Shri Dhimantbhai Hiralal Turakhia, Ahmedabad V. The ACIT, Central Circle-1(1), Ahmedabad

ITA 1674/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2656 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 17-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI
• Keywords: Earning of tax free income; Initiation of penalty proceedings; Corroborative evidences; Rule 8D
• Section: 143(3); 14A; 143(2); 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I SANDEEP GOSAIN , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI DHIMANTBHAI HIRALAL TURAKHIA, B - 203, PUSHPAVAN APARTMENTS, NR. RUCHIR BUNGLOWS, BODAKDEV, AHMEDABAD - 380054 PAN: ABIPT4166F (APPELLANT) VS THE ACIT , CENTRAL CIRCLE - 1 ( 1 ) , AHMEDABAD - 380009 (RESPONDENT) REVENUE BY : S H RI G.C. DAXINI , SR. D . R. ASSESSEE BY: SHRI PARIN SHAH , A.R. DATE OF HEARING : 02 - 0 3 - 2 020 DATE OF PRONOUNCEMENT : 03 - 03 - 2 020 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2014 - 15 , ARI SES FROM ORDER OF THE CIT(A) - 11, AHMEDABAD DATED 10 - 05 - 2 018 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 1674 / A HD/20 18 A SS ESSMENT YEAR 2014 - 15 I.T.A NO. 1674 /AHD/20 18 A.Y. 2014 - 15 PAGE NO SHRI DHIMANTBHAI HIRALAL TURAKHIA VS. ACIT 2 2. THE SOLITARY GROUND OF APPEAL IS FILED AGAINST THE DECISION OF LD. CIT(A) IN CONFIRMING THE DISALLOW ANCE U/S. 14A TO THE AMOUNT OF R S. 5 , 95 ,3 14/ - MADE BY THE ASSESSING OFFICER VIDE ORDER U/S. 143(3) OF THE ACT. 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLARING INCOME OF R S.39 , 24 , 572/ - WAS FILED ON 8 TH SEP, 2014. THE CASE WAS SUBJECT TO SECURITY ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 3RD SEP, 2015. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS MADE INV ESTMENT IN SHARES ON VARIOUS DATES TO THE AMOUNT OF RS. 80 , 17 , 133/ - AND SHOWN DIVIDEND INCOME TO T H E AMOUNT OF RS. 10,1 1 , 736/ - IN THE P & L ACCOUNT DURING THE YEAR UNDER CONSIDERATION . ON PERUSAL OF THE AFORESAID INFORM ATION, THE ASSESSING OFFICER OBSERV ED THAT ASSESSEE HAS NOT SHOWN ANY EXPENDITURE INCURRED TOWARDS EARNING EXEMPT INCOME. ON QUERY, THE ASSESSEE HAS SUBMITTED THAT DIVIDEND INCOME WAS RECEIVED FROM INVESTMENT MADE LONG BACK OUT OF OWN FUND THEREFORE PROVISION OF SECTION 14A OF THE ACT WAS NOT APPLICABLE . THE ASSESSING OFFICER HAD NOT AGREED WITH THE SUBMISSION O F THE ASSESSEE AND STATED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS HAVING NEGATIVE BALANCE OF RS. 3 , 95 , 99 , 067 / - IN THE CAPITAL ACCOUNT AND ALSO THERE WAS A NEGATIV E BALANCE OF RS. 5 , 04 , 41,568 / - IN THE PRECEDING FINANCE YEAR. THE AS SESSING OFFICER HAS ALSO STATED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS MADE FRESH INVESTMENT TO THE AMOUNT OF RS. 78 , 66 , 326/ - . CONSEQEUNTLY , THE ASSESSING OFFICER HAS APPLIED PROVISION OF SECTION 14A OF THE ACT R.W.R. 8D OF THE I.T. RULE AND COMPUTED THE DISALLOWANCE TO THE AMOUNT FOR RS . 5 , 95 , 314/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO. 1674 /AHD/20 18 A.Y. 2014 - 15 PAGE NO SHRI DHIMANTBHAI HIRALAL TURAKHIA VS. ACIT 3 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. RELEVANT PART OF THE DECISION OF LD. CIT(A) IS AS UNDER: - DECISION 5. FACTS OF THE CASE, SUBMISSION OF THE APPELLANT AND ASSESSMENT ORDER HAVE BEEN CAREFULLY CONSIDERED. THE FIRST GROUND OF APPEAL IS OF G ENERAL NATURE, HENCE, DOES NOT NEED ADJUDICATION, THUS, DISMISSED. THE SECOND GROUND OF APPEAL IS AGAINST THE ADDITIONS OF RS.5,95,314/ - MADE BY THE AO U/S.14A R.W. RULE 8D, AS THE APPELLANT HAD DIVIDEND INCOME OF RS.10,11,736/ - AND SAME WAS CLAIMED AS EXE MPT. THE AO MADE THE ADDITIONS STATING THAT THE APPELLANT HAD NEGATIVE CAPITAL BALANCE OF RS.5.07 CRORE IN THE BEGINNING OF THE YEAR, WHICH WAS OF RS.3.95 CRORE AT THE END OF THE YEAR. IT CLEARLY ESTABLISHED THAT THE APPELLANT MADE INVESTMENT FROM THE BORR OWED FUNDS AND THUS DISALLOWED INTEREST OF RS.5,39,294/ - AND RS.56,020/ - BY TAKING 0.5% AVERAGE INVESTMENT. THE APPELLANT CONTENDED THAT ALL THESE INVESTMENTS ARE VERY ' OLD AND THE BORROWED FUNDS HAVE NOT BEEN UTILIZED TO INVEST IN THESE ASSETS. BUT THE A PPELLANT COULD NOT EXPLAIN SATISFACTORILY THE HUGE NEGATIVE CAPITAL BALANCE, WHICH CLEARLY PROVE THAT INTEREST BEARING FUND HAVE BEEN UTILIZED FOR EARNING EXEMPT INCOME. THE AO IS JUSTIFIED IN MAKING ADDITIONS U/S. 14A R.W.RULE 8D. THE CASE LAWS CITED UPON BY THE APPELLANT HAVE DISTINGUISHABLE FACTS, HENCE, NOT BEING RELIED UPON, HENCE, THE ADDITIONS MADE BY THE AO ARE CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 5. DURING THE CO URS E OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS CONTENDED TH AT ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 10 , 11 , 736/ - OUT OF WHICH RS. 8,80,000/ - PERTAINS TO DIVIDEND EARNED ON T H E SHARES OF TURAKHIA OVERSEAS PVT. LTD. AND INVESTMENT IN THE S HARE OF THE SAID COMPANY WAS PERTAINED TO FINANCIAL YEAR 1998 - 99 AND 2000 - 2001 AND 2002 - 03 AND 2007 - 08 RESPECTIVELY. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT ASSESSEE HAS MADE INVESTMENT FROM HIS OWN FUND IN THE SHARES OF TURAKHIA OVERSEAS PVT. LTD., THEREFORE, NO DISALLOWANCE FOR INTEREST U/S. 14A SHOULD BE MADE IN THE CAS E OF THE ASSESSEE. THE LD. COUNSE L HAS ALSO REFERRED THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. INDIA GELATINE & CHEMICAL (2016) 66 TAXMAN.COM 356 (GUJ). ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE S IMILAR SUBMISSION WAS ALSO MADE BEFORE THE LD. CIT(A), H OWEVER, THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT INVESTMENT WAS MADE OUT OF THE INTEREST FREE FUND IN THES E S HARES FROM WHICH THE EXEMPT INCOME WAS EARNED. THE LD. DEPARTMENTAL I.T.A NO. 1674 /AHD/20 18 A.Y. 2014 - 15 PAGE NO SHRI DHIMANTBHAI HIRALAL TURAKHIA VS. ACIT 4 REPRESENTATIVE HAS ALSO SUBMITTED THAT A SSESSEE WAS HAVING NEGATIVE CAPIT AL AS ON 31 ST MARCH, 2014 TO THE AMOUN T OF R S. 3 , 95 , 99 , 067/ - AND ALSO HAVING NEGATIVE CA P IT AL TO THE AMOUNT OF R S. 5 , 07 , 41 , 658/ - AS ON 31 ST MARCH, 2013. T HEREFORE, THE LD. CIT(A) HAS RIGHTLY SUSTAINED T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. 6. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 24 TH OCTOBER , 2016. DURING THE COURSE OF ASSESSMENT ON VERIFIC ATION, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN EXEMPT INCOME U/S. 10(34) OF THE ACT IN THE FORM OF DIVIDEND TO THE AMOUNT OF RS. 10 , 11 , 736/ - . ON FURTHER VERIFIC ATION, THE ASSESSING OFFICER N OTICED THAT ASSESSEE HAS NOT SHOWN ANY EXPENSES INCURRED TOWARDS EARNING THE AFORESAID EXEMPT INCOME U/S. 14A OF THE ACT. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE COULD NOT SUBSTANTIATE WITH RELEVANT EVIDENCES THAT INVESTMENT IN THE SHARES OF VARIOU S COMPANIES WAS MADE OUT OF INTEREST FREE FUNDS, THEREF ORE, THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF R S. 5 , 95 , 314/ - U/S. 14A R.W.R. 8D OF THE I.T. RULE AS COMPUTED ON PAGE 3 OF THE ASSESSMEN T ORDER. AFTER PERUSAL OF THE MATERIAL ON RECORD, IT IS NOTICED THAT ASSESSEE WAS HAVING NEGATIVE CAPITAL BALANCE OF RS.5.07 CRORES IN THE BEGINNING OF THE YEAR AND IT WAS ALSO NEGATIVE BALANCE TO THE AMOUNT OF RS. 3.95 CRORE AT THE END OF FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION . DURING T HE COURSE OF APPE LLATE PROCEEDINGS BEFORE LD. CIT(A) THE ASSESSEE HAS CONTENDED THAT ALL HIS INVESTMENTS W E RE VERY OLD AND WAS MADE OUT OF THE INTEREST FREE FUNDS , HOWEVER , THE ASSESSEE COULD NOT SUBSTANTIATE HIS CONTENTION WITH RELEVANT SUPPORTING MATER IAL. EVEN DURING I.T.A NO. 1674 /AHD/20 18 A.Y. 2014 - 15 PAGE NO SHRI DHIMANTBHAI HIRALAL TURAKHIA VS. ACIT 5 THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE ASSESSEE HAS MADE SIMILAR CONTENTION WHICH WAS MADE BEFORE THE LOWER AUTHORITIES. WE HAVE GONE THROUGH THE PAPER BOOK SUBMITTED BY THE ASSESSEE. IN THE PAPER BOOK, THE ASSESSING OFFICER HAS ENCLOSED COPY OF P & L ACCOUNT AND BALANCE SHEET PERTAINING TO F.Y. 2013 - 14. IT IS NOTICED THAT AS ON 31 ST MARCH, 2014 THE ASSESSEE WAS HAVI NG NEGATIVE CAPITAL BALANCE OF R S. 3 , 95 , 55 , 067/ - AND AS ON 31 ST MARCH, 2013, T HE ASSESSEE HAS ALSO HAVING NEG ATIVE CAPITAL BALANCE TO THE AMOUNT OF RS. 3 , 07 , 41 , 658/ - . APART FROM THIS IT IS NOTICED THAT ASSESSEE WAS NOT HAVING ANY INTEREST FREE FUNDS AS PER THE DOCUMENTS PLACED IN THE PAPER BOOK. IT IS NOTICED THAT THERE WAS UNSECURED LOAN TO THE AMOUNT OF RS. 4 , 93 , 32 , 000/ - AS ON 31 ST MARCH, 2014 AND SAME WAS TO THE AMOUNT OF RS. 8 , 16 , 72 , 700/ - AS ON 31 ST MARCH, 2013. ON PAGE 20 OF THE PAPER BOOK, THE ASSESSEE HAS PLACED COPY OF NOTES FORMING PART OF ACCOUNT IN THE YEAR ENDED ON 31 ST MARCH, 2014 SHOWING TOTAL INV ESTMENT TO THE AMOUNT OF RS. 11 , 168 , 093/ - OUT OF WHICH INVESTMENT IN THE LIST ED SHARES WAS TO THE AMOUNT OF R S. 8 , 017 , 133/ - . HOWEVER, THE ASSESSEE HAS NOT PROVIDED ANY RELEVAN T SUPPORTING DOCUMENT WHICH DEMONSTRATE THAT ASSES SEEEE HAS MADE INVESTMENT IN T HE SHARES IN THE EARLIER YEAR OUT OF INTEREST FREE FUNDS. ON PAGE NO. 36 OF THE PAPER BOOK, THE ASSESSEE HAS SIMPLY CLAIMED THAT INVESTMENT IN THE SHARES OF T ORAKHIA OVERSEAS PVT. LTD. WERE MADE IN THE EARLIER YEARS OUT OF THE INTEREST FREE FUNDS, HOWE VER , AS SEESSEE HAS FAILED TO DEMONSTRATE WITH RELEVANT SUPPORTING EVIDENCES TO SUBSTANTIATE HIS CLAIM THAT INVESTMENT WAS MADE OUT OF INTEREST FREE FUNDS. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FIND ING OF LD. CIT(A), THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. I.T.A NO. 1674 /AHD/20 18 A.Y. 2014 - 15 PAGE NO SHRI DHIMANTBHAI HIRALAL TURAKHIA VS. ACIT 6 7. GROUND NO. 3 OF THE ASSESSEE IS PERTAINED TO INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C). THIS GROUND OF APPEAL IS IMMATUR E AT THIS STAGE, THEREFORE, THE SAME STANDS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 03 - 03 - 20 20 SD/ - SD/ - ( SANDEEP GOSAIN ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT M EMBER AHMEDABAD : DATED 03 /03 /2020 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,