Shri Rameshchandra S. Kasat, Ahmedabad V. The Income Tax Officer, Ward-3(3)(4), Ahmedabad

ITA 2714/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5661 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 20-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Earning of tax free income; Corroborative evidences; Rule 8D
• Section: 143(3); 14A; 201; 143(2); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI RAMESHCHANDRA S. KASAT, 804, AVDESH HOUSE, OPP. GURUDWARA GOVINDDHAM, S.G. HIGHWAY, AHMEDABAD - 380015 PAN: ADCPK446R (APPELLANT) VS THE IT O , WARD - 3(3)(4) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI RA JESH MEENA , SR. D . R. ASSESSEE BY: SHRI MEHUL K. PATEL, A.R. DATE OF HEARING : 01 - 11 - 2 018 DATE OF PRONOUNCEMENT : 29 - 11 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNT ANT MEMBER : - THIS ASSESSEE S APPEAL FOR A. Y. 2013 - 14 , ARI SES FROM ORDER OF THE CIT(A) - 3, AHMEDABAD DATED 22 - 08 - 2 016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS AGAINST THE DECISION OF LD. CIT(A) IN PARTIALLY CONFIRMING THE ADDITION OF RS. 12 ,88, 826/ - OUT OF ADDITION OF RS. 40 , 30 ,354 / - MADE U/S. 14A R.W. RULE 8D OF THE IT RULE IN RESPECT OF EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. I T A NO . 2714 / A HD/20 16 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 2714 /AHD/20 16 A.Y. 2013 - 14 PAGE NO SHRI RAM ESHCHANDRA S. KASAT VS. IT O 2 3. THE FACT IN BRIEF IS THAT THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. 14 , 90 , 400/ - . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) ON 5 TH SEP, 2014. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF COMPU TATION OF INCOME F OR THE YEAR UNDER CONSIDERATION, T HE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS. 12 , 88 , 826/ - WHICH WAS CLAIMED AS EXEMPT U/S. 10 OF THE ACT. THEREAFTER, THE ASSESSEE WAS ASKED TO FURNISH THE DETAIL ALONG WITH SUPPORTING EVIDENCES IN RESPECT OF EXEMPT INCOME ALONG WITH WORKING OF DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE IT ACT. THE ASSESSEE RESPONDED THAT SUCH INCOME WAS DIVIDEND OF RS. 12 , 88 , 826/ - WHICH WAS CLAIMED AS EXEMPT INCOME. T HE ASSESSEE HAS ALSO STATED THAT THEY HAVE BEEN DOING TRADING IN SHARES, THEREFORE, NO INCOME HAS BEEN CLAIMED AS EXEMPT EXCEPT DIVIDEND INCOME AND NO EFFORTS WERE REQUIRED TO EARN DIVIDEND INCOME , THEREFORE , SECTION 14A WAS NOT APPLICABLE FOR EARNING DI VIDEND. THE A SSESSING OFFICER HAS NOT ACCEPTED THE CONTENTION OF T HE ASSESSEE AND STATED THAT AS PER BALANCE SHEET AS ON 31 ST MARCH, 2013 OF THE PROPRIETARY CONCERN OF THE ASSESSEE M/S. MAHESHWARI SALES CORPORATION INVESTMENT IN SHARE AS TRADING IN STOCK W AS MADE AT RS. 4 , 16 ,34, 474/ - .THE LIABILITY SIDE OF THE BALANCE SHEE T WAS COMPRISE D CAPITAL OF RS. 2, 10 , 84 , 667/ - AND UN - SECURED LOAN OF RS. 83 , 23 , 872/ - THEREFORE, THE ASSESSING OFFICER OBSERVED THAT THE MAJOR SOURCE OF INVESTMENT OF T HE ASSESSEE WAS LOAN. HE HAS ALSO ST ATED THAT MANAGEMENT AND MAINTENANCE OF SUCH INVESTMENT ALWAYS REQUIRED CERTAIN ADMINISTRATIVE EXPENDITURE. CONSEQUENTLY , HE HAS WORKED OUT DISALLOWANCE U/S. 14A AS PRESCRIBED RULE 8D OF THE IT RULE TO THE AMOUNT OF RS. 40 , 30 , 354/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. ASSESSEE PREFERRED APPEAL BEFORE EH LD. CIT(A). THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME HOLDING THAT ASSESSEE HAS NOT ESTABLISHED ANY NEXUS BETWEEN THE REALIZATION OF INTEREST FREE FUND A ND INVESTMENT . I.T.A NO. 2714 /AHD/20 16 A.Y. 2013 - 14 PAGE NO SHRI RAM ESHCHANDRA S. KASAT VS. IT O 3 5. DURING THE COURSE OF APPELLANT PROCEEDING BEFORE US THE LEARNED COUNSEL HAS CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFORMING THE ADDITION TO THE EXTENT OF RS.12,88,826 U/S 14A READ WITH THE RULE 8D OF THE IT RULES. HE HAS ALSO FURNISHED THE COPIES OF P ROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31ST OF MARCH 2013 AND BALANCE SHEET AS ON 31ST OF MARCH 2013 OF THE PROPRIETARY CONCERN OF THE ASSESSEE PERTAINING TO THE YEAR UNDER CONSIDERATION. ON THE OTHE R HAND THE LEARNED DR HAS PLACED RELIANCE ON THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX APPEAL. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.12,88,826 WHICH WAS CLAIMED AS EXEMPT UNDER SECTION 10 OF THE IT ACT. THE ASSESSEE WAS ASKED TO FURNISH THE WORKING OF DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D O F T HE IT RULE IN RESPECT OF EXPE NSES INCURRED TOWARDS EARNING OF EXEMPT INCOME. IN THIS REGARD THE ASSESSEE HAS EXPLAINED THAT IT HAS DONE TRADING IN THE SHARES THEREFORE NO EFFORTS HAS BEEN MADE TO EARN DIVIDEND INCOME AND IT IS ALSO STATED THAT SECTION 14A OF THE ACT IS NOT APPLICABLE TO THIS CASE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AND STATED THAT AS PER THE BALANCE SHEET AS ON 31 MARCH 2013 THE ASSESSEE HAS MADE INVESTMENT IN SHARES TO THE AMOUNT OF RS.4,16,34,474 AND AS PER THE LIABILITIES SIDES OF THE BALANCE SHEET THE ASSESS EE WAS HAVIN G CAPITAL OF RS. 2 10 8 4 667 AND UNSECURED LOAN OF RS.85,23,872. FROM THE ABOVE FACTS THE ASSESSING OFFICER HAS CONCLUDED THAT ASSESSEE HAS UTILIZED UNSECURED LOAN FOR MAKING INVESTMENT IN THE SHARES. THE ASSESSING OFFICER HAS COMPUTED DISALLOWANCE UNDER SECTION 14A TO THE AMOUNT OF RS.4,03,0354 AS PER RULE 8D OF THE IT RULE. WE HAVE GONE THROUGH THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST OF MARCH 2013 AND THE BALANCE SHEET AS ON 31ST OF MARCH 2013 FILED BY THE L D COUNCIL AND NOTICED THAT IN THE PRECEDING ASSESSMENT YEAR THE ASSESSEE HAS INCURRED INTEREST EXPENSES OF RS.67,66,434.12 AND DURING THE YEAR UNDER I.T.A NO. 2714 /AHD/20 16 A.Y. 2013 - 14 PAGE NO SHRI RAM ESHCHANDRA S. KASAT VS. IT O 4 CONSIDERATION THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.54,23,360.11. ON THE OTHER HAND WE NOTICED THAT INTEREST FREE FUND IN THE FORM OF SHARE CAPITAL IN THE PRECEDING ASSESSMENT YEARS IN THE CASE OF THE ASSESSEE WAS TO THE AMOUNT OF RS.2,85,65,766.77 AND SHARE CAPITAL DURING THE YEAR UNDER CONSIDER ATION WAS TO THE AMOUNT OF RS. 2 10 84 66 7 .67. IT IS ALSO NOTICED THAT IN THE PRECEDING ASSESSMENT YEAR THE UNSECURED LOAN AS ON 31 MARCH 2012 WAS TO THE AMOUNT OF RS.1,78,45,596.97 AND THE UNSECURED LOAN AS ON 31 MARCH 2013 WAS TO THE AMOUNT OF RS.83,23,872.69. IT IS ALSO NOTICED THAT INVESTMEN T IN SHARE AS REFLECTED IN THE BALANCE SHEET AS ON 31ST OF MARCH 2012 WAS TO THE AMOUNT OF RS.10 , 17 , 39 , 467.61 AND INVESTMENT AS ON 31ST OF MARCH 2013 WAS TO THE AMOUNT OF RS.4,16,34,474.4 2 . THE ABOVE FACTS DEMONSTRATE THAT ASSESSEE HAS FAILED TO SUBSTANT IATE THAT INVESTMENT IN THE SHARES WERE MADE OUT OF INTEREST FREE FUNDS ONLY AND NO ADMINISTRATIVE EXPENDITURE HAS BEEN INCURRED FOR EARNING TOWARDS IMPUGNED EXEMPT INCOME . AFTER CONSIDERING THESE FACTS AND FINDINGS , WE CONSIDER THAT THE LD. CIT(A) HA S RIGHTLY ADJUDICATED THAT THE DISALLOWANCE U/S. 14A IS TO BE RESTRICTED TO THE EXEMPT INCOME EARNED DURING THE YEAR UNDER CONSIDERATION BY THE ASSESSEE. IN THE LIGHT OF THE ABOVE WE COULD NOT FIND ANY MERIT IN THE CLAIM OF THE ASSESSEE THAT NO EXPENSES H AS BEEN INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 29 - 11 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 29 /11 /2018 / COPY OF ORDER FORWARDED TO: - I.T.A NO. 2714 /AHD/20 16 A.Y. 2013 - 14 PAGE NO SHRI RAM ESHCHANDRA S. KASAT VS. IT O 5 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,