PRASHANT J ANDHARIA, MUMBAI V. DCIT 8(2), MUMBAI

ITA 1545/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3409 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Business income; Earning of tax free income; Additional evidence
• Section: 80C; 14A; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.1545/M/14 ( / ASSESSMENT YEAR: 2008-09) MR. PRASHANT J. ANDH ARIA 2 ND FLOOR, GHASWALA BUILDING, SIRM.V.ROAD, ANDHERI(EAST), MUMBAI - 400069 / VS. THE DEPUTY COMMISSIONER OF INCOME TAX 8(2) ROOM NO.218, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACM8741P ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 16.12.2015 /DATE OF PRONOUNCEMENT: 23.03.2016 !' / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL AGAINST THE ORDER DATED 18.12.20 13 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-17, MU MBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] FOR THE A SSESSMENT YEAR 2008-09. 2. THE ASSESSEE IS A RESIDENT INDIVIDUAL AND IS PRO PRIETOR OF M/S. PERRY IMPEX, WHO IS ENGAGED IN THE BUSINESS OF TRAD ING IN ASSESSEE BY: SHRI S.R.PARIKH DEPARTMENT BY: SHRI AKHILENDRA P. YADAV ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 2 CHEMICALS. THE ASSESSEE HAS SHOWN BUSINESS INCOME OF RS.2,07,79,472/- FROM HIS PROPRIETARY CONCERN, M/S. PERRY IMPEX AND INCOME FROM OTHER SOURCES OF RS.2,22,501/-, INC OME FROM SPECULATION BUSINESS OF RS.42,980/- AND INCOME FRO M SHORT TERM CAPITAL GAINS OF RS.2,75,974/-. AFTER CLAIMING DED UCTION U/S. 80C AND 80D OF RS.1,08,075/-, THE ASSESSEE HAS SHOWN NE T TAXABLE INCOME OF RS.2,12,11,760/-. THE ASSESSEE HAS ALSO EARNED DIVIDEND INCOME OF RS.4,71,987/- AND LONG TERM CAPITAL GAIN ON SALE OF MUTUAL FUND OF RS.12,67,903/- WHICH WERE CLAIMED AS EXEMPT. THE ASSESSING OFFICER ARRIVED AT THIS CONCLUSION THAT T HE LOAN A SUM OF RS.1,00,000/- TAKEN BY THE ASSESSEE FROM MANCHHAGAU RI M. ANDHARIA AND RS.5,00,000/- FROM GOPALIJI V. VARIYA AND RS.4,95,000/- FROM D.S.MEHTA WAS NOT CREDITWORTHY A ND GENUINE THEREFORE THE SAME WAS DECLINED AND ADDED TO THE IN COME U/S. 68 OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). THE ASSESSING OFFICER HAS ALSO APPLIED THE PROVISION U/S.14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 IN CONNECTION WITH TH E INCOME WHICH HAS BEEN CLAIMED AS EXEMPT CHALLENGED BY THE ASSESSEE WHICH WERE CONFIRMED BY THE LEARNED CIT(A). 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEALS:- A. ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CRE DITS RS.10,95,000/- 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 17, MUMBAI [CIT(A)] ERRED ON FACTS AND IN LAW IN UPHOLD ING THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX 8(2) , ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 3 MUMBAI (AO) MAKING AN ADDITION OF RS.10,95,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDITS AS UNDE R WITHOUT APPRECIATING THAT THE LOAN CREDITORS HAD CONFIRMED THE LOANS BY WAY OF LOAN CONFIRMATION LETTERS AND ALSO IN THE STATEMENT ON OATH BEFORE THE CIT(A): A) MS. MANCHHAGAURI A. ANDHARIA RS.1,00,000/- B) MR. GOPALJI V. VARIYA HUF RS.5,00,000/- C) MS. D.S.MEHTA RS.4,95,000/- 2) THE APPELLANT PRAYS THAT THE ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDITS OF RS.10,95,000/- AS MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS REQUIRED TO BE D ELETED: A) MS. MANCHHAGAURI A. ANDHARIA RS.1,00,000/- B) MR. GOPALJI V. VARIYA HUF RS.5,00,000/- C) MS. D.S.MEHTA RS.4,95,000/- B. DISALLOWANCE U/S. 14A RS.99,093/- 3) THE LEARNED CIT(A) HAVING HELD THAT THE APPELLANT H AD NOT INCURRED ANY DIRECT OR INDIRECT EXPENDITURE FOR EAR NING THE EXEMPT INCOME ERRED IN CONFIRMING THE DISALLOWANCE U/S.14A TO THE EXTENT OF RS.99,093/- OUT OF THE DISALLOWANC E OF RS.5,11,228/- AS MADE BY THE AO 4) THE APPELLANT PRAYS THAT THE DISALLOWANCE U/S.14A O F RS.99,093/- AS CONFIRMED BY THE CIT(A) MAY BE DELET ED. ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 4 C. DISALLOWANCE OUT OF SALES PROMOTION EXPENSES - RS.6,177/- 5) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPH OLDING THE ORDER OF THE AO MAKING A DISALLOWANCE OF RS.6,1 77/- OUT OF SALES PROMOTION EXPENSES. 6) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.6,1 77/- OUT OF SALES PROMOTION EXPENSES AS MADE BY THE AO AND A S CONFIRMED BY THE CIT(A) MAY BE DELETED. D. DISALLOWANCE OUT OF CONVEYANCE EXPENSES RS.3,676/ - 7) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPH OLDING THE ORDER OF THE AO MAKING A DISALLOWANCE OF RS.3,6 76/- OUT OF CONVEYANCE EXPENSES. 8) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.3,6 76/- OUT OF CONVEYANCE EXPENSES AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) MAY BE DELETED. E. DISALLOWANCE OUT OF MISC. EXPENSES RS.1,063/- 9) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPH OLDING THE ORDER OF THE AO MAKING A DISALLOWANCE OF RS.1,0 63/- OUT OF MISC. EXPENSES. 10) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.1,063/- OUT OF MISC. EXPENSES AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) MAY BE DELETED. ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 5 F. DISALLOWANCE OUT OF STAFF WELFARE EXPENSES RS.3,9 10/- 11) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE AO MAKING A DISALLOWANCE OF RS.3,910/- OUT OF STAFF WELFARE EXPENSES. 12) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.3,910/- OUT OF STAFF WELFARE EXPENSES AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) MAY BE DELETED. G. DISALLOWANCE OUT OF TELEPHONE EXPENSES RS.3,416/- 13) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE AO MAKING A DISALLOWANCE OF RS.3,416/- OUT OF TELEPHONE EXPENSES. 14) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.3,416/- OUT OF TELEPHONE EXPENSES AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) MAY BE DELETED. H. DISALLOWANCE OUT OF TRAVELLING EXPENSES RS.4,638/ - 15) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE AO MAKING A DISALLOWANCE OF RS.4,638/- OUT OF TRAVELLING EXPENSES. 16) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.4,638/- OUT OF TRAVELLING EXPENSES AS MADE BY TH E AO AND AS CONFIRMED BY THE CIT(A) MAY BE DELETED. ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 6 ISSUE NO.:-A:- 4. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS FURNISHED SUFFICIENT DOCUMENTS BEFORE THE LEARNED CIT(A) AND ALSO PROVED THE IDENTITY OF THE LENDERS AND CORRECT ADDRESS AND PROVED THE GENUINENESS OF THE CLAIM WHI CH HAS NOT CONSIDERED BY THE LEARNED CIT(A) WRONGLY AND ILLEGA LLY THEREFORE THE ORDER OF LEARNED CIT(A) IS WRONG AGAINST LAW AN D FACTS AND IS LIABLE TO BE SET ASIDE. HOWEVER THE LEARNED DEPART MENTAL REPRESENTATIVE HAS REFUTED THE SAID CONTENTION. TH E ASSESSING OFFICER HAS DECLINED THE LOAN TAKEN FROM MANCHHAGA URI M. ANDHARIA, GOPALIJI V. VARIYA AND D.S.MEHTA. THE AS SESSEE HAS FURNISHED THE FOLLOWING DOCUMENTS AT THE TIME OF AR GUMENTS:- SR. NO. PARTICULARS MR. GOPALJI V. VARAIYA H.U.F.(RELATION NIL) 1. CONFIRMATION LETTER 2. COPY OF BANK PASS BOOK 3. INCOME TAX ACKNOWLEDGEMENT 4. COMPUTATION OF TOTAL INCOME 5. BALANCE SHEET AS AT 31 ST MARCH, 2008 6. FORM 15G MS. MANCHHAGAURI M. ANDHARIA (RELATION-MOTHER-IN LAW) 1. CONFIRMATION LETTER 2. BANK STATEMENT OF MS. HINA M. ANDHARIA (SISTER I N LAW) 3. DEATH CERTIFICATE 4. BANK CERTIFICATE CONFIRMING THAT AMOUNT TRANSFER RED FROM BANK ACCOUNT OF MS. HINA M. ANDHARIAS ACCOUNT TO APPELLANTS BANK ACCOUNT 5. FORM 15H ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 7 6. INCOME TAX ACKNOWLEDGEMENT OF MS. HINA M. ANDHAR IA 7. SALARY CERTIFICATE OF MS. HINA M. ANDHARIA 8. STATEMENT ON OATH RECORDED BY COMMISSIONER OF IN COME TAX(APPEALS) 17, MUMBAI MS.DARSHANA S. MEHTA (RELATION-SISTER) 1. CONFIRMATION 2. COPIES OF BANK ACCOUNTS/STATEMENTS 3. COPY OF POST OFFICE SAVINGS ACCOUNT 4. COPY OF ACKNOWLEDGEMENT AND COPY OF INCOME TAX R ETURN 5. COMPUTATION OF TOTAL INCOME 6. COPY OF CHALLAN 7. COPY OF CERTIFICATE FOR AMOUNT RECEIVED FROM MAH INDRA & MAHINDRA TOWARDS PROVIDENT FUND DUES 8. COPY OF ANNUAL INFORMATION RETURN 9. STATEMENT ON OATH RECORDED BY COMMISSIONER OF IN COME TAX (APPEALS) 17, MUMBAI 4.1. NO DOUBT THE ASSESSING OFFICER AND LEARNED CI T(A) ACCEPTED THE IDENTITY OF THE LENDERS BUT DOUBTING ABOUT THE CAPACITY OF THE LENDERS HOWEVER IT ALSO CAME INTO NOTICE THAT HE LE ARNED CIT(A) ALSO RECORDED THE STATEMENT OF MS. MANCHHAGAURI M. ANDHARIA WHICH HAS BEEN SHOWN AT PAGE 221 TO 222 OF THE PAPE R BOOK AND STATEMENT OF MS. HINA M. ANDHARIA WHICH HAS BEEN SH OWN AT PAGE 222 AND 223 OF THE PAPER BOOK AND MS. DARSHANA MEHT A WHICH HAS BEEN SHOWN AT PAGE 223 OF THE PAPER BOOK. MS. HINA M. ANDHARIA PROVED THE TRANSACTIONS OF HER MOTHER MS. MANCHHAGA URI M. ANDHARIA. THE REMAND REPORT WHICH HAS BEEN ATTACHE D AT PAGE 234 OF THE PAPER BOOK SPEAKS THAT THE ASSESSEE WAS NOT ENTITLED TO ADDUCE THE EVIDENCE BECAUSE THE EVIDENCE WAS NOT PR ODUCED BEFORE ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 8 THE ASSESSING OFFICER AT INITIAL STAGE, HENCE BY NO T FULFILLING THE CONDITION U/S. 47A OF THE ACT NOTHING IS REQUIRED T O BE CONSIDERED. HOWEVER, THE SAID REPORT ALSO CONFIRMED THE TRANSAC TIONS BUT RAISED THE POINT OF CREDITWORTHINESS OF THE CREDITORS. NO W IT IS TO BE SEEN WHETHER THE CLAIM OF THE ASSESSEE HAS RIGHTLY BEEN DECLINED BY THE AUTHORITY BELOW. BEFORE GOING FURTHER TO DECIDE TH E MATTER OF CONTROVERSY IT IS OBSERVED THAT THE LEARNED CIT(A) ACCEPTED THE ADDITIONAL EVIDENCE BUT ARRIVED AT THIS CONCLUSION THAT THE LENDER WERE NOT HAVING CAPACITY TO GIVE THE LOAN THEREFORE THE LOAN GIVEN BY ABOVE SAID THREE PERSON FALLS UNDER SECTION 68 O F THE ACT. THE RELEVANT PARA OF THE FINDING OF THE LEARNED CIT(A) IS HEREBY REPRODUCED AS UNDER: 1.3.8 AS REGARDS THE IDENTITY OF THE PERSONS WHO HAD GIVEN LOAN TO THE APPELLANT THERE IS NO DISPUTE. THE CREDITWORTHINESS OF MR. GOPALJI V. VARAIYA HUF WHO HAD GIVEN LOAN OF RS.5 LAKHS TO THE APPELLANT REQUIRED TO BE EXAMINED IN RESPECT OF THEIR CREDITWORTHINESS OF ADVANCING SUCH A LOAN. FROM A PERUSAL OF THE COMPUTATION OF TOTAL INCOME IT CAN BE SEEN THAT THE GROSS TOTAL INCOME OF THE HUF IS RS.1,64,727 FOR A.Y.2009-10 AND IN EARLIER YEAR IT IS EVEN LESS THAN THIS, AFTER CLAIMING DEDUCTION UNDER SECTION ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 9 80C THE NET TAXABLE INCOME OF THE MR. GOPALJI V. VARAIYA HUF IS BELOW THE TAXABLE INCOME. THE CREDITWORTHINESS OF THE PERSON WHO IS FILING INCOME TAX RETURN JUST FOR THE SAKE OF IT CANNOT BE SAID TO BE PROVED AUTOMATICALLY. THE CIRCUMSTANTIAL EVIDENCES THUS INDICATE THAT IT IS HIGHLY UNBELIEVABLE THAT A PERSON OF SUCH OF LOWLY MEAN CAN ADVANCE SUM OF RUPEES 5 LAKH TO THE APPELLANT. FURTHER, IT IS ALSO SEEN THAT MR.GOPALJI V. VARAIYA HUF HAD GIVEN LOAN AND ADVANCES STANDING IN THE NAME OF VARIOUS PERSONS AMOUNTING TO RS.16.90 LAKHS. THEREFORE, UNDER THE CIRCUMSTANCES THE CREDITWORTHINESS OF MR. GOPALJI V. VARAIYA HUF IS NOT ESTABLISHED AND THE TRANSACTION IN THIS BACKDROP DOES NOT TRANSPIRE CONFIDENCE AND THUS CANNOT BE TAKEN AS TRUSTWORTHY. SIMILARLY IN RESPECT OF THE DARSHAN S. MEHTA, I FIND THE G ROSS TOTAL INCOME FOR ASSESSMENT YEAR 2008-09 IS RS.1,75,862/- AND AFTER CLAIMING DEDUCTION UNDER SECTION 80C THE AMOUNT OF INCOME IS RS.1,45,860/- THE TOTAL TAX PAID IS RS.90 ONLY. A PERUSAL OF HIS ACCOUNT REVEALED ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 10 THAT THERE ARE SEVERAL ENTRIES WHICH ARE MADE IN CASH AND NO SOURCE OF THE SAME WERE EXPLAINED. FURTHER, IN THE CASE OF HINA MAGANLAL ANDHARIA WHO HAD GIFTED MONEY TO HER MOTHER MANCHHAGAURI M. ANDHARIA IS ALSO IN DOUBT AS THE TOTAL INCOME OF MRS. HINA MAGANLAL ANDHARIA WAS RS.3,30,088/- AND AFTER MAKING INVESTMENT OF APPROXIMATELY ON LAKH, HER CARRY HOME SALARY IS RS.2,20,000/- APPROXIMATELY WHICH IN ANY CASE IS NOT SUFFICIENT TO SUPPORT A SINGLE FAMILY. IT IS THEREFORE HIGHLY IMPROBABLE THAT SHE HAD ADVANCED HIS MONEY TO HER MOTHER WHO THEN HAD INVESTED THIS MONEY WITH THE APPELLANT. UNDER THE CIRCUMSTANCES, UNDOUBTEDLY THE IDENTITY OF THE LOAN GIVERS IS NOT IN DOUBT HOWEVER, THEIR CREDITWORTHINESS IS HIGHLY QUESTIONABLE. THE LOAN GIVERS IS NOT IN DOUBT HOWEVER, THEIR CREDITWORTHINESS IS HIGHLY QUESTIONABLE. THE LOAN GIVERS ARE PERSONS OF VERY LOW MEANS AND UNDER THE CIRCUMSTANCES COULD NOT HAVE GIVEN THE MONEY IN QUESTION TO THE APPELLANT. UNDER THESE CIRCUMSTANCES COUPLED WITH ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 11 THE FACT THAT THE LOAN GIVERS WERE NOT ABLE TO EXPLAIN THE SOURCES OF CREDITS APPEARING IN THEIR BANK ACCOUNTS IMMEDIATELY PRECEDING TO THE ENTRY OF GIVING LOAN, THE CREDITWORTHINESS OF THESE PERSONS THEREFORE CANNOT BE SAID TO BE PROVED. THE ADDITIONAL MADE BY THE LD.AO IS BASED ON THE MATERIAL ON RECORD AND ALSO ON THE CIRCUMSTANTIAL EVIDENCES INDICATING THAT THE IMMEDIATE SOURCES OF ADVANCING LOAN STANDS UNEXPLAINED IN ACCORDINGLY UPHELD. THIS GROUND OF APPEAL IS THUS DISMISSED. APPARENTLY, THE LEARNED CIT(A) DISCREDITED THE SAID CREDIT ON THE BASIS OF CREDITWORTHINESS. HE RELIED UPON THE INCO ME TAX RETURN OF THE CREDITORS. GOPALJI V. VARAIYA HUF PRODUCED THE CONFIRMATION OF ACCOUNT AT PAGE 3 OF THE PAPER BOOK WHEREIN THE CLOSING BALANCE HAS BEEN SHOWN TO THE TUNE OF RS.10,61,049.00. COP Y OF PASS BOOK HAS ALSO BEEN PRODUCED AT PAGE 4 AND 5 OF THE PAPER BOOK WHICH SPEAKS ABOUT THE WITHDRAWAL OF THE SAID MONEY. NO DOUBT THESE DOCUMENTS HAVE NOT BEEN DISCUSSED IN THE ORDER HOWE VER IN THE WRITTEN SUBMISSIONS BEFORE US THESE DOCUMENT ONLY O N THE FILE OF THE CIT(A) AS WELL AS ASSESSING OFFICER. ACCORDING LY, THE LOAN RECEIVED FROM LATE MANCHHAGAURI M. ANDHARIA IS CONC ERNED, IN THIS REGARD THE CONFIRMATION OF ACCOUNT FOR THE PER IOD FROM ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 12 01.04.2008 TO 31.03.2009 IS ON THE FILE WHICH SPEA KS ABOUT THE CLOSING BALANCE OF THE MANCHHAGAURI M. ANDHARIA IS TO THE TUNE OF RS.4,44,230.00. BANK STATEMENT OF HINA MAGANLAL A NDHARIA HAS ALSO BEEN PRODUCED WHICH IS AT PAGE 7 OF THE PAPER BOOK AND SPEAKS ABOUT SOME TRANSACTIONS WHICH IS REQUIRED TO BE VER IFIED IN THE INTEREST OF JUSTICE ALSO. HOWEVER, IT IS ALSO REC ORDED THAT THE STATEMENT OF HINA MAGANLAL ANDHARIA HAS ALSO BEEN R ECORDED AT THE TIME OF ASSESSMENT OF THE CASE WHICH IS ALSO REQUIR ED TO BE VIEWED IN ACCORDANCE WITH LAW. ANYHOW THESE TRANSACTIONS HAVE ALSO NOT BEEN DISCUSSED IN THE ORDER PASSED BY THE LEARNED C IT(A). SO FAR AS THE LOAN RECEIVED FROM D.S.MEHTA IS CONCERNED TH E COPY OF BANK PASS BOOK SHOWING THE WITHDRAWALS ARE ALSO PRODUCED BEFORE US AT PAGE 9 TO 23 OF THE PAPER BOOK. THESE DOCUMENTS AL SO NOWHERE FOUND DISCUSSED IN THE ORDER UNDER CHALLENGED. SINC E THE ASSERTION OF THE ASSESSEE HAS BEEN DECLINED BY THE ASSESSING OFFICER AS WELL AS CONFIRMED BY THE LEARNED CIT(A) ON THE GROUND OF NON- CREDITWORTHINESS OF THE CREDITORS BUT THE SAID DOCU MENTS WERE NOT DISCUSSED THEREFORE, WE ARE OF THE VIEW THAT THE MA TTER OF CONTROVERSY IN THIS REGARD IS ALSO REQUIRED TO BE R E-EXAMINED BY TAKING INTO ACCOUNT THE ABOVE MENTIONED DOCUMENTS T O DECIDE THE CLAIM OF THE ASSESSEE IN THE INTEREST OF THE JUSTIC E THEREFORE WE RESTORE THIS ISSUE UPON THE FILE OF ASSESSING OFFIC ER AGAIN TO DECIDE THE MATTER AFRESH AFTER GIVING AN OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 13 ISSUE NO.:-B:- 5. SO FAR AS THE ISSUE NO.2 REGARDING DISALLOWANCE U/S. 14A OF THE ACT TO THE EXTENT OF RS.99,093/- IS CONCERNED T HIS ISSUE HAS BEEN DECIDED IN THE ASSESSEES OWN CASE FOR THE A.Y.201 0-11 IN ITA NO.5710/MUM/2010 THE RELEVANT PARA NO.2 IS HEREBY M ENTIONED BELOW:- SO FAR AS, DISALLOWANCE OF RS.1,65,830/- U/S. 14A OF THE ACT READ WITH RULE 8D OF THE RULES IS CONCERNED, WE FIND THAT AS PER LETTER DATED 15.11.2 012, OF THE ASSESSEE, ADDRESSED TO THE DCIT, THE ASSESSE E, DURING THE RELEVANT PERIOD EARNED RS.89,981/- (DIVIDEND FROM SHARES), RS.2,92,557/- (DIVIDEND FRO M MUTUAL FUND) AND RS.6,12,061/- (PPF INTEREST). THI S INCOME WAS GENERATED FROM THE SHARES, MUTUAL FUND AND PPF, WHICH WAS TREATED AS INVESTMENT IN THE BALANCE SHEET. THE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNTS, RELATES TO THE BUSINESS, CARRIED OUT BY THE ASSESSEE AND THUS, THERE IS NO NEXUS OF THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT AND T HE INCOME GENERATED OUT OF INVESTMENT. THE CLAIM OF T HE ASSESSEE IS THAT UNSECURED LOANS WERE UTILIZED FOR PAYMENT OF IMPORTS OF CHEMICAL FOR TRADE OR FOR PAY ING ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 14 IMPORT DUTIES OR FOR ESTABLISHING THE FIXED DEPOSIT WITH THE BANK WHICH WAS REQUIRED AS COLLATERAL SECURITY BY THE BANK FOR LETTER OF CREDIT FOR IMPORT OF CHEMICA LS. IT WAS EMPATHETICALLY ASSERTED THAT NONE OF THE LOAN, TAKEN ON WHICH INTEREST WAS PAID, WAS UTILIZED FOR INVESTMENT PURPOSES. IN VIEW OF THESE FACTS, WE FI ND MERIT IN THE EXPLANATION OF THE ASSESSEE, CONSEQUEN TLY, THIS GROUND OF ASSESSEE IS ALLOWED. 5.1 TURNING TO THE CASE IN HAND IT IS SPECIFICALLY ASSERTED BY THE ASSESSEE THAT THE APPELLANT IS MAINTAINING SEPARATE ACCOUNTS OF THE BUSINESS CARRIED ON BY HIM AND HIS INVESTMENT ACTIV ITIES. THE INVESTMENT ACTIVITIES AND ITS EXPENSES ARE REFLECTE D IN THE APPELLANTS PERSONAL ACCOUNTS. NO EXPENSES PERTAIN ING TO THE INVESTMENT ACTIVITY ARE DEBITED TO THE BUSINESS ACC OUNTS. FURTHER, THOUGH THE INVESTMENT HAS BEEN MADE OUT OF THE PROP RIETARY CONCERNS BANK ACCOUNT, THE SAME HAS NOT BEEN MADE OUT OF BORROWED FUNDS BUT OUT OF OWN FUNDS, AS IS EVIDENT FROM THE COPIES OF BANK STATEMENTS FILED WITH AO ALSO. THE APPELLA NTS CAPITAL ACCOUNT SHOWS A FIGURE OF RS.3,85,83,534/-. AS AGA INST THIS, THE APPELLANT HAS INVESTED IN FIXED ASSETS OF RS.2,00,9 77/- AND CURRENT ASSETS OF RS.2,67,57,531/- I.E. RS.2,69,58,508/-. THE INVESTMENT SHOWN IN THE PROPRIETARY FIRMS BALANCE SHEET IS IN FIXED DEPOSIT WITH BANKS, INTEREST OF WHICH IS VERY MUCH TAXABLE. THE APPELLANT HAD EARNED A PROFIT OF RS.2,08,22,452/- DURING THE YEAR UNDER CONSIDERATION. HIS CAPITAL, EVEN AFTER CONSIDERING THE INVESTMENT IN ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 15 SHARES DURING THE YEAR OF RS.74,31,583/-, INCREASED FROM RS.2,99,95,455/- AS AT THE BEGINNING OF THE YEAR TO RS.3,85,83,534/- AT THE CLOSE OF THE YEAR. THE BORROWED FUNDS ARE O NLY TO THE EXTENT OF RS.89,59,626/-, WHICH HAVE BEEN INVESTED IN FIXE D DEPOSITS IN ORDER TO OBTAIN LETTER OF CREDITS FROM BANKS FOR TH E PURPOSE OF OUR BUSINESS OF IMPORTING GOODS. AS PER THE BANK SANCT ION LETTER, THE APPELLANT IS REQUIRED TO MAINTAIN A MINIMUM TERM DE POSIT OF 25% OF THIS LIMIT AS MARGIN MONEY. THE APPELLANT HAS I NVESTED MORE MONEY IN FIXED DEPOSITS IN ORDER TO OBTAIN ADDITION AL LETTERS OF CREDIT FROM THE BANK AT SHORT NOTICE. THE APPELLA NT SUBMITS THAT THE BORROWED MONEY WAS UTILIZED FOR THE PURPOSE OF BUSINESS AND NOT FOR THE PURPOSE OF INVESTMENT IN SHARE. FURTHE R, ALL EXPENSES PERTAINING TO THE EXEMPT INCOME LIKE DMAT CHARGES, BANK CHARGES, ETC. ARE DEBITED BY THE APPELLANT TO HIS PERSONAL C APITAL ACCOUNT AND NOT TO THE BUSINESS ACCOUNTS. THEREFORE IT IS QUIT E CLEAR THAT NO EXPENDITURE OF ANY KIND WAS OCCURRED TO GET THE EXE MPT INCOME THEREFORE IN THESE SAID CIRCUMSTANCES NO DISALLOWAN CE OF EXPENSES IS REQUIRED U/S. 14A READ WITH RULE 8D OF THE ACT. IN VIEW OF THE SAID CIRCUMSTANCES AND BY FOLLOWING THE ORDER PASSE D BY THE INCOME TAX APPELLATE TRIBUNAL IN ASSESSEES OWN CAS E FOR THE A.Y.2010-11 IN ITA NO.5710/MUM/2010. WE ALLOWED TH IS ISSUE IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. ISSUE NO.:-C TO H:- 6. ISSUE NO. C TO H ARE IN CONNECTION WITH CERTAIN DISALLOWANCES WHICH WERE RESTRICTED BY THE LEARNED CIT(A) TO THE EXTENT OF 10% ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 16 AND IN THIS REGARD INCOME TAX APPELLATE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2010-11 IN ITA NO.5710/MUM/201 0 CONFIRMED THE ADDITION TO THE EXTENT OF 10% THEREFO RE, IN VIEW OF THE SAID DECISION WE DECLINED THE ASSERTION OF THE ASSESSEE AND HELD 10% DISALLOWANCE AS JUSTIFIABLE ACCORDINGLY, THESES GROUNDS ARE DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE AS SESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS HEREBY PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2016. SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) ! / ACCOUNTANT MEMBER $% ! /JUDICIAL MEMBER & ' MUMBAI; (! DATED : 23 RD MARCH, 2016 MP MP MP MP ITA NO.1545/MUM/2014 ASSESSMENT YEAR: 2008-09 17 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+, %%-. , -. , & ' / DR, ITAT, MUMBAI 6. ,/0 1 / GUARD FILE. / BY ORDER, * % //TRUE COPY// % / & ' (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI