Anuj Umesh Goel, Pune V. Deputy Commissioner of Income-tax, Circle - 7, Pune

ITA 1632/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2488 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 27-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KRISHNA GUJRATHI
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 234B; 14A; 201; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1632 /P U N/201 7 / ASSESSMENT YEAR : 20 13 - 14 MR. ANNUJ GOEL, SAN MAHU COMPLEX, 5, BUND GARDEN ROAD, OPP. POONA CLUB, PUNE 4110 01 . / APPELLANT PAN: A HCPG8733F VS. THE DY. COMMISSIONER OF INCOME TAX, CIRC LE 7 , PUNE . / RESPONDENT / APPELLANT BY : SHRI KRISHNA GUJRATHI / RESPONDENT BY : SHRI SHASHANK DEOGADKAR / DATE OF HEARING : 05 . 0 8 .201 9 / DATE OF PRONOU NCEMENT: 04 . 0 9 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) , PUNE - 5, PUNE , DATED 11 . 05 .201 7 RELATING TO ASSESSMENT YEAR 20 13 - 14 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1 961 (IN SHORT THE ACT) . ITA NO. 1632 /P U N/20 1 7 ANNUJ GOEL 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT(A) - 5, PUNE HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.62,871/ - MADE BY THE LEA RNED AO BY APPLYING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D(2)(III) OF THE INCOME TAX RULES,1962 WITHOUT APPRECIATING THAT SECTION 14A IS NOT ATTRACTED WHEN THE APPELLANT HAS SUFFICIENT OWN FUNDS AND INTEREST FREE FUNDS TO INVEST IN PARTNERSHIP FIRMS, LLPS, COMPANIES, PPF AND MUTUAL FUNDS. THE APPELLANT HEREBY PRAYS THAT THAT THE DISALLOWANCE OF RS.62,871/ - MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 MAY PLEAS E BE DELETED. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT(A) - 5, PUNE HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.62,871/ - MADE BY THE LEARNED AO BY APPLYING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 WITHOUT APPRECIATING THE FACT THAT DURING THE YEAR UNDER CONSIDERATION NO EXPENDITURE WAS INCURRED FOR EARNING INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AND HENCE NO DISALLOWANCE IS WARRANTED UNDER PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961. THE APPELLANT HEREBY PRAYS THAT THE DISALLOWANCE OF RS.62,871 / - MAY PLEASE BE DELETED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT (A) - 5, PUNE HAS ERRED IN C ONFIRMING THE DISALLOWANCE OF RS.62,871/ - MADE BY THE LEARNED AO BY APPLYING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 WITHOUT APPRECIATING THE FACT THAT THE AMOUNT OF DISALLOWANCE FAR EXCEEDS THE AMOUNT OF EXPENDITURE CLAIMED BY THE APPELLANT THAT MAY BE EVEN REMOTELY LINKED TO THE EARNING OF INCOME NOT FORMING PART OF TOTAL INCOME. THE APPELLANT HEREBY PRAYS THAT THE DISALLOWANCE OF RS.62,871 / - MAY PLEASE BE DELETED. 4) ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT (A) - 5, PUNE IS NOT JUSTIFIED IN MAKING AN ENHANCEMENT OF ASSESSMENT BY ADDITIONAL DISALLOWANCE OF RS.6,020/ - U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D(2)(I) OVER AND ABOVE THE DISALLO WANCE MADE IN THE ASSESSMENT ORDER WITHOUT PROVIDING A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT AS PRESCRIBED U/S 251 OF THE INCOME TAX ACT, 1961. THE APPELLANT HEREBY PRAYS THAT THE DISALLOWANCE OF RS.6,020/ - UNDER SECTION 14A READ WITH RULE 8D(2)(I) MAY PLEASE BE DELETED. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT (A) - 5, PUNE HAS ERRED IN DIRECTING THE LEARNED AO TO MAKE AN ADDITIONAL DISALLOWANCE OF RS.6,020/ - U/S 14A OF THE INCOME TAX A CT, 1961 READ WITH RULE 8D(2)(I) WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PERSPECTIVE. THE APPELLANT HEREBY PRAYS THAT THE ORDER DIRECTING THE LEARNED AO TO MAKE A DISALLOWANCE OF RS.6,020/ - UNDER SECTION 14A READ WITH RULE 8D(2)(I) MAY PLEASE BE SET ASIDE. 6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONOURABLE CIT(A) - 5, PUNE HAS ERRED IN DIRECTING THE LEARNED AO TO COMPUTE ITA NO. 1632 /P U N/20 1 7 ANNUJ GOEL 3 INTEREST UNDER SECTION 234A AND 234B OF THE INCOME TAX ACT, 1961 BY GIVING CREDIT OF ONLY SELF - ASSESSMENT TA X PAID UP TO DUE DATE OF FILING RETURN OF INCOME AS PRESCRIBED IN THE CBDT CIRCULAR NO.2/2015 DATED 10.02.2015 WITHOUT GIVING CREDIT FOR SELF - ASSESSMENT TAX PAID IN INSTALLMENTS FOR CALCULATION OF SAID INTEREST. THE APPELLANT PRAYS THAT THE INTEREST UNDER SECTION 234A AND 234B OF THE INCOME TAX ACT, 1961 BE CHARGED ONLY ON THE AMOUNT OF INCOME TAX WITHHELD/RETAINED BY THE APPELLANT TILL THE DATE OF PAYMENT OF THE SAME. 3. THE FIRST ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE MADE UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) AT 62,871/ - . THE LINKED ISSUE RAISED VIDE GROUNDS OF APPEAL NO.4 AND 5 IS AGAINST ENHANCEMENT MADE BY THE CIT(A) AND MAKING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(I) OF THE RULES AT 6,020/ - . THE GROUND OF APPEAL NO.6 IS AGAIN ST CHARGING OF INTEREST UNDER SECTION 234A AND 234B OF THE ACT. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE IS AN INDIVIDUAL AND WAS ENGAGED IN THE BUSINESS OF REAL ESTATE, CONSTRUCTION AND LAND DEALING. THE ASSESSEE WAS PARTNER IN NUMBER OF CONCE RNS ENGAGED IN THE AFORESAID BUSINESS OF DEVELOPMENT OF RESIDENTIAL AND COMMERCIAL PROPERTIES. DURING THE YEAR UNDER CONSIDERATION, IN ADDITION TO THE SALARY RECEIVED FROM THE SAID PARTNERSHIP FIRMS, THE ASSESSEE HAD ALSO DERIVED PROFIT FROM THE PARTNERSH IP FIRMS. THE ASSESSEE HAD NOT MADE ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT RELATABLE TO THE EXEMPT INCOME OF PROFITS OF PARTNERSHIP CONCERNS. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE IN THIS REGARD AND WAS OF THE VIEW THAT WHERE THE ASSESSEE HAD EARNED EXEMPT INCOME WHICH WAS EXEMPT UNDER SECTION 10(2A) OF THE ACT, DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS WARRANTED. THE ASSESSING OFFICER THUS, MADE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES AT 62,871/ - . ITA NO. 1632 /P U N/20 1 7 ANNUJ GOEL 4 5. THE CIT(A) UPHELD THE AFORESAID DISALLOWANCE. THE ASSESSEE WHILE EXPLAINING THE NATURE OF EXPENDITURE BOOKED BY IT POINTED OUT THAT AT BEST DISALLOWANCE OF 6,020/ - COULD BE MADE IN THE HANDS OF ASSESSEE. THE CIT(A) FIRST DISALLOWED SUM O F 62,871/ - UNDER RULE 8D(2)(III) OF THE RULES. HE FURTHER OBSERVED AT PAGE 18 OF APPELLATE ORDER THAT FURTHER DISALLOWANCE UNDER RULE 8D(2)(I) OF THE RULES HAS TO BE MADE ON ACCOUNT OF ADMISSION OF ASSESSEE OF DIRECT EXPENSES INCURRED TO EARN THE EXEMPT INCOME AT 6,020/ - . THE CIT(A) ALSO UPHELD THE CHARGING OF INTEREST UNDER SECTION 234A AND 234B OF THE ACT BUT GAVE DIRECTIONS TO THE ASSESSING OFFICER TO FOLLOW THE CBDT CIRCULAR NO.2/2015, DATED 10.02.2015. 6. THE ASSESSEE IS IN APPEAL AGAINST THE AF ORESAID ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRONGLY OBJECTED TO THE DISALLOWANCE MADE UNDER RULE 8D(2)(III) OF THE RULES AND POINTED OUT THAT LOOKING AT THE NATURE OF EXPENSES, THERE WAS NO MERIT IN THE AFORESAID DI SALLOWANCE MADE AT 62,871/ - . HE FURTHER POINTED OUT THAT WHILE EXPLAINING THE EXPENSES WHICH HAVE BEEN BOOKED BY ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND WHICH WERE CLAIMED AS DEDUCTIBLE IN HIS HANDS, THE ASSESSEE HAD POINTED OUT THAT AT BEST EXPENSES FOR EARNING SHA RE OF PROFITS WERE TO BE DISALLOWED IN HIS HANDS TO THE EXTENT OF 6,020/ - . HOWEVER, THE CIT(A) IN THIS REGARD MAKES AN ENHANCEMENT AND DISALLOWED THE SAME EXPENDITURE UNDER RULE 8D(2)(I) OF THE RULES, WHICH IS NOT WARRANTED. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. ITA NO. 1632 /P U N/20 1 7 ANNUJ GOEL 5 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. COMING TO THE FIRST DISALLOWANCE MADE IN THE HANDS OF ASSESSEE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE RULES, THE ASSESSEE HAS EARNED SUBSTANTIAL SHARE OF PROFIT FROM PARTNERSHIP CONCERNS AND HENCE, THE AFORESAID DISALLOWANCE. AS FAR AS THE DISALLOWANCE MADE UNDER RULE 8D(2)(III) OF THE RULES IS CONCERNED, THEN THE SAME IS AS PER PROVISIONS OF THE ACT AND IN VIEW OF THE EXEMPT INCOME EARNED BY ASSESSEE IS WARRANTED IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE UPHOLD THE DISALLOWANCE OF 62,871/ - MADE IN THE HANDS OF ASSESSEE. 10. NOW, COMING TO ENHANCEMENT MADE BY CIT(A) IN THE HANDS OF ASSESSEE WHILE EXPLAINING THE DETAILS OF EXPENSES DEBITED AND ITS NATURE, THE ASSESSEE HAD POINTED OUT THAT AT BEST THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES IS TO BE MADE OF EXPENSES TOTALING 6,020/ - . IT WAS NEVER THE CASE OF ASSESSEE THAT THE SAID SUM OF 6,020/ - IS THE DIRECT EXPENDITURE BOOKED BY IT FOR EARNING THE EXEMPT INCOME. IN SUCH FACTS AND CIRCUMSTANCES, ENHANCEMENT MADE BY CIT(A) IS NOT WARRANTED. ACCORDINGLY, WE DELETE THE AFORESAID DISALLOWANCE MADE UNDER RULE 8D(2)(I) OF THE RULES. 11. NOW, COMING TO THE LAST ISSUE RAISED I.E. CHARGING OF INTEREST UNDER SECTION 234A AND 234B OF THE ACT. THE ASSESSEE CLAIMS THAT IT HAD PAID SELF ASSESSMENT TAX IN INSTALLMENTS OF 68,00,896/ - AND 2,06,19,870/ - , RESPECTIVELY . THE ASSESSING OFFICER HAD ERRED IN CHARGING HIGHER INTEREST UNDER SECTION 234A AND 234B OF THE ACT WITHOUT GIVING CREDIT FOR THE SAME. THE CIT(A) IN PARA 5 HAS DIRECTED THAT CBDT CIRCULAR NO.2/2015, DATED 10.02.2015 ITA NO. 1632 /P U N/20 1 7 ANNUJ GOEL 6 BE FOLLOWED, BUT HAS NOT CLARIFIED T HE CONTENTS OF SAID CIRCULAR. BE THAT AS MAY BE, THE ASSESSING OFFICER IS DIRECTED TO GIVE CREDIT FOR THE SELF ASSESSMENT TAX PAID BY ASSESSEE IN INSTALLMENTS AND RE - COMPUTE THE INTEREST UNDER SECTION 234A AND 234B OF THE ACT, AS PER PROVISIONS OF THE ACT AFTER AFFORDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, PARTLY ALLOWED. 12 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 4 TH DAY OF SEPTEMBER , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 4 TH SEPTEMBER , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) , PUNE - 5, PUNE ; 4. THE PR. CIT , PUNE - 4 , PUNE ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE