M/s. Edelweiss Financial Advisors Ltd., Ahmedabad V. The Jt.CIT.,Range-3, Ahmedabad

ITA 1841/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1870 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 04-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: IRA KAPO OR
• Keywords: Depreciation; Earning of tax free income; Initiation of penalty proceedings; Onus to prove
• Section: 14A; 32; 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ITA NO. 1841/AHD/2012 / ASSESSMENT YEAR: 2009-10 EDELWEISS FINANCIAL ADVISORS LIMITED (FORMERLY KNOWN AS ANAGRAM CAPITAL LTD) , ANAGRAM HOUSE, DARSHAN SOCIETY, NR. H L COMMERCE SIX ROADS, NAVRANGPURA, AHMEDABAD-380009 PAN : AABCA 2916 K VS JT. CIT, RANGE-3, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : MS. IRA KAPOOR, AR REVENUE BY : SHRI KEYUR PATEL, SR. DR. / DATE OF HEARING : 04/04/2016 / DATE OF PRONOUNCEMENT: 12/04/2016 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-6, AHM EDABAD DATED 29.06.2012, PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED FOLLOWING CONCISE GROUND S OF APPEAL:- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT THE FIRST GROUND OF THE APPELLANT'S APPEAL CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HIM WAS GENERAL IN NATURE AND THEREFORE, NOT REQUIRED TO BE ADJUDICATED UPON BY HIM. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DI SALLOWANCE OF ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 2 EXPENDITURE OF RS.14,71,507 (INTEREST RS.3,94,655 P LUS ADMINISTRATIVE EXPENDITURE RS.1 1,26,552 MINUS RS. 50,000 SUO MOTU DISALLOWED BY THE APPELLANT) MADE BY THE LEARNE D ASSESSING OFFICER U/S. 14A READ WITH RULE 8D OF THE INCOME-TA X RULES, 1962. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING DISALL OWANCE OF DEPRECIATION OF RS.151/- ON THE MEMBERSHIP CARD OF THE AHMADABAD STOCK EXCHANGE. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING, THE D ISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.9,10,350/- MADE BY THE LEARNED ASSESSING OFFICER. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUN D NO. 8 OF THE APPELLANT'S APPEAL CHALLENGING LEVY OF INTEREST U/S .234A, 234B, 234C AND 234D ON THE GROUND THAT THE LEVIES WERE MA NDATORY. HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT EVEN IF IT WERE ASSUMED THAT THE LEVIES WERE MANDATORY, THEY WERE NOT UNIVE RSAL AND THAT THE APPELLANT'S CASE BEING COVERED BY THE RATIO OF THE DECISION OF THE GUJARAT HIGH COURT IN BHARAT MACHINERY AND HARDWARE MART'S CASE (136 ITR 875) AND OF THE DECISION OF THE ITAT, DELHI BENCH IN HARYANA WAREHOUSING CORPORATION V. DCIT [252 ITR (A T.) 34], THE LEVIES DESERVED TO BE CANCELLED. 6. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING AS PR EMATURE GROUND NO. 9 OF THE APPELLANT'S APPEAL CHALLENGING INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C). HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT IN THE PECULIAR FACTS AND CIRCUMST ANCES OF THE APPELLANT'S CASE, THERE BEING ABSOLUTELY NO WARRANT /JUSTIFICATION FOR INITIATING THE PENALTY PROCEEDINGS, HE OUGHT TO HAV E ORDERED FOR THEIR BEING DROPPED, THEREBY SAVING BOTH THE APPELLANT AN D THE DEPARTMENT FROM LONG DRAWN UNNECESSARY LITIGATION. 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND/OR AL TER THE GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL. ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 3 3. BEFORE US, THE FIRST GROUND OF CONCISE GROUNDS I S NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE; THEREFORE, THE SA ME IS DISMISSED AS NOT PRESSED. 4. GROUND NO. 2 IS AGAINST THE DISALLOWANCE MADE U/ S 14A READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962. BRIEFL Y STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCR UTINY ASSESSMENT AND THE ASSESSMENT U/S.143(3) OF THE INCOME-TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DAT ED 28.12.2011. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.14,71,507/-, BEING THE EXPENDITU RE ON THE INTEREST AND ADMINISTRATIVE COMPONENT RELATED TO EXEMPT INCO ME, WHILE COMPUTING DISALLOWANCE UNDER RULE 8D OF THE INCOME- TAX RULES, 1962. THE ASSESSEE AGGRIEVED BY THIS DISALLOWANCE PREFERR ED AN APPEAL BEFORE THE LD. CIT(A) WHO, AFTER CONSIDERING THE SU BMISSIONS, CONFIRMED THE DISALLOWANCE. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4.1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE DISALLOWANCE AND CONFIRMING THE SAME. THE LD. COUNSEL FOR THE ASSESSEE REITERA TED THE SUBMISSIONS AS WERE MADE IN THE CHART SUBMITTED DURING THE COUR SE OF HEARING. IT IS SUBMITTED BY THE LD. COUNSEL THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS; THEREFORE, THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD MADE DISALLOWANCE O F RS.50,000/-. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING AS TO HOW THE ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 4 DISALLOWANCE MADE BY HIM IS JUSTIFIED. THE LD. COUN SEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF SIRHIND STEEL LTD VS. ACIT IN ITA NO.362/AHD/2012 DATED 29.09.2015, SAFAL REALITY PVT LTD VS. ACIT (OSD) IN ITA NO.2334/AHD/2012 & 1842/AHD/2013 DATED 29.11.2013 AND THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. TORRENT POWER LTD, [2014] 44 TAXMANN.COM 44 1. 4.2 ON THE CONTRARY, LD. SR. DEPARTMENTAL REPRESENT ATIVE HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND S UBMITTED THAT THERE IS NO ILLEGALITY IN TO THE ORDERS PASSED BY THE AUT HORITIES BELOW. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. CIT(A) HAS DECIDED THE ISSUE AS UND ER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER M ADE DISALLOWANCE OF EXPENSE RELATING TO EXEMPT INCOME. SUCH DISALLOWANC E WAS CONSIDERED NECESSARY OUT OF INTEREST AND OTHER EXPENSES AS PER RULE 8D R.W.S. 14A(2) TREATING THE SAME AS RELATING TO INVESTMENT R ESULTING IN EXEMPT INCOME. NOW RULE 8D IS HELD TO BE APPLICABLE WITH E FFECT FROM ASSESSMENT YEAR 2008-09 BY BOMBAY HIGH COURT. IT IS NOT IN DISPUTE THAT APPELLANT EARNED EXEMPT INCOME IN THE FORM OF DIVIDEND ON INVESTMENT OF MORE THAN RS 22.53 CRORES. APPELLANT INCURRED SUBSTANTIAL EMPLOYEES' REMUNERATION AND OTHER ADMIN ISTRATIVE EXPENSES, PART OF WHICH MAY RELATE TO INVESTMENT RE SULTING IN EXEMPT INCOME. SIMILARLY PAYMENT OF INTEREST WILL ALSO PAR TLY RELATE TO INVESTMENT RESULTING IN EXEMPT INCOME THEREFORE DIS ALLOWANCE UNDER SECTION 14 A ON ACCOUNT OF INTEREST AND OTHER EXPEN SES ARE NECESSARY. COMING TO THE METHOD OF COMPUTATION OF DISALLOWANCE UNDER SECTION 14 A, ASSESSING OFFICER DISALLOWED EXPENSES RELATABLE TO EXEMPT INCOME AS PER RULE 8D. FOR INTEREST, PROPORTIONATE EXPENSE IS DISALLOWABLE WHEREAS FOR OTHER EXPENSES .5% OF INVE STMENT VALUE IS DISALLOWABLE. CONSIDERING THE FACT THOSE APPELLANT CLAIMED HUGE ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 5 ADMINISTRATIVE AND OTHER EXPENSES, THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES MADE BY THE ASSESSING OFFICER @.5% OF INVE STMENT RESULTING IN EXEMPT INCOME IS REASONABLE. FROM THE SIZE OF THE B ALANCE SHEET AND APPLICATION OF FUNDS, IT IS CLEAR THAT PART OF EXPE NSES IS RELATABLE TO INVESTMENT RESULTING IN EXEMPT INCOME. IN VIEW OF T HIS THE ADDITION@ .5%OF INVESTMENT AS PROVIDED IN RULE 8D MADE BY THE ASSESSING OFFICER IS CONFIRMED. AS REGARDS INTEREST, APPELLANT HAD BORROWED FUNDS O N WHICH INTEREST WAS PAID. WHILE MAKING INVESTMENTS, BOTH B ORROWED FUNDS AS WELL AS OWN FUNDS WERE USED HENCE ONE CANNOT SAY TH AT BORROWED FUNDS WERE USED ONLY FOR BUSINESS PURPOSE AND CAPITAL RAI SED WAS ONLY USED FOR INVESTMENT. EVEN OTHERWISE, ASSESSING OFFICER H AS TAKEN ONLY THAT PART OF INTEREST PAID FOR GENERAL BORROWINGS NOT MA DE FOR ANY SPECIFIC PURPOSE. I