Rajnish Garg, Ludhiana V. ACIT, C-6, Ludhiana

ITA 1581/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2571 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 18-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K J SHELLY
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRISANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 1581/CHD/2018 / ASSESSMENT YEAR : 2013-14 SHRI RAJNISH GARG, 524-B, AGGAR NAGAR, LUDHIANA VS. THE ACIT, CIRCLE-6, CHANDIGARH ! ' ./ PAN NO: ADFPG2620N !#/ APPELLANT %& !# / RESPONDENT '()* /ASSESSEE BY : SH. K.J. SHELLY, ADVOCATE )* / REVENUE BY : SH. MANJIT SINGH, CIT DR + ,)( -' /DATE OF HEARING : 22.08.2019 ./ )( -' / DATE OF PRONOUNCEMENT : 23.08. 2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 14.09.2018 OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-3, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NO T JUSTIFIED IN LAW AND FACTS OF THE CASE BY CONFIRMIN G DISALLOWANCE OF EXPENSES TO THE TUNE OF RS. 291564/ - ON ACCOUNT OF DISALLOWANCE MADE U/S 14A READ WITH RULE 8-D IN APPELLANT'S CASE. ITA NO. 1581-C-18 SHRI RAJNISH GARG, LUDHIANA 2 2. THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS MISCONSTRUED AND MISAPPLIED THE PROVISIONS OF SECTI ON 14A OF THE INCOME TAX ACT 1961 IN APPELLANT'S CASE. IN THE APPELLANT'S CASE LD. ASSESSING OFFICER WITHOUT POIN TING OUT ANY INACCURACY OR DEFICIENCY IN EXPENSES FURNISHED BY THE ASSESSEE AND WITHOUT RECORDING ANY SATISFACTION THA T HOW THESE EXPENSES ARE NOT ACCEPTABLE STRAIGHTWAY CONCL UDED THAT ASSESSING OFFICER IS NOT SATISFIED WITH THE EXPENSE S CLAIMED BY THE ASSESSEE. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I S GROSSLY ERRED BY HOLDING THAT ONCE THE ASSESSEE HAS EARNED EXEMPT INCOME, THE PROVISIONS OF SECTION 14A ARE AT TRACTED AND DISALLOWANCE HAS TO BE WORKED OUT BY APPLYING R ULE 8D. WHEREAS. IT IS SETTLED BY VARIOUS JUDICIAL PRONOUN- CEMENTS THAT INVOKING RULE 8D IS NOT MANDATORY, IT WILL BE RESORTED ONLY IF LD. ASSESSING OFFICER IS NOT SATISFIED AS T O THE CORRECTNESS OF THE CLAIM OF EXPENSES MADE BY THE AS SESSEE AS STIPULATED AND MANDATED IN SECTION 14A: AND INVOKIN G RULE 8D IS NOT AUTOMATIC. 4. IT IS WELL SETTLED LAW THAT NO DISALLOWANCE OF EXPE NSES CAN BE MADE UNLESS IT IS PROVED THAT THE RELATED EXPENSES WERE INCURRED TO EARN EXEMPT INCOME. WHEREAS THE LD. ASS ESSING OFFICER FAILED TO DISCHARGE SUCH NEXUS. IN THE ABSE NCE OF NEXUS OF EXPENDITURE INCURRED AND INCOME EARNED, DISALLOWANCE CANNOT BE MADE. 5. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO LAW AND FACTS OF THE CASE. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR AL TER ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND D ISPOSED OFF. 3. THE SOLE ISSUE RAISED THROUGH THE ABOVE GROUNDS OF APPEAL IS AGAINST THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER OF RS. ITA NO. 1581-C-18 SHRI RAJNISH GARG, LUDHIANA 3 2,91,564/- U/S 14A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') READ WITH RULE 8D (2)(III) OF THE INCOME TAX RULES, 1962 . 4. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, HAD SUBMITTED THAT THE ISSUE IS SQUARELY COVERED WITH THE EARLIER COMM ON ORDER DATED 29.04.2019 OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE BEARING ITA NO. 288/CHD/2018 FOR ASSESSMENT YEAR 2010-11 AND ITA NO. 1085/CHD/2017 FOR ASSESSMENT YEAR 2011-12, WHEREIN , WHILE DEALING WITH THE IDENTICAL ISSUE OF DISALLOWANCE U/S 14A, T HE ITAT HELD THAT ASSESSING OFFICER HAD NOT RECORDED SATISFACTION WIT H REGARD TO THE ACCOUNTS OF THE ASSESSEE THAT THE SUO MOTU DISALLO WANCE MADE BY THE ASSESSEE U/S 14A OF THE ACT WAS NOT CORRECT, HENCE , THE MANDATE OF SECTION 14A HAS NOT BEEN FOLLOWED. IN THE CASE IN HAND, THE ASSESSEE, FOR THE YEAR UNDER CONSIDERATION, EARNED DIVIDEND INCOME OF RS. 8,06,912/- AND SUO MOTU OFFERED DISALLOWANCE U/S 1 4A OF THE ACT AT RS. 1,13,938/-. THERE IS NO DISALLOWANCE MADE BY THE AS SESSING OFFICER OUT OF ANY INTEREST EXPENDITURE AS ALL THE INVESTMENTS WERE MADE BY THE ASSESSEE FROM HIS OWN FUNDS. THE TOTAL TURNOVER OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS AT RS. 12,73,97,046/- AND THE TOTAL ADMINISTRATIVE EXPENSES CLAIMED BY THE ASSESSEE WER E TO THE EXTENT OF RS. 20,47,817/-. OUT OF THE ADMINISTRATIVE EXPENSES , THE ASSESSEE SUO MOTU DISALLOWED A SUM OF RS. 1,13,938/- U/S 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE I.T. RULES. THE ASSESSING OF FICER WHILE MAKING THE ITA NO. 1581-C-18 SHRI RAJNISH GARG, LUDHIANA 4 DISALLOWANCE HAS NOT FOLLOWED THE GUIDELINES OF OBJ ECTIVE SATISFACTION AS LAID DOWN IN THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF GODREJ AND BOYCE MFG. CO. VS DCIT (2010) 81 TAXM ANN.COM 111 (SC) AND FURTHER IN THE CASE OF MAXOPP INVESTMENT LTD. VS CIT (2018) 91 TAAXMAN.COM 154 (SC). THE ASSESSING OFFICER WITHOUT RECORDING ANY REASONING FOR HIS DIS-SATISFACTION WITH REGARD TO T HE WORKING OF THE SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE STRAIGHT AWA Y APPLIED RULE 8D OF THE I.T. RULES AGAINST THE MANDATORY PROVISIONS OF SECTION 14A OF THE I.T. ACT. WE, THEREFORE, DO NOT FIND ANY JUSTIFICAT ION ON THE PART OF THE LOWER AUTHORITIES IN MAKING / CONFIRMING FURTHER DI SALLOWANCE OVER AND ABOVE THE DISALLOWANCE SUO MOTU OFFERED BY THE ASSE SSEE. WE, THEREFORE, RESTRICT THE DISALLOWANCE U/S 14A O F THE ACT IN THIS CASE TO THE EXTENT OF SUO MOTU OFFERED BY THE ASSES SEE. THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2019 SD/- SD/- ( . . / N.K. SAINI) ( ! / SANJAY GARG) '#$ / VICE PRESIDENT %& / JUDICIAL MEMBER DATED : 23.08.2019 .. 1)%(2343( / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. %& !# / THE RESPONDENT 3. + 5( / CIT 4. + 5( ( )/ THE CIT(A) 5. 36 %(7 , - 7 , 89:; / DR, ITAT, CHANDIGARH 6. :< , / GUARD FILE ITA NO. 1581-C-18 SHRI RAJNISH GARG, LUDHIANA 5 1 + / BY ORDER, = / ASSISTANT REGISTRAR