Amrish jayantilal Kakkad, Pune V. Deputy Commissioner of Income-tax, Circle - 6, Pune

ITA 1671/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9620 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 03-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: HARI KRISHAN
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income; Rule 8D
• Section: 14A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.1671/PUN/2017 / ASSESSMENT YEAR : 2013-14 AMRISH JAYANTILAL KAKKAD, 612/B 1, NANA PETH, PUNE-411002. PAN : AFKPK7818P ....... / APPELLANT / V/S. DCIT, CIRCLE-6, PUNE. / RESPONDENT ASSESSEE BY : SHRI HARI KRISHAN REVENUE BY : SHRI S. P. WALIMBE / DATE OF HEARING : 03.06.2020 / DATE OF PRONOUNCEMENT : 22.06.2020 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-4, PUNE DATED 10.03.2017 FOR THE ASSESSMENT YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX-APPEALS IS WITHOUT JURISDICTION, BAD IN LAW, INVALID AND AB-INITIO VOID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX-APPEALS IS BAD IN LAW, INVALID AND AB-INITIO VOID AS IT HAS BEEN PASSED IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX-APPEALS HAS ERRED IN MAKING ADDITION OF RS.5,54,242/- BY WAY OF DISALLOWANCE U/S 14A OF THE I.T.ACT,1961. 2 ITA NO.1671/PUN/2017 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX-APPEALS HAS NOT CONSIDERED THE FACT THAT SINCE THE ASSESSEE HAS BEEN INVESTING IN VARIOUS PARTNERSHIP FIRMS FOR MORE THAN PAST 5 YEARS OUT OF HIS OWNED FUNDS FROM TIME TO TIME AND AS ON 31.3.2013 SUCH INVESTMENTS OF RS.1,93,11,167/- ARE OUT OF HIS OWNED FUNDS OF RS.6,49,95,455/-, THE PROVISIONS OF SEC.14A ARE SQUARELY NOT APPLICABLE TO THE ASSESSEE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX-APPEALS HAS ERRED IN CONSIDERING THE FACT THAT THOUGH ALL THE AUDITED FINAL STATEMENT OF ACCOUNTS WERE PLACED ON RECORDS, HE HAS CONCLUDED THE APPEAL SAYING NO EVIDENCE WERE PROVIDED. 6. THE APPELLANT CRAVES LEAVE TO DELETE OR TO MODIFY, ALTER OR AMEND ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, OR TO ADD ANY OTHER GROUND/GROUNDS OF APPEAL. 3. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. KAKKAD CONSTRUCTION & ENGINEERING COMPANY. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,08,46,223/-. THE ASSESSMENT WAS COMPLETED ON 20.11.2015 AT AN ASSESSED INCOME OF RS.1,14,99,870/- THEREBY MAKING THE ADDITION OF (I) RS.99,400/- ON ACCOUNT OF INCOME FROM HOUSE PROPERTY AND (II) ADDITION OF RS.5,54,242/- MADE U/S 14A OF THE I.T. ACT READ WITH RULE 8D OF THE I. T. RULES. THE CIT(A) CONFIRMED BOTH THE ADDITIONS AND DISMISSED THE APPEAL OF THE ASSESSEE. THE ADDITION MADE U/S 14A OF THE ACT IS THE BONE OF CONTENTION BEFORE THE TRIBUNAL. 4. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE ABOVE EXTRACTED GROUNDS. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE GROUNDS NO.1 AND 2 AND THE SAME ARE DISMISSED AS NOT PRESSED. 6. REGARDING THE GROUNDS NO.3, 4 AND 5 WHICH RELATES TO THE ADDITION OF RS.5,54,242/-, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT HAS TWO SEGMENTS DISALLOWANCE UNDER CLAUSE (II) AND (III) OF RULE 8D(2) OF THE RULES. REFERRING TO 3 ITA NO.1671/PUN/2017 THE DISALLOWANCE MADE UNDER CLAUSE (II) AMOUNTING TO RS.4,22,503/-, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID DISALLOWANCE IS UNCALLED FOR SINCE NO INTEREST BEARING BANK LOANS WERE INVESTED IN THE EXEMPT INCOME YIELDING ASSETS. FURTHER, LD. COUNSEL MENTIONED THAT THE ASSESSEE HAS EXCESS FUNDS AND, IN THAT CASE, THE APPLICABILITY OF THE FINDING OF HONBLE JURISDICTIONAL COURTS JUDGMENTS IN THE CASE OF (I) CIT VS. HDFC BANK, 366 ITR 505 (BOM.) AND (II) CIT VS. RELIANCE UTILITIES & POWER LTD., 313 ITR 340 (BOM.) ARE APPLICABLE IN THE PRESENT CASE. IN THIS REGARD, LD. COUNSEL MENTIONED THAT FOR WANT OF CLARITY OF AVAILABILITY OF EXCESS FUNDS, THE MATTER MAY BE REMANDED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT THE ADDITION IS NOT TO BE MADE IN CASE OF EXISTENCE OF EXCESS FUNDS. WE AGREE WITH THE SAME AND ACCORDINGLY, THIS PART OF THE GROUND IS REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 7. REGARDING THE DISALLOWANCE MADE UNDER CLAUSE (III) OF RULE 8D(2) OF THE RULES, LD. COUNSEL SUBMITTED THAT THE AVERAGE INVESTMENTS WORKING REQUIRES MODIFICATION WITH REFERENCE TO THE INVESTMENTS MADE IN THE FORMS WHICH YIELDED EXEMPT INCOME. ON THIS ISSUE ALSO, THE LD. COUNSEL MENTIONED THAT THIS PART OF GROUND MAY BE REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. ACCORDING TO HIM, THE DISALLOWANCE WILL WORK OUT TO ONLY RS.13,500/-. THUS, THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE CALCULATION AND DECIDED THE ISSUE AFRESH AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS NO.3 TO 5 ARE ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.6 IS GENERAL IN NATURE AND THE SAME IS DISMISSED. 4 ITA NO.1671/PUN/2017 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 22 ND DAY OF JUNE, 2020. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 22 ND JUNE, 2020 SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-4, PUNE. 4. THE PR. CIT-3, PUNE. 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.