Sandeep Omprakash Koyate, Ahmednagar V. Deputy Commissioner of Income-tax,

ITA 1536/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9311 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 13-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Assessee Lawyers: C V CHITALE
• Keywords: Income from undisclosed sources; Earning of tax free income
• Section: 14A

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 15 36 /P U N/201 6 / ASSESS MENT YEAR : 20 1 2 - 1 3 MR. SANDEEP OMPRAKASH KOYATE, PROP. SURYA CONSTRUCTION, A/P KASHIDA, NIWARA HOUSING SOCIETY, TAL KOPARGAON, DIST AHMEDNAGAR 423601 . / APPELLANT PAN: A IFPK3044F VS. THE DY. COMMISSIONER OF INCOME TAX , AHMEDNA GAR CIRCLE, AHMEDNAGAR . / RESPONDENT / APPELLANT BY : SHRI C.V. CHITALE / RESPONDENT BY : S HRI MUKESH JHA / DATE OF HEARING : 1 5 . 0 2 .201 8 / DATE OF PRONOUN CEMENT: 23 . 0 2 .201 8 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 2, PUNE , DATED 29 . 0 2 .20 1 6 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . ITA NO. 1536 /P U N/20 1 6 MR. SANDEEP OMPRAKASH KOYATE 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX , AHMEDNAGAR CIRCLE, AHMEDNAGAR HAS ERRED IN DISALLOWING LOSS HOUSE PROPERTY OF RS.1,50,000/ - AND THE COMMISSIONER OF INCOME TAX (APPEALS) 2, PUNE HAS ERRED IN CONFIRMING THE SAME. 2. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR HAS ERRED IN CONSIDERING AGRICULTURAL INCOME OF RS.90,250/ - AS INCOME FROM UNDISCLOSED SOURCES AND ADDING THE SAME UNDE R THE HEAD OF INCOME FROM OTHER SOURCES AND THE COMMISSIONER OF INCOME TAX (APPEALS) 2, PUNE HAS ERRED IN CONFIRMING THE SAME. 3. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR HAS ERRED IN TREATING CONTRIBUTION OF RS.1,50,07 5/ - BY TREATING THEM AS DONATIONS AND BY DISALLOWING THE DEDUCTION AND THE COMMISSIONER OF INCOME TAX (APPEALS) 2, PUNE HAS ERRED IN DISALLOWING DEDUCTION OF 50% OF THE CONTRIBUTION. 4. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHM EDNAGAR HAS ERRED IN DISALLOWING AN AMOUNT OF RS.19,47,835/ - UNDER THE PRETEXT OF SECTION 14A OF THE ACT AND THE COMMISSIONER OF INCOME TAX (APPEALS) 2, PUNE HAS ERRED IN DISALLOWING THE SAME. 5. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR C IRCLE, AHMEDNAGAR HAS ERRED IN DISALLOWANCE INTEREST ON ADVANCES MADE OF RS.29,589/ - AND THE COMMISSIONER OF INCOME TAX (APPEALS) 2, PUNE HAS ERRED IN CONFIRMING THE SAME. 3. THE GROUNDS OF APPEAL NO.2, 3 AND 5 ARE NOT PRESSED AND HENCE, THE SAME ARE DISM ISSED AS NOT PRESSED. 4. THE ISSUE IN GROUND OF APPEAL NO.1 IS AGAINST THE DISALLOWANCE OF LOSS FROM HOUSE PROPERTY CLAIMED AT 1,50,000/ - ON ACCOUNT OF INTEREST PAID ON HOUSING LOAN. THE ISSUE IN GROUND OF APPEAL NO.4 IS AGAINST THE DISALLOWANCE MADE U NDER SECTION 14A OF THE ACT AT 19,47,835/ - . 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A BUILDER AND PROMOTER AND WAS CARRYING ON THE ACTIVITIES UNDER THE NAME AND STYLE OF SURYA CONSTRUCTION. THE ASSESSEE HAD CLAIMED LOSS UNDER THE HEAD INCOME FROM ITA NO. 1536 /P U N/20 1 6 MR. SANDEEP OMPRAKASH KOYATE 3 HOUSE PROPERTY OF 1,50,000/ - BEING INTEREST ON LOAN. THE ASSESSEE POINTED OUT THAT LOAN WAS ACQUIRED FOR THE PURPOSE OF RESIDENTIAL UNIT AND ALSO FOR PREMISES LET OUT TO BHARAT PETROLEUM. THE ASSESSEE WAS ASKED TO BIFURCATE THE INTEREST P ORTION IN RELATION TO SELF OCCUPIED PROPERTY AND THE LET OUT PROPERTY. THE RESIDENTIAL PROPERTY BEING CLAIMED TO BE SELF OCCUPIED CONSISTED OF FOUR INDEPENDENT FLATS FROM FLAT NOS.101 TO 104 OF AURSHI RESIDENCY . T HE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS ENTITLED TO CLAIM LOSS OF INTEREST ON EITHER ONE FLAT. HOWEVER, THE ASSESSEE COULD NOT ESTABLISH THE NEXUS BETWEEN THE LOAN TAKEN AND LOAN UTILIZED AND THE CLAIM OF ASSESSEE WAS THUS, REJECTED. 6. THE CIT(A) HAS UPHELD THE ORDER OF ASSE SSING OFFICER, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 7. THE CLAIM OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE THE TRIBUNAL IS THAT THE PERUSAL OF DOCUMENT AT PAGE 18 OF PAPER BOOK WOULD SHOW THAT 2.40 LAKHS OF LOAN ACCOUNT WAS TRANSF ERRED TO CAPITAL ACCOUNT BEING UTILIZED FOR RESIDENTIAL PURPOSE. ATTENTION WAS DRAWN TO PAGE 37, WHEREIN IT IS CERTIFIED THAT THE LOAN WAS AGAINST RESIDENTIAL PROPERTY. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HOWEVER, PLACED RELIANCE O N THE ORDERS OF AUTHORITIES BELOW. 9. ON THE PERUSAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS IN RELATION TO ITA NO. 1536 /P U N/20 1 6 MR. SANDEEP OMPRAKASH KOYATE 4 DEDUCTION CLAIMED FROM THE SELF OCCUPIED PROPERTY ON ACCOUNT OF IN TEREST PAID ON BORROWED FUNDS UTILIZED FOR THE PURCHASE OF SAID PROPERTY. THE ACT PROVIDES DEDUCTION UP TO 1,50,000/ - OF INTEREST PAID ON LOAN WHICH HAS BEEN UTILIZED FOR THE PURCHASE OF PROPERTY, WHICH IS SELF OCCUPIED BY THE ASSESSEE. IN THE FACTS OF THE CASE, THE ASSESSEE HAD ACQUIRED FOUR INDEPENDENT FLATS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WAS ASKED TO EXPLAIN THE POSITION AND IT WAS ADMITTED THAT THERE WERE FOUR INDEPENDENT FLATS, WHERE THE FUNDS RAISED FOR ACQUIRING RESIDENTIAL HOUSE USE HA D BEEN SO UTILIZED, THEN THE ASSESSEE IS ENTITLED TO CLAIM INTEREST ON SUCH LOAN TO THE EXTENT OF 1,50,000/ - . THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAD PAID INTEREST ON SUCH LOAN. HOWEVER, AS POINTED OUT BY THE ASSESSING OFFICER, THE ASSESSEE HAD ACQUIRED FOUR INDEPENDENT FLATS THOUGH SERIATIMLY NUMBERED FLAT NOS.101 TO 104 ; THE CLAIM OF ASS ESSEE AT BEST COULD BE RESTRICTED TO ONE FLAT, IN VIEW OF THE PROVISIONS OF THE ACT. THERE IS MERIT IN THE PLEA OF ASSESSEE FOR CLAIMING THE AFORESAID DEDUCTION. HOWEVER, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE SAME ONLY IN RESPECT OF ONE FLAT I.E. ONE - FOURTH OF INTEREST PAID UP TO 1,50,000/ - . THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. 10. THE ISSUE IN GROUND OF APPEAL NO.4 IS AGAINST THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER HAD NOTED THAT THE ASSESSEE HAD MADE INVE STMENTS IN MUTUAL FUNDS OF 6,02,000/ - INVESTMENT IN SHARES OF 6,62,500/ - , INVESTMENT IN AGRICULTURAL LAND OF 2,21,78,600/ - AND INVESTMENT IN PPF OF 74,340/ - , ETC. AGGREGATING TO 2,35,17,440/ - AS SHOWN IN SCHEDULE D UNDER THE HEAD INVESTMENTS TO THE BALANCE SHEET. SINCE THE ITA NO. 1536 /P U N/20 1 6 MR. SANDEEP OMPRAKASH KOYATE 5 ASSESSEE HAD SHOWN EXEMPT INCOME IN ITS COMPUTATION OF INCOME, THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD NOT BE MADE IN VIEW OF THE PROVISIONS OF RULE 8D OF TH E INCOME TAX RULES, 1962 (IN SHORT THE RULES). THE ASSESSEE FAILED TO FURNISH ANY SUBMISSIONS AND THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE UNDER RULE 8D(II) OF THE RULES AT 18,86,485/ - AND UNDER RULE 8D(III) OF THE RULES AT 61,350/ - . THE ASSESSING OFFICER THUS, DISALLOWED SUM OF 19,47,835/ - UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. 11. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICE R, AGAINST WHICH THE PRESENT GROUND OF APPEAL RAISED BY THE ASSESSEE. 12. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS NO MERIT IN THE ORDER OF ASSESSING OFFICER AS THE INCOME FROM AGRICULTURAL LAND OWNED BY THE ASSESS EE IS NOT EXEMPT FROM TAX. HE POINTED OUT THAT AGAINST THE SAID AGRICULTURAL LAND, NA PERMISSION WAS TO BE RECEIVED AND THEREAFTER, DEVELOPMENT HAD TO BE CARRIED OUT. IN ANY CASE, THE LAND WAS WITHIN THE MUNICIPAL LIMITS AND HENCE, THE SALE OF AGRICULTUR AL LAND WAS ALSO NOT EXEMPT FROM TAX. HE THUS, STRESSED THAT THE INVESTMENT IN AGRICULTURAL LAND NEEDS TO BE EXCLUDED , A S INCOME ARISING THEREFROM WAS NOT EXEMPT FROM TAX. IN RESPECT OF BALANCE INVESTMENT I.E. MUTUAL FUND OF 6.02 LAKHS, INVESTMENT IN S HARES OF 6.62 LAKHS AND IN PPF OF 0.74 LAKHS, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT FUNDS OWNED BY THE ASSESSEE WERE TO THE EXTENT OF 56.79 LAKHS AS OPENING BALANCE. ATTENTION IN THIS REGARD WAS DRAWN TO PAGE 19 OF PAPER BOOK. HE FURTHER POINTED OUT THAT NO ITA NO. 1536 /P U N/20 1 6 MR. SANDEEP OMPRAKASH KOYATE 6 DISALLOWANCE WAS TO BE MADE UNDER RULE 8D(III) OF THE RULES IN RESPECT OF INVESTMENTS IN AGRICULTURAL LAND. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE O RDERS OF AUTHORITIES BELOW. 14. ON PERUSAL OF RECORD AND AFTER HEARING RIVAL CONTENTIONS AND AFTER VERIFYING THE CONTENTION OF ASSESSEE, WHERE THE AGRICULTURAL LAND IS WITHIN MUNICIPAL LIMITS AND HENCE, ITS SALE IS NOT EXEMPT FROM TAX AND IN CASE THE SAID AGRICULTURAL LAND RECEIVE S NA PERMISSION AND IS TAKEN FOR DEVELOPMENT, THEN ALSO THE INCOME ARISING THEREFROM IS NOT EXEMPT FROM TAX. HENCE, THE INVESTMENT IN AGRICULTURAL LAND IS NOT TO BE INCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THE ASSESSING OFFICER IS THUS, DIRECTED. 15. NOW, COMING TO THE BALANCE INVESTMENTS MADE BY THE ASSESSEE IN MUTUAL FUNDS, SHARES IN PPF. THE BALANCE SHEET OF ASSESSEE CLEARLY REFLECTS THAT THE OWN FUNDS AT 56.79 LAKHS AS OPENING ON THE START OF THE YEAR. IN SUCH CIRCUMSTANCES, WHERE OWN FUNDS WERE MUCH MORE THAN THE INVESTMENTS MADE, THEN THERE IS NO MERIT IN DISALLOWING ANY PART OF INTEREST EXPENDITURE UNDER RULE 8D(II) OF THE RULES . SECOND PART OF DIS ALLOWANCE WAS THE ADMINISTRATIVE EXPENSES UNDER RULE 8D(III) OF THE RULES , WHICH SHALL STAND REDUCED AFTER EXCLUDING THE INVESTMENT IN AGRICULTURAL LAND . THE ASSESSING OFFICER IS THUS, DIRECTED TO RE - WORK THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH ITA NO. 1536 /P U N/20 1 6 MR. SANDEEP OMPRAKASH KOYATE 7 RULE 8D OF THE RULES. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 1 6 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 23 RD DAY OF FEBRUARY , 201 8 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 23 RD FEBRUARY , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 2, PUNE ; 4. THE PR. CIT - 1, PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE