Sarangdhar Ramchandra Nirmal, Ahmednagar V. Deputy Commissioner of Income-tax, Ahmednagar

ITA 2506/PUN/2016

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7269 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 28-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE SHRI VIKAS AWASTHY, JM . / ITA NO.2506/PUN/2016 ! '! / ASSESSMENT YEAR : 2012-13 SARANGDHAR RAMCHANDRA NIRMAL, A/P-RANJANKHOL, TAL. RAHATA, DIST. AHMEDNAGAR, PIN-423 107 PAN : AAJPN5198B ....... / APPELLANT # / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR RANGE, AHMEDNAGAR. / RESPONDENT . / ITA NO.2507/PUN/2016 ! '! / ASSESSMENT YEAR : 2012-13 ARVIND JAGANATH NIRMAL, A/P-RANJANKHOL, TAL. RAHATA, DIST. AHMEDNAGAR. PAN : ADFPN5972L ....... / APPELLANT # / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR RANGE, AHMEDNAGAR. / RESPONDENT 2 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 . / ITA NO.2508/PUN/2016 ! '! / ASSESSMENT YEAR : 2012-13 KISHOR RAMCHANDRA NIRMAL, A/P-RANJANKHOL, TAL. RAHATA, DIST. AHMEDNAGAR. PAN : ADJPN3695G ....... / APPELLANT # / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR RANGE, AHMEDNAGAR. / RESPONDENT APPELLANT BY : SHRI S.N. PURANIK RESPONDENT BY : SHRI SUDHENDU DAS / DATE OF HEARING : 18.09.2018 / DATE OF PRONOUNCEMENT : 28.09.2018 $ / ORDER PER VIKAS AWASTHY, JM THESE THREE APPEALS BY THREE DIFFERENT ASSESSEES ARE DIR ECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, PUNE IN THEIR RESPECTIVE CASES. ALL THE IMPUGNED ORDERS IN THE RESPECTIVE APPEALS A RE OF EVEN DATE I.E. 11.07.2016. 2. SINCE, THE ISSUE RAISED IN ALL THE THREE APPEALS IS IDENTICAL AND IS ARISIN G FROM SAME SET OF FACTS, THESE APPEALS ARE TAKEN UP TOGET HER FOR ADJUDICATION AND ARE BEING DISPOSED OF VIDE THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE, FACTS ARE EXTRACTED FROM ITA NO. 2506/PUN/2016. 3 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 ITA NO. 2506/PUN/2016 A.Y.2012-13 3. THE ASSESSEE HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON FOLLOWING GROUNDS: 1. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING ADDITIONS OF RS.14,02,920/- MADE U/S.14A WHICH MAY PLEASE BE DEL ETED OR REDUCED. 2. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE ADDITIONS OF RS.2,12,007/- ON A/C OF AGRICULTURAL INCOME WHICH M AY PLEASE BE DELETED OR REDUCED. 3. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING T HE AD-HOC ADDITIONS OF RS.1,75,079/- WHICH MAY PLEASE BE DELETED OR RED UCED. 4. APPELLANT PRAYS TO ADD, ALTER, AMEND, RATIFY, EX PLAIN, AND /OR WITHDRAW THE GROUND/S AS THE OCCASION MAY DEMAND. 4. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE IS A DIRECTOR OF PRABHAT DAIRY PVT. LTD. AND IS ENGAGED IN THE BUSINESS OF TRANSPORT. THE ASSESSEE IS ALSO HAVING INCOME FROM AGRICUL TURE. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE INVESTMENTS TO THE TUNE O F RS.23,81,14,105/- IN SHARES AND MUTUAL FUNDS. NO SUO-MOTO DISALLOWANCE U/S.14 A OF THE ACT WAS MADE BY THE ASSESSEE. THE ASSESSING OFFICER MADE DISALLOWAN CE UNDER PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) R.W.R 8D OF THE INCOME TAX RULES, 1962. TH E ASSESSING OFFICER COMPUTED DISALLOWANCE UNDER RULE 8D AS UNDER: I) CLAUSE 2(II) RS. 5,25,450/- II) CLAUSE 2(III) RS. 8,70,470/- TOTAL RS.14,02,920/- 5. AGGRIEVED BY THE DISALLOWANCE MADE BY THE ASSESSING O FFICER VIDE ORDER DATED 23.03.2015, THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE 4 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF IN COME TAX (APPEALS) CONFIRMED THE ADDITIONS MADE BY ASSESSING OFFICER IN TOTO. 6. SHRI S.N. PURANIK APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL FROM THE INVESTMEN TS, THEREFORE, NO DISALLOWANCE U/S.14A R.W.R. 8D IS WARRANTED. TO SUPPORT HIS CONTENTIONS, THE LD. AR PLACED RELIANCE ON FOLLOWING DECISIONS: I) CIT VS. CHETTINAD LOGISTICS (P.) LTD. (S.C), RE PORTED AS 257 TAXMAN 2 (SC). II) PR. CIT VS. M/S. BALLARPUR INDUSTRIES LIMITED, DECIDED BY HON'BLE BOMBAY HIGH COURT, NAGPUR BENCH, INCOME TAX APPEAL NO. 51 OF 2016 DECIDED ON 13.10.2016 III) FORCE MOTORS LIMITED VS. DCIT, ITA NO. 1205 & 1206/PUN/2016 DECIDED ON 18.07.2018 IV) DCIT VS. DISHTI INDUSTRIES LTD., ITA NO.1277/PU N/2016 DECIDED ON 25.06.2018 6.1 THE LD. AR FURTHER SUBMITTED THAT OWN INTEREST FREE FU NDS OF THE ASSESSEE ARE MUCH MORE THAN THE INVESTMENT MADE BY A SSESSEE. THIS FACT HAS BEEN RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMEN T ORDER. DESPITE THAT, THE ASSESSING OFFICER HAS MADE DISALLOWANCE UNDER RULE 8D(2)(II). THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. REPORTED AS 366 ITR 505 HAS HELD THAT WHERE OWN INTEREST FREE FUND S ARE MORE THAN THE INVESTMENTS, IT IS PRESUMED THAT INVESTMENTS ARE MADE OU T OF OWN INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE LD. AR POINTED TH AT THE ASSESSEE HAS TAKEN TERM LOAN FOR HIS TRANSPORT BUSINESS. THE LOAN HAS BEEN UTILIZED FOR THE PURPOSE, IT WAS TAKEN. BORROWED FUNDS HAVE NOT BEEN DIVERTED FOR MAKING INVESTMENTS. 5 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 7. ON THE OTHER HAND, SHRI SUDHENDU DAS VEHEMENTLY DE FENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE DISALLO WANCE MADE U/S.14A R.W.R. 8D(2). THE LD. DR POINTED THAT THE ASSE SSEE HAS MADE HUGE INVESTMENT IN SHARE AND MUTUAL FUNDS. NO SUO-MOTO DISALLOWANCE HAS BEEN MADE BY THE ASSESSEE DESPITE MAKING HUGE INVESTME NT. THE POSSIBILITY OF USE OF BUSINESS HOURS, EMPLOYEES COST, ELECTRICITY, STATIO NARY ETC. IN MAKING INVESTMENT IN SHARES/MUTUAL FUNDS CANNOT BE RULED OUT. 8. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PER USED. THE ASSESSEE IN APPEAL HAS ASSAILED DISALLOWANCE MADE U/S.14A R.W.R.8D. IT IS AN UNDISPUTED FACT THAT NO SUO-MOTO DISALLOWANCE U/S.14A OF T HE ACT WAS MADE BY THE ASSESSEE. IT IS ALSO AN ADMITTED FACT THAT DURIN G THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS NO T EARNED ANY TAX FREE INCOME. IN SO FAR AS DISALLOWANCE UNDER RULE 8D(2)(II) IS CONCERN ED, IT IS NOT DISPUTED BY THE REVENUE THAT OWN INTEREST FREE FUNDS OF THE ASSESSEE ARE SUFFICIENT TO COVER THE INVESTMENT MADE. THUS, IN THE LIGHT OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS, HDF C BANK LTD. (SUPRA.), NO DISALLOWANCE UNDER RULE 8D(2)(II) IS WARRANTED. 9. AS HAS BEEN POINTED EARLIER, THE ASSESSEE HAS NOT EA RNED ANY EXEMPT INCOME DURING THE YEAR. THE HON'BLE BOMBAY HIGH COURT A ND IN VARIOUS DECISIONS, THE TRIBUNAL HAS HELD THAT WHERE NO EXEMPT INCO ME IS EARNED BY THE ASSESSEE IN THE RELEVANT PERIOD, DISALLOWANCE U/S. 14A IS NOT WARR ANTED. 10. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF P R.CIT VS. M/S. BALLARPUR INDUSTRIES LIMITED (SUPRA.) HAS HELD THAT THE PROV ISIONS OF SECTION 14A OF THE ACT, WOULD NOT APPLY WHERE NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 6 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF FORC E MOTORS LIMITED VS. DCIT (SUPRA.) AND IN THE CASE OF DCIT VS. DISHTI INDUSTRIES LTD.(SUPRA.) AND VARIOUS OTHER DECISIONS HAVE BEEN CONSISTE NTLY HOLDING THAT NO DISALLOWANCE U/S.14A IS WARRANTED WHERE NO EXEMPT INCO ME IS EARNED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. THUS, IN VIEW OF UNDISPUTED FACTS AND THE LAW LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT, NO DISALLOWANCE UNDER THE PROVISIONS OF SECTION 14A R.W.R 8D IS TO BE MADE WHERE THE ASSESSEE HAS NOT EAR NED ANY EXEMPT INCOME. ACCORDINGLY, GROUND NO.1 RAISED IN APPEAL BY THE AS SESSEE IS ALLOWED . 11. IN RESPECT OF GROUNDS NO. 2 AND 3 OF THE APPEAL, TH E LD.AR HAS STATED AT BAR THAT HE IS NOT PRESSING THE SAME. THUS, IN VIEW OF ST ATEMENT MADE BY THE LD. AR, GROUND NOS. 2 AND 3 RAISED IN APPEAL ARE DISMISSED AS NOT PRESSED . 12. THE GROUND NO. 4 OF THE APPEAL IS GENERAL IN NATURE AND HENCE, REQUIRES NO ADJUDICATION. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.2506 /PUN/2016 FOR ASSESSMENT YEAR 2012-13 IS PARTLY ALLOWED IN THE TERMS AFORESAID . ITA NO. 2507/PUN/2016 A.Y.2012-13 14. IN ITA NO.2507/PUN/2016, THE ASSESSEE HAS RAISED FOLLOWING GRO UNDS : 1. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING ADDITIONS OF RS.7,06,459 /- MADE U/S.14A WHICH MAY PLEASE BE DEL ETED OR REDUCED. 2. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE ADDITIONS OF RS.50,956/- ON A/C OF AGRICULTURAL INCOME WHICH MAY PLEASE BE DELETED OR REDUCED. 7 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 3. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING T HE AD-HOC ADDITIONS OF RS.1,97,977/- WHICH MAY PLEASE BE DELETED OR RED UCED. 4. APPELLANT PRAYS TO ADD, ALTER, AMEND, RATIFY, EX PLAIN, AND /OR WITHDRAW THE GROUND/S AS THE OCCASION MAY DEMAND. 15. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MA DE FOLLOWING DISALLOWANCE UNDER RULE 8D: I) CLAUSE 2(II) RS.2,43,999/- II) CLAUSE 2(III) RS.4,62,460/- TOTAL RS.7,06,459/- 16. THE ASSESSEE HAS MADE INVESTMENT IN SHARES AND MU TUAL FUNDS TO THE TUNE OF RS.9,33,74,007/- AND OWN INTEREST FREE FUNDS AVAILAB LE WITH THE ASSESSEE ARE TO THE TUNE OF RS.12,10,88,559/-. THE ASSESS EE HAS NOT EARNED ANY TAX FREE INCOME DURING THE RELEVANT PERIOD. THESE FACT S ARE NOT DISPUTED BY THE REVENUE. SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN ITA NO.2506/PUN/2016, FINDINGS GIVEN WHILE ADJUDICATING GRO UND NO. 1 OF THE SAID APPEAL WOULD APPLY MUTATIS MUTANDIS TO THE PRE SENT CASE AS WELL. ACCORDINGLY, GROUND NO. 1 RAISED IN APPEAL BY ASSESSEE IS ALLOWE D FOR SIMILAR REASONS. 17. SO FAR AS GROUND NOS. 2 AND 3 ARE CONCERNED, THE LD . AR HAS STATED AT BAR THAT HE IS NOT PRESSING THE SAME. THUS, IN VIEW OF ST ATEMENT MADE BY THE LD. AR, GROUND NOS. 2 AND 3 RAISED IN APPEAL ARE DISMISSED AS NOT PRESSED . 18. THE GROUND NO. 4 RAISED OF THE APPEAL IS GENERAL IN N ATURE AND HENCE, REQUIRES NO ADJUDICATION. 8 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 19. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 250 7/PUN/2016 FOR ASSESSMENT YEAR 2012-13 IS PARTLY ALLOWED IN THE TERMS AFORESAID. ITA NO. 2508/PUN/2016 A.Y.2012-13 20. IN ITA NO.2508/PUN/2016, THE ASSESSEE HAS RAISED FOLLOWING GRO UNDS : 1. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING ADDITIONS OF RS.470906/- MADE U/S.14A WHICH MAY PLEASE BE DELETE D OR REDUCED. 2. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE ADDITIONS OF RS.230086/- ON A/C OF AGRICULTURAL INCOME WHICH MAY PLEASE BE DELETED OR REDUCED. 3. HON. COMMISSIONER (APPEALS) ERRED IN CONFIRMING T HE AD-HOC ADDITIONS OF RS.119827/- WHICH MAY PLEASE BE DELETED OR REDUC ED. 4. APPELLANT PRAYS TO ADD, ALTER, AMEND, RATIFY, EX PLAIN, AND /OR WITHDRAW THE GROUND/S AS THE OCCASION MAY DEMAND. 21. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER M ADE DISALLOWANCE U/S.14A R.W.R. 8D(2)(III) OF RS.4,70,906/-. THE ASSESSEE HAS MADE INVESTMENT IN SHARE AND MUTUAL FUNDS TO THE TUNE O F RS.9,38,63,100/-. THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME FROM TH E INVESTMENTS DURING THE RELEVANT PREVIOUS YEAR. THESE FACTS ARE NOT DISPUTE D BY THE REVENUE. THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN I TA NO.2506/PUN/2016. THUS, THE FINDINGS GIVEN WHILE ADJUDICATING GROUND NO. 1 OF T HE SAID APPEAL WOULD APPLY MUTATIS MUTANDIS TO THE PRESENT CASE AS W ELL. ACCORDINGLY, GROUND NO. 1 RAISED IN APPEAL BY THE ASSESSEE IS AL LOWED IN THE SIMILAR TERMS. 22. SO FAR AS GROUND NOS. 2 AND 3 ARE CONCERNED, THE LD . AR HAS STATED AT BAR THAT HE IS NOT PRESSING THE SAME. THUS, IN VIEW OF ST ATEMENT MADE BY THE LD. AR, GROUND NOS. 2 AND 3 OF THE APPEAL ARE DISMISSED AS NOT PRESSED. 9 ITA NOS.2506 TO 2508/PUN/2016 A.Y.2012-13 23. THE GROUND NO. 4 RAISED IN APPEAL IS GENERAL IN NATUR E AND HENCE, REQUIRES NO ADJUDICATION. 24. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.2508 /PUN/2016 FOR ASSESSMENT YEAR 2012-13 IS PARTLY ALLOWED IN THE TERMS AFORESAID. 25. TO SUM UP, APPEALS OF THE ASSESSEES IN ITA NO.2506 /PUN/2016, ITA NO.2507/PUN/2016 AND ITA NO.2508/PUN/2016 ARE PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 28 TH OF SEPTEMBER, 2018. SD/- ( /VIKAS AWASTHY) / JUDICIAL MEMBER / PUNE; ! ' / DATED : 28 TH SEPTEMBER, 2018. SB $%&'()'' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-2, PUNE. 4. THE PR. CIT-1, PUNE. 5. %&' () , * () , - +,- , / DR, ITAT, SMC BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.