K.Navarathanmal, Gudiyatham V. ACIT, Vellore

ITA 1629/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8448 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: B R SUDHEENDRA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1629/MDS/2016 ( )( / ASSESSMENT YEAR : 2011-12 SHRI K. NAVARATHANMAL, NO.89, SANTHAPET, GUDIYATTAM, VELLORE, PIN: 632 602. PAN : AABPN 4277 H V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, VELLORE. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI B.R. SUDHEENDRA, CA -.+, / 0 / RESPONDENT BY : SHRI V. NANDAKUMAR, JCIT 1 / 2% / DATE OF HEARING : 18.08.2016 3') / 2% / DATE OF PRONOUNCEMENT : 23.09.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 13, CHEN NAI, DATED 29.02.2016 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2 I.T.A. NO.1629/MDS/16 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. SHRI B.R. SUDHEENDRA, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER DISA LLOWED A SUM OF ` 8,14,353/- UNDER RULE 8D OF INCOME-TAX RULES, 1962. THE LD. REPRESENTATIVE SUBMITTED THAT NO INVESTMENT WAS MAD E IN THE AGRICULTURAL LAND DURING THE YEAR UNDER CONSIDERATI ON. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SHARE TRADING, GOLD JEWELLERY AND FINANCE. THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR EARNING THE AGRICULTURA L INCOME. WHAT WAS DISCLOSED IN THE RETURN OF INCOME IS ONLY NET A GRICULTURAL INCOME, THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE RE CANNOT BE ANY DISALLOWANCE FOR EARNING AGRICULTURAL INCOME. IN T HE CASE OF SHARE TRADING, THE ASSESSEE HAS UTILIZED ONLY HIS OWN FUN DS AND NO EXPENDITURE WAS INCURRED. THEREFORE, THE CIT(APPEA LS) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER . 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE PROPRIETORSHIP OF JEWELLERY BUSINESS WAS C ONVERTED INTO 3 I.T.A. NO.1629/MDS/16 PRIVATE LIMITED COMPANY AND SHARES WERE ALLOTTED TO THE ASSESSEE WITHOUT ANY INVESTMENT. THEREFORE, ACCORDING TO TH E LD. REPRESENTATIVE, IT CANNOT BE SAID THAT THE ASSESSEE HAS INVESTED HIS FUNDS FOR THE PURPOSE OF EARNING EXEMPT INCOME. ON A QUERY FROM THE BENCH WHETHER THE ASSESSEE HAS BORROWED ANY LOA N, THE LD. REPRESENTATIVE SUBMITTED THAT LOAN WAS BORROWED FOR THE PURPOSE OF BUSINESS BUT NO BORROWED LOAN WAS USED FOR THE PURP OSE OF EARNING THE EXEMPT INCOME. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, AS CONFIRMED BY THE CIT(APPEALS), IS NOT JUSTIFIED. 5. ON THE CONTRARY, SHRI V. NANDAKUMAR, THE LD. DEP ARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R COMPUTED THE DISALLOWANCE OF ` 8,14,353/- BY FOLLOWING THE PROVISIONS OF RULE 8D(2) OF INCOME-TAX RULES, 1962. SINCE THE ASSESSE E HAS CLAIMED THAT THERE WAS NO EXPENDITURE WAS INCURRED FOR EARN ING THE EXEMPT INCOME, ACCORDING TO THE LD. D.R., THE ASSESSING OF FICER HAS TO COMPUTE THE DISALLOWANCE UNDER RULE 8D(2). THEREFOR E, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MAD E BY THE ASSESSING OFFICER. 4 I.T.A. NO.1629/MDS/16 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT NO AMOUNT WAS INVESTED IN THE AGRICULTU RAL LAND DURING THE YEAR UNDER CONSIDERATION. IN FACT, THE LD. REP RESENTATIVE FOR THE ASSESSEE CLAIMS THAT THE INVESTMENT IN THE AGRICULT URAL LAND WAS MADE 15-20 YEARS AGO. HOWEVER, FROM THE ASSESSMENT ORDER IT APPEARS THAT INVESTMENT MADE BY THE ASSESSEE BETWEE N 31.03.2010 AND 31.03.2011 WAS ` 2,16,912/-. WHEN THE ASSESSEE CLAIMS THAT NO INVESTMENT WAS MADE IN THE AGRICULTU RAL LAND DURING THE YEAR UNDER CONSIDERATION, IT IS NOT KNOWN WHERE THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS INVESTED ` 2,16,912/-. THE ASSESSEE HAS ALSO INVESTED A SUM OF ` 46,410/- IN THE H.A. TRUST. IN THE BUSINESS OF GOLD JEWELLERY, THE LD. REPRESENTAT IVE FOR THE ASSESSEE CLAIMS THAT THE PROPRIETORSHIP BUSINESS OF THE ASSESSEE WAS CONVERTED INTO A PRIVATE LIMITED COMPANY, THERE FORE, THERE IS NO INVESTMENT MADE BY THE ASSESSEE. THESE FACTS WERE NOT TAKEN INTO CONSIDERATION EITHER BY THE ASSESSING OFFICER OR BY THE CIT(APPEALS). THEREFORE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSE SSING OFFICER AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESS EE. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE A ND THE 5 I.T.A. NO.1629/MDS/16 DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSI NG OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH AND FIND OUT THE INVESTMENT MADE IN THE AGRICULTURAL LAND AND INVEST MENT MADE IN THE H.A. TRUST AND INVESTMENT MADE IN THE AMBALAL J EWELLERS VELLORE (P) LTD. BY THE ASSESSEE AND CLAIM OF THE A SSESSEE THAT THE PROPRIETORSHIP WAS CONVERTED INTO PRIVATE LIMITED C OMPANY AND THEREAFTER DECIDE THE ISSUE AFRESH, IN ACCORDANCE W ITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 23 RD SEPTEMBER, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 23 RD SEPTEMBER, 2016. KRI. 6 I.T.A. NO.1629/MDS/16 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-13, CHENNAI 4. PRINCIPAL CIT-8, CHENNAI-34 5. 7: -2 /DR 6. ;( < /GF.