DO NOT AGREE WITH THE APPELLANT THAT NET INTEREST SHOULD ONLY BE CONSIDERED WHILE MAKING DISALLOWANCE OF INTEREST . SINCE THE INTEREST DISALLOWANCE IS MADE IN THE PROPORTION OF EXEMPT IN VESTMENT TO TOTAL ASSETS OF THE BUSINESS, GROSS INTEREST PAID HAS TO BE CONSIDERED. SINCE FUNDS WERE UTILISED FROM THE COMMON POOL FOR BOTH T AXABLE AND EXEMPT ACTIVITIES, EXACT SOURCE CANNOT BE DETERMINED. THER EFORE IN THE ABSENCE OF CLEAR CUT DETAILS OF UTILIZATION OF FUNDS, THE F ORMULA GIVEN IN RULE 8D IS MOST APPROPRIATE METHOD. JUDICIAL DECISIONS REFER RED BY THE APPELLANT ARE RELATING TO ASSESSMENT YEARS PRIOR TO 2008-09 W HEN THE RULE 8D WAS NOT MANDATORY. SINCE RULE 8D IS MANDATORY THIS YEAR , THESE DECISIONS DO NOT HELP APPELLANT. SINCE ASSESSING OFFICER WORK ED OUT INTEREST DISALLOWANCE AS PER THE FORMULA GIVEN IN RULE 8D, T HE INTEREST DISALLOWANCE IS CONFIRMED.. THE CONTENTION OF THE ASSESSEE IS TWO FOLDS. FIRSTL Y, WITH REGARD TO THE INTEREST, IT IS SUBMITTED THAT THE INTEREST FREE FUNDS WERE AVAILABLE AT RS.119 CRORES, OUT OF WHICH THE ASSESS EE HAS MADE INVESTMENT OF RS.22.54 CRORES. SECONDLY, THE INTER EST INCOME WAS RS.10.99 CRORES, WHEREAS THE INTEREST EXPENSE WAS R S.2.97 CRORES. NET INTEREST INCOME CLAIMED TO BE REPORTED AT RS.8.01 C RORES. IT IS CONTENDED THAT WHEN THERE IS NO NET INTEREST EXPEND ITURE, NO DISALLOWANCE CAN BE MADE. IN THIS REGARD, RELIANCE HAS BEEN PLACED ON THE DECISIONS OF CO-ORDINATE BENCH RENDERED IN THE CASE OF M/S. TRADE ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 6 APPARTMENT LIMITED IN ITA NO.1277/KOL/2011 AND SAFA L REALITY PVT LTD VS. ACIT IN ITA NO.2334/AHD/2011 DATED 29.11.20 13. WE FIND THAT THE CO-ORDINATE BENCH IN THE CASE OF SAFAL REA LITY PVT LTD (SUPRA) HAS HELD AS UNDER:- 5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE ABOVE COMPILATION FILED. ONCE, THE FACTUAL POSITION IS TH AT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS, AS DEMONSTRATED BEFORE US WHICH WERE STATED TO BE UTILIZED FOR THE INVESTMENT IN CAPITAL OF THE PARTNERSHIP FIRM THEN IT IS UNFAIR ON THE PART OF THE REVENUE DEPART MENT TO PRESUME THAT THE BORROWED CAPITAL WAS UTILIZED FOR THE PURPOSE O F INVESTMENT IN THE FIRM TO EARN THE EXEMPTED INCOME FOR A.Y. 2008-09. THE MAIN PROVISIONS OF SECTION 14A ARE TO BE APPLIED. FURTHE R RULE 8D (1) READS AS FOLLOWS: WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIED W ITH- (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITU RE HAS BEEN INCURRED, IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, HE SHALL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SUB-RULE (2). 5.1 AS PER THIS RULE, AS REPRODUCED ABOVE, THE AO H AS TO DETERMINE THE DISALLOWANCE HAVING REGARD TO THE ACCOUNTS OF THE A SSESSEE TO SATISFY HIMSELF IN RESPECT OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE AS WELL AS IN RESPECT OF THE CLAIM WHETHER ANY EXPENDI TURE WAS INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME; HENCE, EXEMPT UNDER THE ACT. THE AO IS FIRST REQUIR ED TO DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH EXEMPTED INCOME. WE HAVE ALSO NOTED THAT EVEN FOR A.Y. 2008-09 THE RESPECTED CO-ORDINATE BENCH D ITAT AHMEDABAD IN THE CASE OF KARNAVATI PETROCH EM PVT. LTD. (SUPRA) HAS HELD AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE GRANTING RELIE F TO THE ASSESSEE HAS GIVEN A FINDING THAT NO NEXUS HAS BEE N ESTABLISHED ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 7 BY THE AO WHICH THE AMOUNT INCURRED BY THE ASSESSE E FOR EARNING THE TAX FREE INCOME. HE HAS FURTHER NOTED THAT IN THE ASSESSEES CASE THE INTEREST INCOME WAS MORE THAN I NTEREST EXPENSE AND THUS THE ASSESSEE WAS HAVING NET POSITI VE INTEREST INCOME AND THEREFORE THE SAME CANNOT BE CONSIDERED FOR DISALLOWANCE AND FOR WHICH HE PLACE RELIANCE ON THE DECISION OF KOLKATA TRIBUNAL IN THE