Shri Pavani Parameshwara Rao, New Delhi V. Addl. CIT, New Delhi

ITA 181/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7220 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 09-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 181/DEL/2015 (ASSESSMENT YEAR: 2011 - 12 ) PAVANI PARAMESHWARA RAO, SENIOR ADVOCATE, SUPREME COURT, 82, LAWYERS CHAMBER, SUPREME COURT, TILK MARG, NEW DELHI PAN: AACPR8466P VS. ADDL. CIT, RANGE - 37, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY: SHRI S.L. ANURAGI, SR. DR DATE OF HEARING 25/04 / 2018 DATE OF PRONOUNCEMENT 0 6 / 07 / 2018 O R D E R PER PRASHANT MAHARISHI , A. M. 1 . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - XXVIII, NEW DELHI DATED 12.11.2014 FOR THE ASSESSMENT YEAR 2011 - 12. 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ID. CIT(APPEALS) HAS ERRED ON FACTS AND IN LAW IN DISMISSING THE APPEAL BEFORE HER AND UPHOLDING THE ASSESSMENT ORDER OF THE ID. AO, DISALLOWING A SUM OF RS. 3,00,912/ - BY INVOKING SEC. 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INC OME TAX RULES, 1962 AND ADDING BACK THE SAID AMOUNT TO THE TOTAL INCOME OF THE APPELLANT. 2. THAT THE FINDINGS OF THE ID. CIT(APPEALS) AND THE ID. AO BEFORE HER A RE WITHOUT ANY COGENT MATERIAL BASIS AND IS CONTRARY TO THE FACTS OF THE APPELLANTS CASE. 3. THAT THE FINDINGS OF THE ID. CIT(APPEALS) AND THE ID. AO BEFORE HER IS WITHOUT TAKING INTO COGNISANCE THE FACTS: - I) THAT EXPENDITURE RELATABLE TO INCOME NOT FORMING PART OF THE TOTAL INCOME FROM INVESTMENTS AMOUNTING TO RS. 4,79,805/ - HAD BEEN CHARGED B Y THE CITI BANK AS TRANSACTION CHARGES DURING THE YEAR AND HAVE BEEN ACCOUNTED FOR IN THE CAPITAL ACCOUNT AS PERSONAL WITHDRAWALS AND HAS NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT WHICH RELATES ONLY TO PROFESSIONAL PAVANI PARAMESHWARA RAO VS. ADDL. CIT, ITA NO. 181/DEL/2015 (ASSESSMENT YEAR: 2011 - 12) PAGE | 2 INCOME RECEIPTS AND EXPENDITURE INCUR RED IN CONNECTION THEREWITH. II) THAT THE LEARNED AO APPLIED THE PROVISION OF SECTION 14A OF THE ACT AND RULE 8D OF THE RULES WITHOUT GIVING ANY FINDING ON WHY WAS HE NOT SATISFIED WITH THE APPELLANTS BOOKS OF ACCOUNTS OR THAT ANY EXPENDITURE DEBITED TO T HE PROFIT & LOSS ACCOUNT HAD ANY NEXUS WITH ANY INCOME NOT FORMING PART OF THE TOTAL INCOME. 4. THAT THE IMPUGNED ORDER OF THE CIT(APPEALS) IS INFLUENCED BY MISCONCEIVED FACTS AND ERRONEOUS APPRECIATION OF EVIDENCE AND MISPLACED NOTIONS OF OBLIGATIONS OF T HE ASSESSEE AND REVENUE. 3 . THE ONLY GRIEVANCE RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS. 300912/ - U/S 14A OF THE INCOME TAX ACT, 1961 CONFIRMED BY THE LD CIT(A) WHICH WAS MADE BY THE LD AO IN HIS ORDER U/S 143(3) OF THE ACT ON 29.01.2014. 4 . T HE BRIEF ISSUE IS THAT THE ASSESSEE WAS A SENIOR ADVOCATE NOW DECEASED WHO FILED HIS RETURN OF INCOME ON 24.09.2011 FOR RS. 8.90 CRORES AND ASSESSMENT U/S 143(3) OF THE ACT WAS MADE AT RS. 8.93 CRORES ON 29.01.2014 , WHEREIN, DISALLOWANCE U/S 14A WAS MADE OF RS. 300912/ - . DURING THE YEAR THE ASSESSEE HAS SHOWN EXEMPT INCOME FROM MUTUAL FUND OF RS. 29.75 LACS AND DIVIDEND FROM THE SHARES OF RS. 27.4 LACS. THE ASSESSEE HAS NOT DISALLOWED ANY SUM U/S 14A OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT HE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF SUCH EXEMPT INCOME . THE LD AO ON THE BASIS OF THE SCRUTINY OF THE BOOKS OF ACCOUNT OF THE ASSESSEE, EXPENDITURE CLAIMED IN THE PROFIT AND LOSS ACCOUNT INCLUDING ESTABLISHMENT AND PERSONAL EXPENDITURE STATED THAT HE IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE THAT NO EXPENSES HAVE BEEN INCURRED FOR EARNING TAX - FREE INCOME AFTER THAT HE APPLIED THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES AND DISALLOWED HALF PERCENTAGE OF AVERAGE INVESTMENT AMOUNTING TO RS. 30 0912/ - . THE LD CIT(A) CONFIRMED THE DISALLOWANCE. 5 . THE LD AR SUBMITTED THAT IN BEFORE ITAT IN ASSESSEES OWN CASE FOR EARLIER YEARS FOR ASSESSMENT YEAR 2009 - 10 , ON IDENTICAL ISSUE AROSE AND THE PAVANI PARAMESHWARA RAO VS. ADDL. CIT, ITA NO. 181/DEL/2015 (ASSESSMENT YEAR: 2011 - 12) PAGE | 3 ADDITION WAS DELETED. HE REFERRED TO THE ORDER OF THE COORDINA TE BENCH IN ASSESSEES OWN CASE DATED 27.02.2015. HE FURTHER REFERRED TO THE SUBMISSION MADE BEFORE THE LD AO STATING THAT THERE ARE NO EXPENDITURE INCURRED FOR EXEMPT INCOME BY THE ASSESSEE AT ALL. HE FURTHER STATED THAT THERE IS NO SATISFACTION RECORDED BY THE LD AO THAT ANY EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE. HE EXTENSIVELY REFERRED TO THE INCOME AND EXPENDITURE ACCOUNT PLACED AT PAGE NO. 58 OF THE PAPER BOOK TO SHOW THAT THERE ARE NO SUCH EXPENDITURE. HE THEREFORE, SUBMITTED THAT NO DISALLOWA NCE U/S 14A OF THE ACT IS CALLED FOR. 6 . THE LD DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE HAS EARNED INCOME FROM MUTUAL FUND OF RS. 29.75 LACS AND DIVIDEND OF RS. 27.34 LACS. HE HAS CLAIMED THAT NO EXPENDITURE IS INCURRED FOR EA RNING OF THE EXEMPT INCOME. THE LD AO REJECTED HIS CONTENTION STATING THAT HE HAS EXAMINED THE BOOKS OF ACCOUNT AND LOOKED AT THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. FROM THAT HE WAS SATISFIED THAT THE EXPLANATION OF THE ASSESSEE IS INCORRECT. HE HAS NOT STATED ANY INSTANCES IN THE ASSESSMENT ORDER THAT THESE ARE THE EXPENDITURE WHICH HAS BEEN INCURRED BY THE ASSESSEE WHICH COULD BE FOR THE PURPOSES OF EARNING OF THE EXEMPT INCOME. WE HAVE LOOKED AT THE INCOME AND EXPENDITURE ACCOUNT OF THE ASS ESSEE WHICH IS PLACED AT PAGE 58 OF THE PAPER BOOK. WE COULD NOT FIND ANY EXPENDITURE WHICH COULD BE SAID TO HAVE BEEN INCURRED FOR EARNING OF EXEMPT INCOME. THE ASSESSEE HAS SHOWN GROSS RECEIPT OF RS. 7.64 CRORES AS ALLOCATE AND HAS SHOWN THE EXCESS OF IN COME OVER EXPENDITURE OF RS. 7.36 CRORES. HE HAS DEBITED OTHER EXPENDITURE OF RS. 67.52 LACS IN HIS CAPITAL ACCOUNT. IN THE PROFIT AND LOSS ACCOUNT THE MAJOR EXPENDITURE HAS BEEN INCURRED IS CAR MAINTENANCE, DEPRECIATION, TRAVELLING, ASSISTANT FEES PAID TO ADVOCATE, STIPEND AND SALARIES. THEREFORE, ON LOOKING AT THE PROFIT AND LOSS ACCOUNT WE COULD NOT FIND ANY EXPENDITURE WHICH EVEN REMOTELY SUGGESTS TO HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME. THE LD DR ALSO PAVANI PARAMESHWARA RAO VS. ADDL. CIT, ITA NO. 181/DEL/2015 (ASSESSMENT YEAR: 2011 - 12) PAGE | 4 COULD NOT SHOW US ANY SUCH E XPENDITURE. FURTHER , ON THE IDENTICAL FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 THE DISALLOWANCE OF RS. 8.43 LACS MADE BY THE LD AO WAS DELETED BY THE COORDINATE BENCH. THE LD DR COULD NOT POINT OUT THAT WHY THAT DECIS ION SHOULD NOT BE FOLLOWED IN THIS CASE. THE COORDINATE BENCH HAS HELD THAT NO SPECIFIC INSTANCES WERE REFERRED BY THE AUTHORITIES BELOW WITH REGARD TO THE EXPENDITURE INCURRED RELATED TO THE EXEMPT INCOME. IN THE PRESENT CASE ALSO WE COULD NOT FIND ANY IN STANCES OF EXPENSES INCURRED FOR EXEMPT INCOME RECORDED BY THE LOWER AUTHORITIES. WE FIND NO SATISFACTION HAS BEEN RECORDED OF INSTANCE OF EXPENSES BY THE LD AO TO SHOW THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. FURTHER , THE ARGUMENT OF THE LD AR THAT TRANSACTION CHARGES ON ACCOUNT OF MUTUAL FUND INVESTMENTS OF RS. 4.79 LACS H AS ALREADY BEEN DEBITED TO THE CAPITAL ACCOUNT AND NOT CLAIMED AS DEDUCTION. IN VIEW OF THIS , WE ALLOW GROUND NO. 1 OF THE APPEAL AND DIRECT THE LD AO TO DELETE THE DISALLOWANCE OF RS. 300912/ - U/S 14A OF THE ACT. 8 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 6 / 07 / 2018 . - S D / - - S D / - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 6 / 07 / 2018 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI