOWN IN THE DECISION OF JURISDICTIONAL HIGH COURT, AND CONFIRMED THE ADDITI ON. THEREFORE, FINDING OF THE AO AND CIT(A) MAY PLEASE BE VACATED AND ADDITION MAY PLEASE BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER THE PROVISION OF LAW, IT MAY PLEASE BE HELD THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN RESTRICTING THE DEVELOPMENT EXPENSES AT RS.2,00,000 /- , AS AGAINST CLAIMED AT RS.5,89,000/- IN THE YEAR 200 9-10. THEREFORE, THE SAID EXPENDITURE INCURRED IN THE EARL IER YEAR AND WHICH WAS EITHER ALLOWED U/S 143(1) OR 143(3), CANNOT BE DISALLOWED ARBITRARILY ON ASSUMPTION AND PRESUMPTION BASIS. THEREFORE, FINDING OF THE A . O AND CIT(A) MAY PLEASE BE VACATED AND ADDITION MAY PLEASE BE DELETED. 3 ITA NO.1487/PUN/2015 3. 1 ST GROUND IS WITH RESPECT TO ADDITION OF RS.6,50,000/- U/S 68 OF THE ACT. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT ASSESSEE HAD RECEIVED GIFT OF RS.6,50,000/- FROM SUS HILADEVI RAMESH JAIN (THE DONOR) WHICH WAS CREDITED TO HIS CAPITAL ACCOUNT. THE ASSESSEE WAS ASKED TO EXPLAIN THE AMOUNT CREDITED IN THE CAPITAL ACCOUNT WITH SUPPORTING EVIDENCE AND MATER IAL. ASSESSEE FURNISHED THE COPY OF THE ACKNOWLEDGMENT OF RE TURN OF INCOME AND COMPUTATION OF INCOME OF THE DONOR. ON PERUSIN G THE COMPUTATION OF INCOME OF THE DONOR, AO NOTICED THAT DONOR HAD DECLARED TOTAL INCOME OF RS.1,86,177/- WHICH COMPRISED ON INTEREST FROM BANK (RS.456/-), INTEREST ON FDRS (RS.2,130/-) AND INTERE ST FROM PARTIES (RS.2,12,364/-). AO THEREAFTER ISSUED A LETTER T O THE DONOR U/S 133(6) OF THE ACT ASKING THE DETAILS FOR PAN, COMPUTATION OF INCOME, LEDGER ACCOUNT ETC. THE DONOR FU RNISHED HER BANK STATEMENT WITH SBI BRANCH, BEKANER, JODHPUR B EARING ACCOUNT NO.61001363152. ON ANALYZING THE BANK STATEME NT, AO NOTICED THAT THE DONOR HAS DEPOSITED CASH OF RS.5,00,000/ - ON THE SAME DAY ON WHICH THE GIFT WAS GIVEN BY HER TO THE ASSE SSEE. HE FURTHER NOTICED THAT THE BANK STATEMENT REFLECTED THE T RANSACTIONS INVOLVED IN THE SMALL AMOUNT EXCEPT ONE TRANSACTION OF RS .1.5 LACS ON 27.09.2010 WHICH WAS AGAIN GIFT BY HER TO THE ASSESSE E. HE NOTICED THAT EXCEPT FOR THE GIFT RELATED TRANSACTIONS O F MAJOR AMOUNTS, NO TRANSACTIONS INVOLVING MAJOR AMOUNTS WERE N OTICED IN THE BANK ACCOUNT. HE ALSO NOTICED THAT THAT DONOR NEIT HER HAD RECEIVED NOR HAD GIVEN ANY GIFT IN THE LAST FOUR YEARS EXC EPT TO THE 4 ITA NO.1487/PUN/2015 ASSESSEE. AO THEREFORE CONCLUDED THAT THERE WAS NOTH ING TO SHOW THAT THE DONOR HAS FINANCIAL CAPACITY AND CREDITWORTHINESS TO GIVE GIFT TO THE ASSESSEE. AO THEREFORE DID NOT ACCEPT THE CR EDIT OF GIFT OF RS.6,50,000/- TO ASSESSEE. HE ACCORDINGLY TREATED THE AMOUNT OF GIFT OF RS.6,50,000/- CLAIMED BY THE ASSESSEE AS INCOME OF T HE ASSESSEE AND MADE ITS ADDITION U/S 68 OF THE ACT. AGG RIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT (A), WHO UPHELD THE ORDER OF AO BY OBSERVING AS UNDER : 6.6 FROM THE DISCUSSION CITED, SUPRA, IT EMERGES T HAT THE OPINION OF THE AO IS REQUIRED TO BE FORMED OBJECTIVELY WITH RE FERENCE TO THE MATERIAL ON RECORD. SUCH OPINION FORMED BY THE AO I TSELF CONSTITUTES A PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE I.E. TH E RECEIPT OF MONEY AND IF THE ASSESSEE FAILS TO REBUT THE SAID EVIDENC E THE SAME CAN BE USED AGAINST THE ASSESSEE BY HOLDING THAT I T WAS A RECEIPT OF INCOME IN NATURE. ALL ISSUES ARE ESSENTIALLY IN THE REALM OF APPRECIATION OF FACTS. 6.7 IN THE PRESENT CASE, THE AO AFTER CONSIDER I NG THE MATERIAL AVAILABLE ON RECORD AND EXAMINING THE FACTS PRODUCE D HAS OBSE R VED THAT THE DONOR HAS DEPOSITED THE CASH ON THE SAME D AY ON WHICH THE GIFT WAS GIVEN TO THE DONE . THEREFORE, THE INFERENCE DRAWN BY THE AO THAT THE G I FT IS NON GENUINE IS NOT WITHOUT ANY BASIS. THE AO ALSO FOUND THAT THE DONOR HAD NO BALANCE TO GIVE TH IS G I FT. JUST BEFORE GIVING GIFT IT DEPOSITED CASH AND FORWARDED THE SAME TO THE APPELLANT . THIS SHOWS THAT DONOR DID NOT POSSESS THE CREDITWORTHINESS TO GIVE THE GIFT . FURTHER, THE APPELLANT NEITHER BEFORE THE AO NOR BEFORE ME COULD PRODUCE ANY SUBST ANTIATING DOCUMENT TO PROVE THE GENUINENESS OF TRANSACTIONS . MERELY PROVING THE I DENTITY OF THE DONOR DOES NO T DISCHARGE THE ONUS OF THE ASSESSEE IF THE CAPAC I TY O R CREDITWORTH I NESS OF T H E DONOR IS NOT PROVED. THE ASSESSEE ALSO HAS TO PROVE THE CAPACITY TO G I VE G IF T OF THE DONOR. FOR EXAMPLE I N SHANKAR GHOSH V I T O ( 1985 ) 23 TTJ ( CA L . ) 20 T H E ASSESSEE FAI L ED TO PROVE THE CAPACITY OF THE PERSON FROM WHOM HE H AD AL L EGEDLY TAKEN LOAN. FURTHER, THE ASSESSEE COULD NOT EXPLAIN THE REASON FOR THE GIFT OR WHAT WAS THE SPE C I AL OCCASION FOR WHICH THE G I FT WAS GIVEN . THERE F O R E , TH E GIF T AMOUNT WAS RIGHTLY HELD AS ASSESSEE ' S OWN UND I SC L OSED INCOME. I N V I EW OF TH I S FACT , TH R OUGH THE APPELLANT IS ABLE TO ESTABLISH THE IDENTITY OF THE DONOR , IT CANNOT BE SAID THAT THE ASSESSEE WAS ABLE TO PROVE THE CRE DITWOR T HINESS OF THE DONOR OR THE GENUINENESS OF TRANSACTION OF THE GIFT . A HARMON I OUS C ONST R UCTION . OF SECTION 106 OF THE INDIAN EVIDENCE ACT AND 68 OF THE IT ACT WI L L BE THAT THOUGH APART FROM ESTABL I SHING THE IDENTITY OF THE DONOR T HE ASSESSEE M UST ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE C R ED IT WORTH I NESS OF THE DONO R. I N VIEW OF THIS FACT , THROUGH THE APPELLANT IS ABLE TO ESTABL I SH THE I DENTITY OF THE DONOR , IT CANNOT BE SAID THAT THE ASSESSEE WAS AB L E TO PROVE TH E 5 ITA NO.1487/PUN/2015 CREDITWORTHINES S OF THE DONOR OR THE GENUINENESS OF TRANSACT I ON OF TH E L OA N. THEREFO R E , THE AO HAD RIGHTLY ADDED THE SUM OF RS.6,50,000/- TO THE APPE LLANT'S INCOME AND HELD I T TO BE SUBJECT TO TAX. 6.8 HUMAN PROBABILITY TEST IS ONE OF THE IMPORTANT TESTS LAID DOWN BY SUPREME COURT IN ORDER TO CHECK THE GENUINENESS OF TRANSACTION ENTERED INTO BOOKS OF ACCOUNT OF THE ASSESSEE. SHE THEREAFTER AFTER REFERRING TO THE HUMAN PROBABILITY TE ST AS LAID DOWN IN DURGA PRASAD MORE REPORTED IN (1971) 82 ITR 5 40 (SC) AND THE DECISION IN THE CASE OF SUMATI DAYAL VS. CIT (1995 ) 214 ITR 801 (SC) OBSERVED AS UNDER : 6.9.2. THUS, THE COURT HAS LAID DOWN A TEST TO ANAL YSES THE GENUINENESS AS OF THE ENTRY THROUGH THE LOGICAL ANA LYSIS. THE HUMAN PROBABILITY TEST HAS BEEN APPLIED IN PLETHORA OF CASES FOR HACIENDA FARMS (P) LTD., VS. CIT (2011) 239 (BOM) 3 85, MAJOR METALS LTD. 2012 251 CTR (BOM) 385 ETC. APPLYING TH E HUMAN PROBAB I LITY TEST IN MY OPINION THE APPELLANT IS NOT ABLE TO PROVE THE CREDITWORTHINESS OF THE LENDER AND THE GENUINENESS OF THE LOAN TRANSACTION . 6.9.3 SIMILARLY, THE ASSESSEE HAS PLACED RELIANCE O N NUMBER OF OTHER CASE LAWS IN SUPPORT OF ITS CONTENTION THAT NO ADDI TION ON CASH CREDITS CAN BE MADE. HOWEVER , THE ASSESSEE HAS NOT BEEN ABLE TO DEPICT SIMILARITY AND EQUITABILITY OF FACTS FROM TH E CASE CITED WITH HIS OWN CASE . PERUSAL OF THESE DECISIONS , HOWEVER , SHOWS THAT THE JUDGMENTS OF HON'BLE COURTS WERE BASED O N THE FACTS AND THE CASES WHICH ARE BEING DEC I DED AND WHICH ARE D I ST I NGU I SHAB L E FROM THE FACTS IN THE CASE OF ASSESSEE . 6.10 IN VIEW OF THE FACTS OF THE CASE AND RELEVANT JUD I C I AL PRONOUNCEMENT , I HOLD THAT THE ASSESSING OFFICER WAS RIGHT I N REJECTING THE CLAIM OF APPE L LANT OF GIFT OF RS. 6 , 50 , 000/- AS THE BONAFIDE OF THE SAME WA S NO T ESTABLISHED . THE CONTENTION OF THE APPELLANT STANDS REJECTED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL. 4. BEFORE ME, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFO RE AO AND LD.CIT(A) AND FURTHER POINTED TO THE LETTER OF THE DONOR WHICH WAS ADDRESSED TO THE AO WHEREIN THE DONOR HAD CONFIRMED THE GIFT MADE BY HER TO THE ASSESSEE. HE SUBMITTED TH AT THE GIFT 6 ITA NO.1487/PUN/2015 WAS THROUGH CHEQUES. HE ALSO POINTED TO THE COMPUTATIO N OF INCOME WHICH IS PLACED AT PAGE 126 OF THE PAPER BOOK AND FROM THE AFORESAID COMPUTATION, HE SUBMITTED THAT THE ASSESSEE HA D TOTAL INCOME OF RS.2.6 LAKHS. HE THEREAFTER POINTED TO THE DECLA RATION OF GIFT WHICH IS PLACED AT PAGE 179 OF THE PAPER BOOK WHEREIN THE DONOR HAS CONFIRMED THE GIVING OF GIFT TO THE ASSESSEE. H E FURTHER SUBMITTED THAT THE ASSESSEE WAS BROTHER-IN-LAW OF THE D ONOR AND THE GIFT WAS BETWEEN CLOSE RELATIVES. HE SUBMITTED THAT ASSESSEE HAS DEMONSTRATED THE CAPACITY AND THE GENUINENESS OF G IFT. HE FURTHER SUBMITTED THAT NO QUERY WITH RESPECT TO DEPOSIT OF CASH WAS RAISED BY THE AO AND THE SAME WAS NOT CONFRONTED TO T HE DONOR. HE THEREAFTER PLACED RELIANCE ON THE DECISION OF HONBLE G UJARAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS REPOR TED IN 256 ITR 360, DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF NEMI CHAND KOTHARI VS. CIT AND ANOTHER AND THE DECISIO N OF PUNE TRIBUNAL IN THE CASE OF ITO VS. SMT. INDIRA KAMALAKAR YE ULA (IN ITA NO.021/PN/2012 ORDER DT.27.11.2012). HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISIONS. HE THEREFORE SUBMITTED THAT SINCE THE ASSESSEE HAS SATISFIED THE THREE CONDITIONS STIPULATE D U/S 68 OF THE ACT NAMELY, THE IDENTITY OF THE CREDITOR, TH E GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR NO ADDITION IS CALLED FOR AND SUBMITTED THAT THE ADDITION BE DELETED. LD.D.R. ON THE OTHER HAND, TOOK ME THROUGH THE FINDINGS OF AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE H AS NOT PROVED THE CAPACITY OF THE DONOR TO THE GIFT. HE ALSO PO INTED TO THE FINDINGS OF AO WHEREIN HE HAS NOTED THAT CASH WAS DEPOSIT ED ON THE SAME DAY ON WHICH THE CHEQUE WAS ISSUED TO THE A SSESSEE. HE 7 ITA NO.1487/PUN/2015 ALSO PLACED RELIANCE ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE (P) LTD., REPORTED IN (1994) 208 465 (CALCUTTA). HE THUS SUPPORTED THE ORDER OF AO AND LD.CIT(A). 5. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESP ECT TO ADDITION U/S 68 OF THE ACT. IT IS UNDISPUTED FACT THAT AS SESSEE HAS RECEIVED A GIFT OF RS.6,50,000/- FROM SUSHEELA DEVI JAIN, WHO IS STATED TO BE RELATED TO THE ASSESSEE. IT IS ALSO AN U NDISPUTED FACT THAT GIFT HAS BEEN RECEIVED THROUGH BANK CHANNELS. HOWE VER, I FIND THAT AO AFTER CALLING FOR THE DETAILS U/S 133(6) OF THE ACT AND ON EXAMINATION OF THE BANK ACCOUNT OF THE DONOR HAS NOTED THAT THE DONOR (SUSHEELA DEVI JAIN) HAD DEPOSITED CASH OF RS.5,00,000 /- ON THE SAME DATE ON WHICH THE GIFT WAS GIVEN BY HER TO THE ASSESSEE. AO HAS ALSO NOTED THAT THE BANK STATEMENT REFLECTED ONLY THE SMALL TRANSACTIONS INVOLVING SMALL AMOUNTS EXCEPT FOR THE TRANSACTION OF RS.1.5 LACS ON 27.09.2010 WHICH WAS THE GIFT TO ASSESSEE. AO HAS ALSO NOTED THAT DONOR HAD NEITHER RE CEIVED NOR GIVEN GIFT TO ANY PERSON IN THE LAST FOUR YEARS EXCEPT TO THE ASSESS EE AND THAT THE DONOR HAD DECLARED TOTAL INCOME OF RS.1,86,1 77/-. THE AFORESAID FINDINGS OF AO HAS NOT BEEN CONTROVERTED BY LD.A.R. FURTHER THE ONUS U/S 68 OF THE ACT CAN BE SAID TO HAV E BEEN DISCHARGED ONLY WHEN THE ASSESSEE PROVES IDENTITY AND CAPACITY OF THE CREDITOR ALONG WITH THE GENUINENESS OF TRANSACTION TO THE SATISFACTION OF THE AO. ALL THE THREE CONSTITUENTS ARE REQ UIRED TO BE 8 ITA NO.1487/PUN/2015 CUMULATIVELY SATISFIED. IF ONE OR MORE OF THEM IS ABSENT, THEN AO CAN LAWFULLY MAKE ADDITION. 6. BEFORE ME LD.A.R. HAS HOWEVER RELIED ON THE DECISIONS OF DCIT VS. ROHINI BUILDERS (SUPRA) NEMI CHAND KOTHARI VS. C IT AND ANOTHER (SUPRA) AND ITO VS. SMT. INDIRA KAMALAKAR YEULA (SUPRA). IT IS A SETTLED LEGAL POSITION THAT EVERY CASE DEPENDS ON ITS OWN FACTS AND EVEN A SLIGHTEST CHANGE IN THE FACTUAL SCENARIO MAKES ONE CASE DISTINGUISHABLE FROM ANOTHER. I FIND THAT THE FACTS I N THE CASES RELIED UPON BY LD.A.R. ARE DISTINGUISHABLE AND ARE N OT APPLICABLE TO THE PRESENT SET OF FACTS BECAUSE IN NONE OF THE CASES IT WAS A CASE WHERE THE AO HAD FOUND THAT THE DONOR HAD DEPOSITED CASH ON THE SAME DAY ON WHICH THE GIFT WAS GIVEN BY T HE DONOR WHEREAS IN THE PRESENT CASE, AO HAS OBSERVED THAT CAS H WAS DEPOSITED BEFORE GIVING THE GIFT TO ASSESSEE AND THE BANK ACCOUNT OF THE DONOR DID NOT REFLECT ANY MAJOR MONETARY TRANSACTIO NS. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, I FIND NO REA SON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS, THE GROUND OF THE ASSESSEE IS DISMISSED. 7. 2 ND GROUND IS WITH RESPECT TO ADDITION OF RS.21,849/- U/S 14A OF THE ACT. 7.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSES SEE HAD RECEIVED EXEMPT INCOME IN THE FORM OF DIVIDEND FROM THE COMPANIES AND EXEMPT CAPITAL GAINS FROM SHARES APART FROM MATURITY PROCEEDS FROM LIC MONEY BACK POLICY. ASSESSEE WAS A SKED TO 9 ITA NO.1487/PUN/2015 EXPLAIN AS TO WHY THE PROVISIONS OF SEC.14A OF THE ACT WE RE NOT APPLICABLE. AO ALSO NOTICED THAT ASSESSEE HAD DEBITED THE NET INTEREST OF RS.8,68,012/-. AO NOTED THAT ASSESSEE HAS N OT PROVED THE NEXUS OF INVESTMENTS WITH OWN FUNDS. HE WAS OF THE VIEW THAT THE PROVISIONS OF SEC.14A OF THE ACT ARE APPLICABLE. HE THER EAFTER WORKED OUT THE DISALLOWANCE U/S 14A OF THE ACT AT RS.2 1,849/- AND MADE ITS DISALLOWANCE. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL. 8. BEFORE ME LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT NO PROPER SATISFACTIO N WAS RECORDED BY THE AO BEFORE INVOKING THE PROVISIONS OF SEC.14A OF THE ACT. ON THE MERITS HE POINTING TO THE CAPITAL ACC OUNT OF THE ASSESSEE WHICH IS PLACED AT PAGE 38 OF THE PAPER BOOK S UBMITTED THAT ASSESSEES CAPITAL ACCOUNT IS IN EXCESS OF RS. 2.29 C RORES AS AGAINST THE INVESTMENTS IN SHARES OF RS.7.92 LACS. HE THER EAFTER SUBMITTED THAT ASSESSEE HAS EARNED NET INTEREST INCOME AND IT IS NOT A CASE OF NET INTEREST PAYMENT AND IN SUPPORT OF T HE AFORESAID CONTENTION, HE POINTED TO THE PROFIT AND LOSS ACCOUNT W HICH IS PLACED AT PAGE 34 OF THE PAPER BOOK. HE THEREFORE RE LYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LIMITED VS. DCIT REPORTED IN (2014) 366 ITR 505 (BOM) SUBM ITTED THAT IN SUCH A SITUATION, NO DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) IS CALLED FOR. HE THEREFORE SUBMITTED THAT NO DISALLOW ANCE IS CALLED FOR IN THE PRESENT CASE. AS AN ALTERNATIVE CONTE NTION, HE 10 ITA NO.1487/PUN/2015 SUBMITTED THAT 50% OF THE DISALLOWANCE MAY BE UPHELD. LD.D .R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 9. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO DISALLOWANCE OF INTEREST U/S 14A R.W.R 8D OF THE INCOME TA X RULES. THE COPY OF THE BALANCE-SHEET AS ON 31.03.2011 WHICH IS PLACED IN THE PAPER BOOK REVEALS THAT ASSESSEES CAPITAL ACCOU NT IS 2.29 CRORES AS AGAINST THE INVESTMENTS OF RS.7.92 LACS MEANING THEREBY THAT THE AVAILABILITY OF INTEREST FREE FUNDS ARE MUCH MORE THAN THE INVESTMENTS. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LIMITED (SUPRA) HAS HELD THAT WHEN THE OWN FUND S ARE MORE THAN INVESTMENTS THEN NO DISALLOWANCE OF INTEREST U/ S 14A OF THE ACT IS CALLED FOR. THE AFORESAID RATIO OF HONBLE BOMB AY HIGH COURT HAS BEEN FOLLOWED IN VARIOUS DECISIONS RENDERED BY T HE PUNE BENCHES OF THE TRIBUNAL. BEFORE ME, REVENUE HAS NOT PLAC ED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. FURTHER THE PR OFIT AND LOSS ACCOUNT WHICH IS PLACED AT PAGE 34 OF THE PAPER BO OK ALSO SHOWS THAT ASSESSEE HAS EARNED NET INTEREST INCOME. CONSIDERING THE AFORESAID FACTS AND IN THE LIGHT OF THE AFORESAID DECIS ION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD ., (SUPRA), I HOLD THAT NO DISALLOWANCE OF INTEREST UNDER RU LE 8D(2)(II) IS CALLED FOR IN THE PRESENT CASE. I THEREFORE DIRECT TH AT THE DELETION OF ADDITION TO THE EXTENT OF RS.18,044/- MADE BY THE AO. AS FAR AS DISALLOWANCE U/S 14A R.W.R 8D(2)(III) OF ADMINISTRATIVE EXPENSES O F RS.3,805/- IS CONCERNED, I FIND NO REASON TO INTERFERE WITH THE 11 ITA NO.1487/PUN/2015 ORDER OF LD.CIT(A). THUS, THE GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 10. 3 RD GROUND IS WITH RESPECT TO DISALLOWANCE OF DEVELOPMENT EXPENSES. 10.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NO TICED THAT ASSESSEE HAS SHOWN LONG TERM CAPITAL GAINS OF RS.7,61 ,373/-. THE ASSESSEE WAS ASKED TO FURNISH EVIDENCE AND MATERIAL SUPPORTING INCOME FROM CAPITAL GAINS. ON THE BASIS OF SUBMIS SIONS MADE BY THE ASSESSEE, AO NOTICED THAT ASSESSEE HAD PU RCHASED A LAND FOR RS.1,20,000/- IN 2013 AT SY.NO.88/1 OF DONDAICHA. ASSESSEE HAD FURTHER ADDED COST OF IMPROVEMENT INCURRED IN THE YEAR 1999-10 AT RS.5,89,540/-. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE COST OF IMPROVEMENT OF RS.5,89,540/-. AO NOTICED THAT ASSESSEE DID NOT FURNISH ANY EVIDENCE WITH RESPECT TO THE COST OF IMPROVEMENT. HE ACCORDINGLY DENIED THE COST OF IMPROVE MENT AND RE-WORKED THE CAPITAL GAINS AT RS.8,56,712/- AND DEN IED THE EXCESS CLAIM OF RS.95,312/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER : 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE SUBMISSION OF THE APPELLANT AND THE ORDER OF THE AS SESSING OFFICER MATERIAL AVAILABLE ON RECORDS. FROM THE DETAILS SU BMITTED BY THE APPELLANT IT IS OBSERVED THAT ALL THE PAYMENTS MADE FOR COST OF IMPROVEMENT IS MADE IN CASH. THIS CANNOT BE SUBSTA NTIATED BY ANY CORROBORATING EVIDENCE. CONSIDERING THE ENTIRE FAC TS AND CIRCUMSTANCES OF THE CASE, THE COST OF IMPROVEMENT IS RESTRICTED TO RS.2,00,000/-. THE AO IS DIRECTED TO RE-COMPUTE TH E CAPITAL GAIN ACCORDINGLY. GROUND IS ALLOWED IN PART. 12 ITA NO.1487/PUN/2015 AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL. 11. BEFORE ME, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE COST OF IMPROVEMENT WAS ADDED TO THE FIXED ASSETS AND IS REFLEC TED IN THE ASSESSEES BALANCE-SHEET FOR THE PERIOD 31.03.2010 AND IN SUPPORT OF WHICH HE POINTED TO THE FIXED ASSET SCHEDULE PLACED AT PAGE 31 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT THE ADDIT IONS MADE IN EARLIER YEARS HAS BEEN ACCEPTED BY REVENUE. HE FURT HER SUBMITTED THAT THE ADDITION HAS BEEN MADE ON ESTIMATE B ASIS WITHOUT GIVING ANY REASONS AND THEREFORE SUBMITTED THAT THE ADDITION BE DELETED. AS AN ALTERNATIVE CONTENTION, HE SUBM ITTED DISALLOWANCE BE RESTRICTED TO A REASONABLE AMOUNT. LD.D.R . ON THE OTHER HAND, SUPPORTED THE ORDER OF AO. 12. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESP ECT TO THE DISALLOWANCE OF COST OF IMPROVEMENT. I FIND THAT AO WHILE DISALLOWING THE CLAIM HAS NOTED THAT ASSESSEE HAD NOT PRO DUCED ANY EVIDENCE TO PROVE THE GENUINENESS OF EXPENDITURE ON IMPROVEMENT TO THE ASSETS. I FURTHER FIND THAT LD.CIT(A) THOUGH HAS NOTED THAT ALL THE PAYMENTS MADE TOWARDS THE COS T OF IMPROVEMENT WAS INCURRED IN CASH AND WAS NOT SUBSTANT IATED BY ANY CORROBORATIVE EVIDENCE BUT RESTRICTED THE COST OF IM PROVEMENT TO RS.2 LACS. CONSIDERING THE FACT THAT THE COST OF IMPR OVEMENT 13 ITA NO.1487/PUN/2015 HAS BEEN ACCEPTED BY THE REVENUE IN EARLIER YEARS AND REVENUE HAS NOT DOUBTED THE INCURRING OF COST OF IMPROVEMENT, I AM OF THE VIEW THAT THE COST OF IMPROVEMENT BE ALLOWED TO THE EX TENT OF RS.3 LACS. I DIRECT ACCORDINGLY. THUS, THE GROUND OF THE ASSE SSEE IS PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 11 TH DAY OF JANUARY, 2019. SD/- ( ANIL CHATURVEDI ) ' / ACCOUNTANT MEMBER PUNE; DATED : 11 TH JANUARY, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, NASHIK. PR. CIT-1, NASHIK. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &' , / ITAT, PUNE.