ASHWINI MANMOHAN KAKKAR, MUMBAI V. DY.CIT.,-1(3), MUMBAI

ITA 1538/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3578 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M MURLI
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER ./ I.T.A. NO.1538/MUM/2012 / ASSESSMENT YEAR: 2008-09 MR. ASHWINI MANMOHAN KAKKAR 11B, JOLLY MAKER APT.1 CUFFE PARADE COLABA,MUMBAI-400 005. PAN:AACPK 9698 Q VS. DY. DIRECTOR OF INCOME TAX -1(3), AAYAKAR BHAVAN MAHARSHI KARVE MARG MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M. MURLI A SSESSEE BY: SHRI VIJAY KOTHARI / DATE OF HEARING :02.03.2016 / DATE OF PRONOUNCEMENT : 02 0202 02 .03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) ! '# PER RAJENDRA, AM - CHALLENGING THE ORDER DT.31.1.2011 OF CIT(A)-2, MUM BAI THE ASSESSEE HAS FILED THE PRESENT APPEAL RAISING THREE GROUNDS OF APPEAL.DURING THE C OURSE OF HEARING BEFORE US THE AUTHORISED REPRESENTATIVE (AR)DID NOT PRESS GROUND NO.1. HENCE , SAME STANDS DISMISSED AS NOT PRESSED. 2. GROUND NO.2 IS ABOUT DISALLOWANCE OF RS.5.75 LAKHS U/S.14A OF THE ACT R.W. RULE 8D OF THE INCOME TAX RULES, 1961 (RULES). DURING THE ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER (AO)FOUND THAT THE ASSESSEE HAD RECEIVED DIVIDEND I NCOME OF RS.36,466/-.APPLYING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE C ASE OF GODREJ & BOYCE CO. LTD.,THE AO MADE A DISALLOWANCE OF RS.5,75,033/- U/S. 14A FOR E ARNING TAX FREE INCOME. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY THAT NO EXPENDITURE WAS INCURRED IN RELATION TO EARNING OF EXEMPT INCOME DIRECTLY OR INDIRECTLY, THAT THE DISALLOWANCE SHOULD BE BASED ON A REASONABLE ME THOD. UPHOLDING THE ORDER OF THE AO,THE FAA DISMISSED THE APPEAL OF THE ASSESSEE. 3. BEFORE US,THE AR CONTENDED THAT ASSESSEE HAD NOT IN CURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME, THAT IT HAD NOT INCURRED INTEREST E XPENDITURE, THAT IT HAD RECEIVED INTEREST OF RS.80,022/-FROM OTHERS, THAT THE AO HAD BY MISTAKE CONSIDERED THE SAID AMOUNT AS INTEREST EXPENDITURE,THAT THE ASSESSEE HAD SHOWN PROFESSIONA L FEES OF RS.90 LAKHS AND SALARY OF RS.3.30 CRORES,THAT THE AO HAD NOT RECORDED HIS SAT ISFACTION BEFORE MAKING THE DISALLOWANCE, THAT THE ASSESSEE HAD INCURRED THE EXPENSES FOR HI S BUSINESS ONLY. ALTERNATIVELY, IT WAS ARGUED THAT REASONABLE DISALLOWANCE SHOULD BE MADE.THE DEP ARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD RECEIVED EXEMPT INCOME OF RS. 36,466/- ONLY, THAT THE AO HAD MADE DISALLOWANCE OF RS.5.75 LAKHS, THAT HE HAD NOT GIVE N ANY REASON FOR APPLYING PROVISIONS OF RULE 8D OF THE RULES. IN OUR OPINION, FOR MAKING DI SALLOWANCE U/S. 14A R.W.R RULE 8D OF THE RULES THE FIRST PRE-CONDITION IS INCURRING OF EXPEN DITURE BY AN ASSESSEE FOR EARNING EXEMPT INCOME.IN THIS CASE THE AO/FAA HAD NOT MENTIONED AS TO HOW MUCH EXPENDITURE WAS INCURRED BY THE ASSESSEE.THEY HAD MECHANICALLY APPL IED THE PROVISIONS OF SECTION/RULE 8D.IN OUR OPINION,THE APPROACH OF THE FAA IS NOT LEGALLY SUSTAINABLE.CONSIDERING THE AMOUNT 1538/M/12-ASHWINI MK 2 INVOLVED AND THE FACTORS LIKE-NON-RECORDING OF SATI SFACTION FOR MAKING DISALLOWANCE AND NON- INCURRING OF EXPENDITURE BY THE ASSESSEE-WE ARE REV ERSING THE ORDER OF THE FAA.GROUND NO.2 IS DECIDED IN FAVOUR OF THE ASSESSEE. 5. GROUND NO.3 IS ABOUT DISALLOWANCE MADE BY THE AO, A MOUNTING TO RS.5.51 LAKHS UNDER THE HEAD TRAVELLING EXPENSES.DURING THE ASSESSMENT PROC EEDINGS THE AO HAD MADE AD HOC DISALLOWANCE OF TRAVELLING EXPENSES @10%.THE FAA IN THE APPELLATE PROCEEDINGS UPHELD THE ORDER OF THE AO. 6. BEFORE US,THE AR ARGUED THAT THE ASSESSEE HAD NOT D ISCUSSED ANYTHING IN THE ASSESSMENT ORDER AS TO WHY THE DISALLOWANCE WAS BEING MADE,THA T HE HAD ADDED THE SUM IN THE COMPUTATION OF INCOME.DR LEFT THE ISSUE TO THE DIS CRETION OF THE BENCH. 7 .WE FIND THAT THE AO HAD NOT UTTERED A SINGLE WORD IN THE OPERATIVE PART OF THE ASSESSMENT ABOUT THE NON-ALLOWABILITY OF THE TRAVELLING EXPENS ES INCURRED BY THE ASSESSEE.IF HE HAD ANY DOUBT ABOUT INCURRING OF EXPENDITURE OR NON GENUINE NESS OF THE EXPENDITURE,HE SHOULD HAVE CALLED FOR AN EXPLANATION OF THE ASSESSEE.BUT,HE SI MPLY MADE AN AD-HOC DISALLOWANCE WITHOUT ASSIGNING ANY REASON.THE FAA HAS IGNORED THIS VITAL FACTOR.THEREFORE,WE ARE REVERSING THE ORDER OF THE FAA AND DECIDE GROUND NO.3 IN FAVOUR O F THE ASSESSEE. AS A RESULT, APPEAL FILED B Y THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND ,MARCH,2016. 2 , 2016 SD/- SD/- ( / AMIT SHUKLA ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, DATE: 02.03.2016 . . . .. . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , A , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.