IHP FINVEST LTD, MUMBAI V. DCIT 2(2), MUMBAI

ITA 2660/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0195 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWARUP
• Assessee Lawyers: PRASAD BAPAT
• Keywords: Business income; Opportunity of being heard
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 2660/MUM/2015 ASSESSMENT YEAR: 2010 - 11 M/S IHP FINVEST LTD., CONSTRUCTION HOUSE, 2 ND FLOOR, WALCHAND HIRACHAND MARG, FORT, M UMBAI 400001 PAN: AAACI5206P VS. THE DCIT, 2(2) 577, 5 TH FLOOR, AAYAKAR BHAVAN, CHURCHGATE, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRASAD BAPAT (AR) REVENUE BY : MS. POOJA SWARUP ( AR ) DAT E OF HEARING: 05/02 /201 8 DATE OF PRONOUNCEMENT: 21 / 0 2 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 09.03.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 5 , MUMBAI , FOR THE A S S ESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 75,05,636/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE AO ISSUED NOTICES U/S 143 (2) AND 142(1). IN RESPONSE THEREOF THE AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE BEING ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED DETAILS. IT WAS NOTICED THAT THE ASSESSEE HAD SHOWN NET LONG TERM CAPITAL GAIN OF RS. 15,30,455/ - . THE ASSESSEE WAS ACCORDINGLY ASKED AS TO WHY 2 ITA NO. 2 660 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 THE INCOME FROM SUCH TR ANSACTION SHOULD NOT BE TREATED AS BUSINESS INCOME . A FTER HEARING THE ASSESSEE IN THE LIGHT OF THE WRITTEN SUBMISSIONS, THE AO TREATED THE SAID AMOUNT AS BUSINESS INCOME. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 3,06,11,1 35/ - AND HAD CLAIMED THE SAME AS EXEMPT U/S 10 OF THE I.T. ACT. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE EXPENSES RELATED TO THIS INCOME SHOULD NOT BE DISALLOWED AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. THE ASSESSEE SUBMITTED THAT IT HAD ALREADY MADE DISALLOWANCE U/S 14A TO THE TUNE OF RS. 2,77,469/. AFTER HEARING THE SUBMISSIONS OF THE ASSESSEE, THE AO DETERMINED THE TOTAL DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D AT RS. 5,14,958/ - AND AFTER GIVING BENEFIT OF DISALLOWANCE ALREA DY MADE BY THE ASSESSEE , ADDITION OF RS. 2,37,489/ - WAS MADE AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 92,73,850/ - . 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE CHALLENGED THE SAME BEFORE THE LD. CIT (A). THE LD. CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, HOWEVER , DIRECTED THE AO TO INCLUDE THE SHARES HELD AS STOCK - IN - TRADE HOLDING THAT THE AO WHILE WORKING OUT THE AVERAGE INVESTMENTS FOR THE PURPOSE OF RULE 8D (2), THE AO HAS NOT INCLUDED THE SAME. THE ASSESSEE IS IN APPEAL AGA INST THE SAID FINDINGS OF THE LD. CIT (A). 4. T HE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT GIVING OPPORTUNITY OF HEARING IN CASE OF ENHANCEMENT OF DISALLOWANCE OF EXPENSES U/S 14A R.W.R. 8D(2)(III), WHILE RELYING UPON THE DECISION OF MUMBAI ITAT IN THE CASE OF D.H. SECURITIES P. LTD. V/S DCIT [2014] 146 ITD 1. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN HOLDING THAT THE SHARES HELD BY 3 ITA NO. 2 660 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 THE APPELLANT COMPANY AS STOCK IN TRADE SHOULD ALSO BE INCLUDED IN THE VALUE OF THE AVERAGE INVESTMENTS FOR THE PURPOSE OF RULE 8D, AND CONSEQUENTLY ERRED IN DIRECTING THE ASSESSING OFFICER TO RE - COMPUTE THE DISALLOWANCE. 5. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT VIDE IMPUGNED ORDER , THE LD. CIT (A) HAS DIRECTED THE AO TO ENHANCE THE DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(III) BY DIRECTING THE AO TO INCLUDE THE SHARE HELD BY THE ASSESSEE AS STOCK - IN - TRADE . HOWEVER, NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE BEFORE PASSING THE ORDER IN QUESTION. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE ORDER PASSED BY THE LD. CIT (A) IS CONTRARY TO THE EXPRESSED PROVIS IONS OF LAW, THE SAME IS LIABLE TO BE SET ASIDE . 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ITAT, MUMBAI I BENCH HAS ALREADY DECIDED THIS ISSUE AGAINST THE ASSESSEE IN ASSESSEES OWN CASE, ITA NO. 6338/MUM/2011 FO R THE A.Y. 2008 - 09. THEREFORE, THE APPEAL OF THE ASSESSEE IS LIABLE TO BE DISMISSED BEING DEVOID OF MERIT. IN REJOINDER, THE LD. COUNSEL SUBMITTED THAT THE ISSUE INVOLVED FOR THE A.Y. 2008 - 09 WAS DIFFERENT FROM THE ISSUE INVOLVED IN THE ASSESSMENT YEAR UND ER CONSIDERATION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO CAREFULLY PERUSED THE DOCUMENTS PLACED ON RECORD. THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT (A) HAS ERRED IN NOT GIVING OPPORTUNITY OF BEING HEARD WHILE ISSUING DIRECTIONS TO THE AO TO ENHANCE THE DISALLOWANCE OF EXPENSES U/S 14A READ WITH RULE 8D(2)(III) BY INCLUDING THE SHARES HELD BY THE ASSESSEE AS STOCK - IN - TRADE. WE FURTHER NOTICE THAT THE LD. CIT (A) HAS DIRECTED THE AO TO INCLUDE THE SHARES HELD BY THE ASSESSEE AS ST OCK - IN - TRADE BY RELYING UPON THE DECISION OF THE ORDER OF ITAT, MUMBAI IN THE CASE OF D.H. SECURITIES PVT. LTD. VS. DCIT 2014 146 ITD 1 , WHICH AMOUNTS TO ENHANCEMENT OF ADDITION . 4 ITA NO. 2 660 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 UNDER SECTION 251 OF THE ACT , THE LD. CIT (A) HAS POWER TO CONFIRM REDUCE EN HANCE OR ANNUL THE ASSESSMENT. HOWEVER, UNDER SECTION 251 (2), THE COMMISSIONER SHALL NOT ENHANCE AND ASSESSMENT OR PENALTY OR REDUCED THE AMOUNT OF REFUND UNLESS THE APPELLANT HAS HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT OR R EDUCTION. ACCORDINGLY, IN OUR CONSIDERED VIEW, THE LD. CIT (A) HAS VIOLATED THE EXPRESSED PROVISIONS OF LAW BY PASSING ORDER FOR ENHANCEMENT OF DISALLOWANCE IN QUESTION WITHOUT ISSUING SHOW CAUSE TO THE ASSESSEE. WE , THEREFORE, SET ASIDE THE FINDINGS OF T HE LD. CIT (A) WITHOUT GOING INTO THE MERITS OF THE CASE AND REMAND THE APPEAL BACK TO THE LD. CIT (A) FOR DECIDING THE ISSUE AFRESH AFTER DUE COMPLIANCE OF THE PROVISIONS OF SECTION 251 OF THE ACT. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR A SSESSME NT YEAR 2010 - 20 11 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY , 2018 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBE R JUDICIAL MEMBER MUMBAI ; DATED: 21 / 02 / 201 8 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . 5 ITA NO. 2 660 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI