Shri Pavani Parameswara Rao, New Delhi V. ACIT, New Delhi

ITA 1640/DEL/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8893 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 19-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY SENIOR
• Assessee Lawyers: GIRISH K SHUKLA
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.1640/DEL./2013 ASSESSMENT YEAR : 2009-10 SHRI PAVANI PARAMESWARA RAO, VS. ACIT, CIRCLE 37 (1), SENIOR ADVOCATE, NEW DELHI. 82, LAWYERS CHAMBER, NEW DELHI. (PAN : AACPR8466P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GIRISH K. SHUKLA, ADVOCATE REVENUE BY : SHRI VIKRAM SAHAY, SENIOR DR DATE OF HEARING : 19.02.2015 DATE OF PRONOUNCEMENT : 27.02.2015 O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XXVII, DELHI DATED 14.01.2013 FOR THE ASS ESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS FILED RETURN OF INCOME ON 29.09 .2009 DECLARING TOTAL INCOME OF RS.4,99,67,330/-. THE ASSESSEE IS AN ADV OCATE AND EARNING INCOME UNDER THE HEAD BUSINESS & PROFESSION AND OTHER SO URCES. THE ASSESSING OFFICER MADE A DISALLOWANCE INVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME-TAX ACT, 1961 READ WITH RULE 8D OF INCOME-TA X RULES, 1962 OF 2 ITA NO.1640/DEL/2013 RS.8,43,616/-. THE CIT (A) UPHELD THE ADDITION. N OW, THE ASSESSEE IS IN APPEAL BY TAKING THE FOLLOWING GROUNDS OF APPEAL :- THE APPELLANT HUMBLY CRAVES LEAVE TO RESPECTFULLY OBJECT TO THE IMPUGNED ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) DATED 14.01.2013 UPHOLDING THE ASSESSMENT ORDER OF THE ID. ASSESSING OFFICER IMPUGNED IN APPEAL BEFORE HIM ON THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT (APPEALS) HAS ERRED ON FACTS AN D IN LAW IN DISMISSING THE APPEAL BEFORE HER AND UPHOLDING THE ASSESSMENT ORDE R OF THE LD. ASSESSING OFFICER, DISALLOWING A SUM OF RS.8,43,616 /- BY INVOKING SEC. 14A OF THE INCOME TAX ACT, 1961 AND ADDING BAC K THE SAID AMOUNT TO THE TOTAL INCOME OF THE APPELLANT. 2. THAT THE FINDING OF THE LD., CIT (APPEALS) AND T HE ID. ASSESSING OFFICER BEFORE HER IS WITHOUT ANY COGENT MATERIAL, BASIS AND IS CONTRARY TO THE FACTS OF THE APPELLANT'S CAS E AND THE ARGUMENTS ON APPELLANT'S BEHALF PRESENTED BEFORE HER IN HIS D ETAILED WRITTEN SUBMISSIONS. THE APPELLANT CRAVES LEAVE TO RESERVE A RIGHT TO AD D TO, DELETE FROM, AMEND, ALTER OR MODIFY THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. AS PER RULE 8D (2)(III) OF INCOME-TAX RULES, 196 2, AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE AVERAGE OF THE VALUE OF IN VESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME , AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAS T DAY OF THE PREVIOUS YEAR, SHALL NOT BE ALLOWED. AS PER RULE 8D, THE ASSESSING OFFI CER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE EXPENDITURE MADE BY THE ASSESSE E, OR THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED, IN RELATION TO INCOME WHICH DOES 3 ITA NO.1640/DEL/2013 NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, SHALL BE DETERMINED AND SHALL NOT BE ALLOWED. IN THE PRESEN T CASE, THE ASSESSEE HAS CLAIMED THAT HE HAS NOT INCURRED ANY EXPENDITURE RE LATABLE TO THE INCOME WHICH IS NOT FORMING PART OF THE TOTAL INCOME. THEREFORE , THIS RULE CANNOT BE INVOKED. HE PLEADED TO SET ASIDE THE ORDER OF AUTHORITIES BE LOW. 4. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE CIT (A) HAS SIMPLY RELIED ON THE ORDER OF THE ASSESSING OFFICER IN WHICH HE H AS RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE VS. DCIT, 328 ITR 81 (MUM.). NOTHING HAS BEEN BROUGHT ON RECORD TO E STABLISH THAT ASSESSEE CLAIM IS NOT CORRECT THAT NO EXPENDITURE WAS INCURRED ON INVESTMENTS FROM WHERE NON- TAXABLE INCOME WAS EARNED. CIT (A) HAS MADE AN OBSE RVATION THAT THERE IS DIRECT AND PROXIMATE NEXUS BETWEEN THE EXEMPTED INCOME AND THE EXPENDITURE IS WITHOUT ANY BASIS. THERE ARE NO SPECIFIC INSTANCES REFERRED BY AUTHORITIES BELOW WITH REGARD TO THE EXPENSE RELATABLE TO THE EXEMPTE D INCOME. THEY HAVE BEEN FAILED TO PINPOINT ANY EXPENDITURE WHICH CAN BE DIR ECTLY OR INDIRECTLY RELATED TO THE EARNING OF THE EXEMPTED INCOME. THUS, ASSESSIN G OFFICER ACTED WITHOUT SATISFYING HIMSELF ABOUT THE INCORRECTNESS OF THE C LAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN EARNING THE INCOME , WHICH IS NOT FORMING PART OF THE TOTAL INCOME. THE ASSESSING OFFICER HAS MAD E WILD ASSERTION WITHOUT ANY BASIS WITH REGARD TO THE EXPENDITURE INCURRED, RELA TABLE TO THE INCOME WHICH IS NOT FORMING PART OF THE TOTAL INCOME. THE MAIN OBJ ECT BEHIND THE INSERTION OF SECTION 14A IN THE ACT IS THAT CERTAIN INCOMES WHIC H ARE NOT INCLUDED WHILE 4 ITA NO.1640/DEL/2013 WORKING OUT THE TOTAL INCOME AS THESE ARE EXEMPT UN DER VARIOUS PROVISIONS OF ACT THE EXPENDITURE INCURRED IN RESPECT OF SUCH EXE MPT INCOME SHOULD NOT BE ALLOWED TO THE ASSESSEE AS SUCH CLAIM IS AGAINST TH E BASIC PRINCIPLES OF TAXATION, WHERE ONLY THE NET INCOME WHICH IS EQUAL TO GROSS I NCOME MINUS THE EXPENDITURE IS TAXED. EXPENDITURE INCURRED WITH RE GARD TO THE EXEMPTED INCOME CANNOT BE ALLOWED AND ONLY THE EXPENDITURE RELATABL E TO THE EARNING OF TAXABLE INCOME IS TO BE ALLOWED. THIS WAS THE INTENTION OF THE LEGISLATURE. SINCE THE ASSESSEE HAS CLAIMED THAT NO EXPENDITURE INCURRED R ELATABLE TO EXEMPTED INCOME THEN IT IS ON THE REVENUE TO ESTABLISH THAT SOME EX PENDITURE WAS INCURRED WHICH HAS BEEN DEBITED TOWARDS THE TAXABLE INCOME THEN ON LY PROVISIONS OF RULE 8D CAN BE INVOKED. IN THE ABSENCE OF ANY SUCH FINDING S, WE ALLOW THE APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF FEBRUARY, 2015. SD/- SD/- (C.M. GARG) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 27 TH DAY OF FEBRUARY, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.