CASE OF TRADINGAPARTMENT LI MITED AND THE DECISION OF TRIBUNAL IN THE CASE MORGAN STANLEY INDIA SECURITIES PRIVATE LIMITED. HE HOWEVER CONSIDERED T HE ADMINISTRATIVE EXPENSES TO BE 0.5% OF THE AVERAGE I NVESTMENTS AND DISALLOWED THE SAME. 5.2 TO COMPLETE THIS ORDER, WE DEEM IT PROPER TO R EPRODUCE A PORTION OF THE ORDER OF HONBLE DELHI HIGH COURT PRONOUNCED IN THE CASE OF MAXOPP INVESTMENT LTD. AND OTHERS VS. CIT AS FOLLOW S: SUB-S. (2) OF S. 14A PROVIDES THE MANNER IN WHICH T HE AO IS TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . HOWEVER, IF ONE EXAMINES THE PROVISION CAREFULLY, ONE WOULD FIN D THAT THE AO IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDI TURE ONLY IF THE AO, HAVING REGARD TO THE ACCOUNTS OF THE ASSESS EE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME W HICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OTH ER WORDS, THE REQUIREMENT OF THE AO EMBARKING UPON A DETERMINATIO N OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMP T INCOME WOULD BE TRIGGERED ONLY IF AO RETURNS A FINDING THA T HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB-S. (3) IS NOTHING BUT AN OFFSHOOT OF SUB-S. (2) OF S. 14A. SUB- S. (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS TH AT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OTHER WORDS, SUB-S. (2) DEALS WITH CASES WHERE THE ASSESSEE SPECI FIES A POSITIVE AMOUNT OF EXPENDITURE IN RELATION TO INCOME WHICH D OES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT AND SUB-S. ( 3) APPLIES TO CASES WHERE THE ASSESSEE ASSERTS THAT NO EXPENDITUR E HAD BEEN INCURRED IN RELATION TO EXEMPT INCOME. IN BOTH CASE S, THE AO, IF SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 8 RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE, AS T HE CASE MAY BE, CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCORDANCE WITH ANY PRESCRIBED METHO D, AS MENTIONED IN SUB-S. (2) OF S. 14A. IT IS ONLY IF THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE AO GETS JURISDICTION TO DETERMINE T HE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN ACCO RDANCE WITH THE PRESCRIBED METHOD, THE PRESCRIBED METHOD BEING THE METHOD STIPULATED IN R. 8D. WHILE REJECTING THE CLAIM OF T HE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE AO WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. IT IS, THEREFORE, CLEA R THAT DETERMINATION OF THE AMOUNT OF EXPENDITURE IN RELAT ION TO EXEMPT INCOME UNDER RULE 8D WOULD ONLY COME INTO PLAY WHEN THE ASSESSING OFFICER REJECTS THE CLAIM OF THE ASSESSEE IN THIS REGARD. IF ONE EXAMINES SUB-RULE (2) OF RULE 8D, THE METHOD FOR DETERMINING THE EXPENDITURE IN RELATION TO EXEMPT I NCOME HAS THREE COMPONENTS. THE FIRST COMPONENT IS THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE SECOND IS BEING COMPUTED O N THE BASIS OF THE FORMULA GIVEN THEREIN IN A CASE WHERE THE ASSES SEE INCURS EXPENDITURE BY WAY OF INTEREST WHICH IS NOT DIRECTL Y ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. THE FORMULA ES SENTIALLY APPORTIONS THE AMOUNT OF EXPENDITURE BY WAY OF INTE REST (OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) I NCURRED DURING THE PREVIOUS YEAR IN THE RATIO OF THE AVERAG E VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, TO THE AVERAGE OF THE TOTAL ASSET S OF THE ASSESSEE. THE THIRD COMPONENT IS AN ARTIFICIAL FIGURE-ONE HAL F PERCENT OF THE AVERAGE OF THE INVESTMENT, INCOME FROM WHICH DOES N OT OR SHALL NOT FORM PART OF THE TOTAL INCOME, APPEARING IN THE BALANCE-SHEETS OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. IT IS THE AGGREGATE OF THESE THREE COMPONENTS WHICH WOULD CONSTITUTE THE EXPENDITURE IN RELATION TO EXEMPT IN COME AND IT IS THIS AMOUNT OF EXPENDITURE WHICH WOULD BE DISALLOWE D UNDER SECTION 14A OF THE ACT. IT IS, THEREFORE, CLEAR THA T IN TERMS OF THE RULE, THE AMOUNT OF EXPENDITURE IN RELATION TO EXEM PT INCOME HAS TWO ASPECTS- (A) DIRECT, AND (B) INDIRECT. THE DIREC T EXPENDITURE IS STRAIGHTAWAY TAKEN INTO ACCOUNT BY VIRTUE OF CLAUSE (I) OF SUB- ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 9 RULE(2) OF RULE 8D. THE INDIRECT EXPENDITURE, WHERE IT IS BY WAY OF INTEREST, IS COMPUTED THROUGH THE PRINCIPLE OF APPO RTIONMENT. SECTION 14A EVEN PRIOR TO THE INTRODUCTION OF SUB-S ECTIONS (2) AND (3) WOULD REQUIRE THE ASSESSING OFFICE TO FIRST REJECT THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXTENT OF SUCH EXPENDITURE AND SUCH REJECTION MUST BE FOR DISCLOSE D COGENT REASONS. IT IS THEN THAT THE QUESTION OF DETERMINAT ION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER WOULD ARISE. T HE REQUIREMENT OF ADOPTING A SPECIFIC METHOD OF DETERM INING SUCH EXPENDITURE HAS BEEN INTRODUCED BY VIRTUE OF SUB-SE CTION (2) OF SECTION 14A. PRIOR TO THAT, THE ASSESSEE WAS FREE T O ADOPT ANY REASONABLE AND ACCEPTABLE METHOD. SO, EVEN FOR THE PRE-RULE 8D PERIOD, WHENEVER THE ISSUE OF SECTION 14A ARISES BE FORE AN ASSESSING OFFICER, HE HAS, FIRST OF ALL, TO ASCERTA IN THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPE NDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE ACT. EVEN WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, THE ASSESSING OF FICER WILL HAVE TO VERIFY THE CORRECTNESS OF SUCH CLAIM. IN CASE, T HE ASSESSING OFFICER IS SATISFIED WITH THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, THE ASSESSING OFFICER IS TO ACCEPT THE CLAIM OF THE ASS ESSEE IN SO FAR AS THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A IS CO NCERNED. IN SUCH EVENTUALITY, THE ASSESSING OFFICER CANNOT EMBA RK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE FOR THE PURPOSES OF SECTION 14A (1). IN CASE, THE ASSESSING OFFICER IS N OT, ON THE BASIS OF THE OBJECTIVE CRITERIA AND AFTER GIVING THE ASSE SSEE A REASONABLE OPPORTUNITY, SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HE SHALL HAVE TO REJECT THE CLAIM AND STA TE THE REASONS FOR DOING SO. HAVING DONE SO, THE ASSESSING OFFICER WIL L HAVE TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HE IS REQUIRED TO DO SO ON THE BASIS OF A REAS ONABLE AND ACCEPTABLE METHOD OF APPORTIONMENT. 5.3 UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT WHEN THE INTEREST IN COME WAS MORE THAN THE INTEREST EXPENDITURE THEN THE AO WAS NOT JUSTIF IED TO INVOKE THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF IT A CT. WE HEREBY ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 10 REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND D IRECT TO DELETE THE DISALLOWANCE. 4.4. IN THE PRESENT CASE, THE REVENUE HAS NOT REBUT TED THE CONTENTION OF THE ASSESSEE THAT THE INTEREST INCOME WAS MORE T HAN INTEREST EXPENDITURE; THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF CO-ORDINATE BENCH IN THE CASE OF SAFAL REALITY PVT LTD (SUPRA), WE HEREBY DIRECT THE ASSESSING OFFICER TO DELETE THE D ISALLOWANCE MADE TOWARDS INTEREST EXPENDITURE. 4.5 IN RESPECT OF THE DISALLOWANCE MADE ON ADMINIST RATIVE EXPENSES, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANC E ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF SIRHIND STEEL LTD VS. ACIT IN ITA NO.362/AHD/2012, IN SUPPORT OF THE CONTENTION THAT THE ASSESSING OFFICER OUGHT TO HAVE RECORDED SATISFACTION HOW THE ESTIMATION OF THE ASSESSEE THAT IT INCURRED A SUM OF RS.50,000/- EARN ING EXEMPT INCOME WAS NOT CORRECT. WE FIND THAT THE CO-ORDINATE BENCH IN THE CASE OF SIRHIND STEEL LTD (SUPRA), WHILE DECIDING THE IDENT ICAL ISSUE, HAS HELD AS UNDER:- 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDIA GELTI NE AND CHEMICALS LTD (SUPRA) REPRODUCED THE ORDER OF THE ITAT, WHEREI N THE ITAT HAS ALLOWED THE RELIEF ON THE IDENTICAL FACTS. THE CON CLUDING PARAGRAPH OF THE ITAT WAS AS UNDER:- 9. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME TAX (APPEALS) COULD NOT PINPO INT ANY ERROR IN THE COMPUTATION OF DISALLOWANCE MADE BY TH E ASSESSEE OF RS.2,00,000/- IN EARNING TAX FREE DIVIDED INCOME. IN THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, DISALLOWA NCE OF RS.6,22,228/- COULD NOT HAVE BEEN MADE BY THE ASSES SING OFFICER ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 11 AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (AP PEALS). OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CONSOLIDATE D PHOTO & FINVEST LTD. (2012) 211 TAXMAN 184 (DEL.). THEREFORE , WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE TH E DISALLOWANCE OF RS.6,22,228/-. THUS, GROUND NO.1 OF APPEAL OF T HE ASSESSEE IS ALLOWED. 7. THE ABOVE FINDING OF THE ITAT WAS APPROVED BY TH EIR LORDSHIPS OF HONBLE JURISDICTIONAL HIGH COURT WITH THE FOLLOW ING OBSERVATIONS:- WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN B Y THE LEARNED TRIBUNAL AND THE REASONS GIVEN BY THE LEARN ED TRIBUNAL WHILE DELETING THE DISALLOWANCE OF INTEREST EXPENSE S UNDER SECTION 14A OF THE ACT. 8. THE ITAT, AHMEDABAD BENCH IN THE CASE OF DYNEMIC PRODUCTS LIMITED (SUPRA) HELD AS UNDER:- 8. FROM THE ABOVE, IT IS EVIDENT THAT IN THE FIRST PARAGRAPH, THE ASSESSING OFFICER HAS RECORDED THE FINDING THAT SOME DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT IS WARRA NTED. IN PARAGRAPH 2, THE ASSESSING OFFICER HAS RECORDED THA T THE ASSESSEE HAS OFFERED THE EXPENSES OF RS.18,43,737/- AS EXPEN DITURE INCURRED FOR EARNING OF EXEMPT INCOME AND ADDED BAC K THE SAME TO THE TOTAL INCOME. IN THE THIRD PARAGRAPH, THE AS SESSING OFFICER REJECTED THE ASSESSEES CLAIM ON THE GROUND THAT TH E DISALLOWANCE IS TO BE MADE AS PER RULE 8D OF THE INCOME-TAX RULE S. IN OUR OPINION, THE DISALLOWANCE IS TO BE MADE AS PER RULE 8D ONLY AFTER THE ASSESSING OFFICER RECORDS HIS SATISFACTION THAT THE AMOUNT OF EXPENDITURE CLAIMED TO HAVE BEEN INCURRED BY THE AS SESSEE FOR THE PURPOSE OF EARNING OF EXEMPT INCOME IS INCORRECT. T HE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE INCORRECT MERELY ON THE GROUND THAT THE WORKING OF THE EXPENDITURE HAS NOT BEEN MA DE BY THE ASSESSEE AS PER RULE 8D. IF THE INTERPRETATION OF THE ASSESSING OFFICER IS ACCEPTED, THEN THE WORKING OF DISALLOWAN CE UNDER RULE 8D WOULD COME COMPULSORY MAKING THE PROVISIONS OF S ECTION 14A(2) AS WELL AS RULE 8D(1) REDUNDANT. THE ASSESSING OFFICER HAS NOT GIVEN ANY OTHER REASON FOR NOT ACCEPTING TH E ASSESSEES WORKING OF THE EXPENDITURE CLAIMED TO HAVE BEEN INC URRED FOR EARNING OF EXEMPT INCOME. THEREFORE, WE ARE OF THE OPINION THAT ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 12 NO SATISFACTION WAS RECORDED BY THE ASSESSING OFFIC ER FOR REJECTING THE ASSESSEES CLAIM WITH REGARD TO EXPEN DITURE INCURRED FOR EARNING OF EXEMPT INCOME. WITHOUT RECORDING SUC H SATISFACTION, THE ASSESSING OFFICER CANNOT PROCEED TO COMPUTE THE DISALLOWANCE AS PER RULE 8D(2). IN VIEW OF ABOVE, W E DELETE THE ADDITION MADE BY THE ASSESSING OFFICER U/S 14A READ WITH 8D(2) OF THE INCOME-TAX RULES. 9. ON THE FACTS OF THE ASSESSEES CASE, BOTH THE AB OVE DECISIONS, I.E., THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AS WELL AS ITAT WOULD BE SQUARELY APPLICABLE. IN THIS CASE ALSO, T HE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION HOW THE ESTIMATE OF THE ASSESSEE THAT IT INCURRED A SUM OF RS.75,000/- FOR EARNING THE EXEMP T INCOME WAS INCORRECT. THE ASSESSING OFFICER CAN PROCEED TO WO RK OUT THE DISALLOWANCE UNDER RULE 8D ONLY AFTER HIS SATISFACT ION THAT THE DISALLOWANCE OFFERED BY THE ASSESSEE IS NOT CORRECT . IN FACT, THE ASSESSING OFFICER HAS NOT DISCUSSED AT ALL THAT THE SUM OF RS.75,000/- IS ALREADY OFFERED BY THE ASSESSEE AS EXPENDITURE INCU RRED FOR EARNING OF EXEMPT INCOME. HE SIMPLY PROCEEDED TO MAKE THE DIS ALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME-TAX ACT. AS HELD B Y THE ITAT, AHMEDABAD BENCH AND THE HONBLE JURISDICTIONAL HIGH COURT THAT UNLESS THE ASSESSING OFFICER RECORD HIS SATISFACTIO N DISPUTING THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE, HE CANNOT PROCEED TO WORK OUT THE DISALLOWANCE UNDE R RULE 8D. ADMITTEDLY, NO SUCH SATISFACTION IS RECORDED BY THE ASSESSING OFFICER. HE, IN FACT, DID NOT NOTICE THAT ANY DISALLOWANCE W AS ALREADY MADE BY THE ASSESSEE. THE CIT(A) TOOK NOTE OF THE DISALLOWA NCE MADE BY THE ASSESSEE, BUT HE SIMPLY GAVE THE SET OFF OF SUCH DI SALLOWANCE MADE BY THE ASSESSEE. IN VIEW OF ABOVE, IN OUR OPINION, THE ASS ESSING OFFICER WAS NOT JUSTIFIED IN COMPUTING THE DISALLOWANCE UNDER R ULE 8D. ACCORDINGLY, WE, RESPECTFULLY FOLLOWING THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDIA GELTI NE AND CHEMICALS LTD (SUPRA) AND ITAT IN THE CASE OF DYNEMIC PRODUCT S LIMITED (SUPRA), DELETE THE DISALLOWANCE SUSTAINED BY THE C IT(A) AND ALLOW GROUND NOS.1 & 2 OF THE ASSESSEES APPEAL. 4.6 IN THE PRESENT CASE ALSO THERE IS NO MATERIAL O N RECORD TO SUGGEST THAT THE ASSESSING OFFICER HAS RECORDED ANY SATISFA CTION WITH REGARD TO THE CORRECTNESS OF THE EXPENDITURE AS CLAIMED BY TH E ASSESSEE. ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 13 THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF C O-ORDINATE BENCH IN THE CASE OF SIRHIND STEEL LTD (SUPRA), WE HEREBY DI RECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE UNDER RULE 8D IN RESPECT OF THE ADMINISTRATIVE EXPENDITURE QUA THE INCOME NOT F ORMING PART OF THE TOTAL INCOME OF THE ASSESSEE. THUS, THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 5. IN RESPECT OF GROUND NO.3, IT IS SUBMITTED BY TH E LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 IN ITA NO.1718/AHD/2011. ON THE CONTRARY, LD. SR. DR HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CO-ORDINATE BENCH IN ASSES SEES OWN CASE IN ITA NO.1718/AHD/2011, HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE BY OBSERVING AS UNDER:- 13. THE ASSESSEES NEXT GROUND RAISED IN THE INSTA NT APPEAL CHALLENGES DISALLOWANCE OF DEPRECIATION ON AHMEDABAD STOCK EXC HANGE CARD OF RS.141/- MADE IN THE COURSE OF ASSESSMENT AND AFFIR MED IN THE LOWER APPELLATE PROCEEDINGS. BOTH THE LOWER AUTHORITIES HOLD THAT STOCK EXCHANGE MEMBERSHIP CARD IS NOT AN ELIGIBLE ASSET U/S 32 OF THE ACT AS HELD BY HONBLE BOMBAY HIGH COURT IN M/S. TECHNOSHARES AND STOCKS L TD. VS. CIT 193 TAXMAN 248. THE CIT(A) OBSERVES THAT THE HONBLE A PEX COURT HAS REVERSED THE ABOVE STATED DECISION AS REPORTED IN 327 ITR 32 3 WITH A RIDER THAT THE SAME RELATES TO BOMBAY STOCK EXCHANGE CARD ONLY. H E REPRODUCES RELEVANT PORTION OF THIS JUDGMENT AS WELL. HOWEVER, THE REV ENUE FAILS TO POINT OUT ANY DISTINCTION BETWEEN THE ASSESSEES AHMEDABAD ST OCK EXCHANGE CARD AND RELEVANT FEATURES OF BOMBAY STOCK EXCHANGE CARD . NOR SUCH A DISTINCTION IS FORTHCOMING FROM HONBLE APEX COURT DECISION. WE FIND THAT A CO-ORDINATE BENCH OF THE TRIBUNAL IN CASE OF ASSESS EES SISTER CONCERNS CASE M/S. EDELWEISS STOCK BROKING LTD. VS. CIT, ITA NO. 1168/AHD/2011 DECIDED ON 11.07.2014 FOR AY 2006-07 GRANTS IDENTIC AL DEPRECIATION RELIEF. ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 14 WE ALSO DRAW SUPPORT THEREFROM FOR ALLOWING THE IMP UGNED DEPRECIATION CLAIMED. THIS GROUND IS ACCEPTED. 5.2 THE REVENUE HAS NOT PLACED ANY CONTRARY MATERIA L ON RECORD TO REBUT THE AFORESAID SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE IN QUESTION. 6. GROUND NO.4 IS AGAINST THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.9,10,350/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MA KING THE DISALLOWANCE WHEN THE CORRESPONDING INCOME HAS BEEN DULY OFFERED FOR TAXATION. ON THE CONTRARY, LD. SR. DEPARTMENTA L REPRESENTATIVE HAS OPPOSED THE SUBMISSIONS OF THE LD. COUNSEL AND SUBM ITTED THAT THE ASSESSEE HAS FAILED TO SUPPORT ITS CONTENTION BY PL ACING DEMONSTRATIVE EVIDENCES; THEREFORE, THE AUTHORITIES BELOW WERE JU STIFIED IN MAKING THE DISALLOWANCE. 6.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED MATERIAL ON RECORD. WE FIND THAT THE LD. CIT(A), ON FINDING OF FACTS IN PARAGRAPH 8.2 OF HIS ORDER, HAS OBSERVED AS UNDER:- 8.2 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. PRIOR PERIOD EXPENS ES ARE ALLOWABLE IN THE YEAR IN WHICH THE SAME ARE CRYSTALLIZED. APPELL ANT HAS NOT GIVEN DETAILS TO THE AO. NO SUCH DETAILS WERE FILED IN TH E APPEAL HEARING ALSO. ONLY MENTION OF CERTAIN ITEMS OF EXPENSES IS THERE, IN ABSENCE OF DETAILS AND VOUCHERS ETC, ONE CANNOT REACH TO THE CONCLUSIO N THAT THESE EXPENSES WERE CRYSTALLISED DURING THE YEAR. IT IS N OT AT ALL IN DISPUTE THAT ONLY THOSE EXPENSES WHICH WERE CRYSTALLISED DU RING THE CURRENT YEAR ARE ALLOWABLE BUT ONUS TO PROVE THAT PRIOR PER IOD EXPENSES WERE CRYSTALLISED DURING THE YEAR IS ON THE APPELLANT BE CAUSE APPELLANT HAS THE DETAILS AND NOT THE DEPARTMENT. IN THE ABSENCE OF DETAILS OF PRIOR ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 15 PERIOD EXPENSES, SIMPLE MENTION OF THE NATURE OF TH ESE EXPENSES WILL NOT SERVE THE PURPOSE. I AGREE WITH THE APPELLANT THAT ASSESSING OFFICER SHOULD HAVE DISCUSSED THIS ISSUE IN THE ASSESSMENT ORDER BEFORE MAKING THE DISALLOWANCE. HOWEVER THIS OMISSION ON THE PART OF ASSESSING OFFICER WILL NOT ENTITLE APPELLANT THE CLAIM OF PRIOR PERIO D EXPENSES WHICH ARE NOT ALLOWABLE FROM CURRENT YEAR'S INCOME. THEREFORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF PRIOR P ERIOD EXPENSES IS CONFIRMED. APPELLANT'S ARGUMENT OF REDUCING PRIOR PERIOD INCOM E FROM THESE EXPENSES IS NOT CORRECT BECAUSE THE NATURE OF INCOM E AND EXPENSES ARE DIFFERENT AND THE SAME CANNOT BE NETTED. WHEREAS ON LY CURRENT YEAR'S EXPENSE ARE ALLOWED UNDER SECTION 37 (1) OF IT ACT, PRIOR PERIOD EXPENSES NOT CRYSTALLIZED DURING THE YEAR ARE NOT A LLOWABLE. AS REGARD PRIOR PERIOD INCOME, IF APPELLANT WANTED THE SAME T O BE EXCLUDED FROM THIS YEARS INCOME, IT SHOULD HAVE GIVEN DETAILS IN THIS REGARD. IN ABSENCE OF NECESSARY DETAILS AND EVIDENCES, THE PRI OR PERIOD EXPENSES ARE NOT ALLOWABLE AND SIMILARLY THESE CANNOT BE SET OFF AGAINST PRIOR PERIOD INCOME. THIS GROUND IS THEREFORE REJECTED. 6.2 THE ABOVE FINDING OF THE LD. CIT(A) IS NOT REBU TTED BY THE ASSESSEE BY PLACING ANY CONTRARY MATERIAL ON RECORD . EVEN BEFORE THE TRIBUNAL ALSO THE ASSESSEE HAS FAILED TO PLACE ON R ECORD ANY MATERIAL SUGGESTING THAT THE EXPENDITURE RELATED TO PRIOR PE RIOD WAS CRYSTALLIZED IN THE PRESENT YEAR AND THE ASSESSEE H AS OFFERED CORRESPONDING INCOME IN THE EARLIER YEARS. IN THE ABSENCE OF SUCH MATERIAL EVIDENCE, WE DO NOT SEE ANY REASON TO INTE RFERE WITH THE ORDER OF THE LD. CIT(A) AND THE SAME IS UPHELD. THIS GRO UND OF THE ASSESSEES APPEAL IS REJECTED. 7. GROUND NO.5 IS IN RESPECT OF LEVY OF INTEREST U/ S 234A, 234B, 234C AND 234D OF THE ACT. THE SAME IS CONSEQUENTIA L IN NATURE AND ACCORDINGLY, THIS GROUND OF THE ASSESSEES APPEAL I S REJECTED. ITA NO. 1841/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD VS. JT. CIT AY : 2009-10 16 8. GROUND NO.6 IS AGAINST INITIATION OF PENALTY PRO CEEDINGS U/S 271(1)(C) OF THE ACT. THIS GROUND, BEING PREMATURE IN NATURE, IS ALSO REJECTED. 9. GROUND NO.7 IS GENERAL IN NATURE AND NEEDS NO SE PARATE ADJUDICATION. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 12 TH OF APRIL, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (KUL BHARAT) JUDICIAL MEMBER AHMEDABAD; DATED 12/04/2016 *BIJU T. '#$%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' ' # / CONCERNED CIT 4. ' ' # ( ) / THE CIT(A) 5. &'( ! , ' ! , / DR, ITAT, AHMEDABAD 6. (- . / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD