Prabhu Shankar Agarwal, Kolkata V. DCIT, Central Circle - XIII, Kolkata, Kolkata

ITA 2072/KOL/2010

• Counselvise Citation: 207223514 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 28-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2010
• Court: TRIBUNAL
• Department Lawyers: ASHOK KR DEY LD DR
• Assessee Lawyers: S M SURANA LD
• Keywords: Business income; Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

, B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B CALCUTTA () BEFORE , SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER /AND !'!# 1%&, SHRI GEORGE MATHAN, JUDICIAL MEMBER ' / ITA NO.2072/KOL/2010 (&' )*/ ASSESSMENT YEAR: 2007-08 PRABHU SHANKAR AGARWAL PAN:ADEPA 4448F DCIT, CENTRAL CIRCLE-XIII,KOLKATA (%, / APPELLANT ) - & - - VERSUS -. (.%,/ RESPONDENT ) %, ( /FOR THE APPELLANT / SHRI S.M SURANA, ADVOCATE, LD.AR .%, ( / FOR THE RESPONDENT: / SHRI ASHOK KR.DEY, LD. DR &/ 0 1 /DATE OF HEARING : 13-06-2012 2) 0 1 /DATE OF PRONOUNCEMENT: 13-06-2012 3 / ORDER PER BENCH THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST ORD ER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-CENTRAL-II, KOLKATA IN APPEAL NO.201/CC-X III/CIT(A)-C-II/KOL/09-10 DATED 16-09-2010 FOR THE ASSESSMENT YEAR 2007-08. 2. IN THIS ASSESSEES APPEAL, THE ASSESSEE HAS RAIS ED FOLLOWING GROUNDS OF APPEAL :- I. FOR THAT THE ORDER OF THE LD. CIT (A) IS ARBIT RARY, ILLEGAL AND BAD IN LAW. 2. FOR THAT THE LD. C.I.T(A) ERRED IN DISALLOWING RS.4,76,950/- FROM INTEREST PAID U/S. 14A THEREBY ENHANCING THE ADDITION FROM INTEREST DISALLOWED BY THE AO AT RS. 276189/- IGNOR 1NG THE EXPLANATION FILED AND THE EVIDENCES SUBMITTED. 3. FOR THAT THE ENHANCEMENT OF THE INCOME IS OTHER WISE NOT IN ACCORDANCE WITH LAW SINCE THE APPELLANT WAS NOT GIV EN ANY OPPORTUNITY OF BEING HEARD BEFORE MAKING THE ENHANC EMENT. 4. FOR THAT THE LD. C.I.T(A) ERRED IN RETAINING TH E ADDITION OF RS. 276189/- BEING DISALLOWED FROM INTEREST PAID BY APP LYING SECTION 14A AND FURTHER ENHANCING SUCH DISALLOWANCE BY RS. 2007 61/- WHEN NO PART OF THE INTEREST BEARING LOANS WAS UTILIZED FOR EARNING EXEMPTED INCOME. 5. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE CIT(A) BE MODIFIED AND THE ASSESSEE BE GIVEN TH E RELIEF PRAYED FOR. ITA NO. 2072/KOL/10-B-GM 2 6. FOR THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTE R OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 3. SHRI S.M SURANA, ADVOCATE, LD.AR AND SHRI ASHO K KR.DEY, LD. CIT/DR REPRESENTED ON BEHALF OF THE REVENUE. 4. IN REGARD TO GROUND NO.2, IT WAS SUBMITTED BY T HE LEARNED AR FOR THE ASSESSEE THAT DISALLOWANCE OF INTEREST PAID AS ALSO THE ENHANCEMENT OF DISALLO WANCE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME-TAX ACT 1961 BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS IGNORED THE EXPLANATION / THE EVIDENCES FILED. IT WAS THE SUBMISSION THAT THE ASSESSEE BEING AN INDIVIDUAL WAS HAVING INCOME FRO M BUSINESS, FROM HOUSE PROPERTY, SALARY, CAPITAL GA INS AND OTHER SOURCES. IT WAS THE SUBMISSION THAT ASSES SEE HAD RECEIVED DIVIDEND INCOME OF RS.22,65,049/- . IT WAS THE SUBMISSIONS THAT THE ASSESSING OFFICER H AD HELD THAT AMOUNT OF RS.5,345/- WAS DIRECTLY RELATING TO THE DIVIDEND INCOME. IT WAS THE FURTHE R SUBMISSION THAT THE ASSESSING OFFICER HAD DISALLO WED AN AMOUNT OF RS.1,67,560/- OUT OF INTEREST PAID BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE I.T RULES 1962. IT WAS THE SUBMISSIONS THAT NO POR TION OF INTEREST PAID WAS IN ANY WAY DIRECTLY ATTRIBUTABLE TO THE EARNING OF DIVIDEND INCOME. IT WAS THE FURTHER SUBMISSIONS THAT INTEREST PAID WA S DIRECTLY ATTRIBUTABLE TO THE BUSINESS OF THE ASSES SEE. IT WAS SUBMITTED THAT NO INTEREST BEARING FU ND HAD BEEN USED FOR MAKING ANY INVESTMENT FROM WHICH THE ASSESSEE HAD DERIVED THE DIVIDEND INCOME. 5. IT WAS THE SUBMISSION THAT ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HE LD THAT INTEREST BEARING FUNDS HAVE BEEN USED FOR INVESTMENT IN SHARES. IT WAS THE SUBMISSIONS THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FURTHER PROCEEDED TO HOLD THAT THE ASSESSEE HAD EMP LOYED HIS CAPITAL OF RS.8.17 CRORES TOWARDS ACQUIRI NG FIXED ASSETS, LAND, JEWELLERY AND ADVANCING INTERE ST FREE LOANS TO ITS RELATED CONCERNS AND RELATIVES , CONSEQUENTLY, THE OVERDRAFT AND LOAN OF ABOUT OF RS .4.3 CRORE WERE HELD TO BE DIRECTLY RELATABLE TO THE EXEMPT INCOME EARNING INVESTMENT OF 2.2 CRORE. IT WAS THE SUBMISSIONS THAT THE LEARNED COMMISSIONER O F INCOME-TAX(APPEALS) CONSEQUENTLY HELD THAT THE INVE STMENT IN EXEMPT INCOME EARNING INVESTMENT AND TAXABLE INCOME EARNING INVESTMENT WAS ALMOST 50:5 0 AND CONSEQUENTLY, HELD 50% OF INTEREST EXPENDITUR E WAS DISALLOWABLE BY INVOKING THE PROVISIONS OF SECT ION 14A OF THE INCOME-TAX ACT 1961. IT WAS THE SUBMISSION THAT EVEN THE LEARNED COMMISSIONER OF I NCOME-TAX (APPEALS) HAS ONLY DRAWN PRESUMPTION IN SO FAR AS THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) IN PAGE 11 OF HIS ORDER CATEGORICALLY HELD THAT THE PRESUMPTION CAN BE MADE. IT WAS THE SUB MISSION THAT THE ASSESSEE HAD NOT USED ANY OF HIS INTEREST BEARING FUND FOR MAKING ANY INVESTMENT. I T WAS THE SUBMISSION THAT INTEREST FREE FUND AVAILA BLE ITA NO. 2072/KOL/10-B-GM 3 WITH THE ASSESSEE WAS MUCH MORE THAN THE INVESTMENT . IT WAS THE SUBMISSION THAT THE WORDS USED FOR TH E PURPOSE OF DISALLOWING THE EXPENDITURE RELATABLE T O THE EXEMPT INCOME WAS EXPENDITURE INCURRED BY T HE ASSESSEE IN RELATION TO. IT WAS THE SUBMISSIONS T HAT THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE I N RELATION TO EARNING OF THE EXEMPT INCOME. AS THE A SSESSEE DID HAVE ADEQUATE INTEREST FREE FUNDS BEING MORE THAN THE AVERAGE VALUE OF INVESTMENT, WHICH HA D GIVEN THE ASSESSEE THE DIVIDEND INCOME, IT WAS TH E SUBMISSIONS THAT IF AT ALL DISALLOWANCE WAS CALLED FOR, THE SAME SHOULD BE RESTRICTED TO RS. 5345/-, B EING THE EXPENDITURE DIRECTLY RELATABLE TO THE DIVIDEN D INCOME. 6. IN REPLY, THE LEARNED CIT/DR HAS VEHEMENTLY SUP PORTED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ASSESSMENT ORDER SHOWS THAT AN AMOUNT OF RS.5345/- HAS BEEN SHOWN TO THE EXPENDITU RE DIRECTLY RELATING TO THE EARNING OF DIVIDEND INCOME. THIS AMOUNT WAS NOT DISPUTE BY THE ASSESSE E. FURTHER, A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS TREATED THE INTEREST EXPENDITURE BEING NOT DIRECTLY ATTRIBUTABLE TO A NY PARTICULAR INCOME OR RECEIPT. ADMITTEDLY, O/D HAS BEEN TAKEN FOR THE PURPOSE OF BUSINESS, WHICH HAS GIVEN RISE TO BUSINESS INCOME IN THE HANDS OF THE A SSESSEE. ONCE, AN EXPENDITURE IS SHOWN TO BE ATTRIBUTABLE OF A PARTICULAR SOURCE OF INCOME OR R ECEIPT, THE SAME CANNOT BE TAKEN INTO CONSIDERATION FOR COMPUTING THE DISALLOWANCE U/S.14A OF THE ACT. A P ERUSAL OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FURTHER SHOWS THAT IN PAGE 11, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS DRAWN THE PRESUMPTION. THE WORD USED IN SECTION 14A DOES NOT GIVE ROOM FOR PRESUMPTION. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DISALLOW ANCE U/S.14A R.W.R 8D IF AT ALL CAN BE MADE ONLY O F AN AMOUNT OF RS.5345/-. IN THE CIRCUMSTANCES, THE DI SALLOWANCE AS CONFIRMED AND ENHANCED BY THE LEAR NED COMMISSIONER OF INCOME-TAX (APPEALS) STANDS REDUCED TO RS.5,345/- BEING THE EXPENDITURE DIRECTLY RELATING TO THE EARNING OF THE DIVIDEND INCOME. IN THE CIRCUMSTANCES, THE APPEAL OF THE ASSESSEE STAN DS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STA NDS PARTLY ALLOWED 4 3 5 & 6 47 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DTD 13-0 6-2012 SD/- SD/- ( , ) ( PRAMOD KUMAR, ACCOUNTANT MEMBER) ( !'!# 1%& , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( (1 1 1 1) )) ) DATE 13-06-2012 ITA NO. 2072/KOL/10-B-GM 4 *PP/SPS 3 0 ((8 98): / COPY OF THE ORDER FORWARDED TO: 1. . %, / THE APPELLANT : M/S. PRABHU SHANKAR AGARWAL P-42 0, KAZI NAZRUL ISLAM AVENUE, KOL-52. 2 .%, / THE RESPONDENT- DCIT,CENTRAL CIRCLE-XIII, 18 RA BINDRA SARANI, PODDAR COURT, KOL-1. 3 4. . (3& / THE CIT, (3& ( )/ THE CIT(A) 5 . ;(6 (& / DR, KOLKATA BENCH 6 . GUARD FILE . .8 (/ TRUE COPY, 3&/ BY ORDER, 4 ! /ASSTT REGISTRAR