Paresh Nath Maity, Kolkata V. Addl.C.I.T., Range52, Kolkata, Kolkata

ITA 2743/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4560 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-12-2013
• Court: TRIBUNAL
• Department Lawyers: K K TRIPATHI
• Assessee Lawyers: K K SARKAR
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.2743/KOL/2013 ASSESSMENT YEAR: 2009-10 PARESH NATH MAITY VS. ADDL. COMMISSIONER OF IN COME-TAX, (PAN: AEZPM6001N) RANGE-52, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 10.06.2016 DATE OF PRONOUNCEMENT: 08.07.2016 FOR THE APPELLANT: SHRI K. K. SARKAR, FCA FOR THE RESPONDENT: SHRI K. K. TRIPATHI, JCIT, S R. DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXIII, KOLKATA VIDE APPEAL NO. 83/CIT(A)-XXXIII/ADDL.CIT R-12/11-12 DAT ED 03.09.2013. ASSESSMENT WAS FRAMED BY ADDL.CIT, RANGE-52, KOLKATA U/S. 143( 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2009- 10 VIDE HIS ORDER DATED 16.09.2011. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL OF ASSES SEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF RS.83,868/- U/S. 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES, 1962 IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE, A PAINTER OF ACCLAIM, HAS BEEN RECOGNIZED AS ONE OF THE FAMOUS ARTISTS IN INDIA. HE STARTED HIS PROFESSION IN KOLKATA IN 1991. APART FROM PROFESSIONAL INCOME THE ASSESSEE HAS INCOME FROM HOUSE PROPERTY AND FROM INTEREST ON BANK ACCOUNTS DURING THE YEAR UNDER CONSIDERATION. THE LD AO OBSERVED THAT THE ASSESSEE DERIVED EXEMPT INCOME AS BELOW:- TAX FREE INTEREST ON RELIEF BONDS 8,40,900.00 DIVIDEND ON MUTUAL FUNDS 27,21,362.87 ----------------- 35,62,262.87 THE ASSESSEE WAS ASKED TO FURNISH CALCULATION OF EX PENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AS PER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES. THE ASSESSEE REPLIED THAT NO EXPENDITURE WAS INCURRED BY 2 ITA NO.2743/K/2013 PARESH NATH MAITY, AY 2009-10 HIM FOR THE PURPOSE OF EARNING THESE EXEMPT INCOME. THE LD AO APPLIED 0.5% OF AVERAGE VALUE OF INVESTMENTS AS PER RULE 8D(2)(III) OF THE RULES AND MADE DISALLOWANCE U/S 14A OF THE ACT TO THE TUNE OF RS. 83,868/-. THIS ADDITION WAS UPHELD BY THE LD CITA . AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE US. 4. THE LD AR ARGUED THAT THE LD AO HAD NOT RECORDE D ANY SATISFACTION IN TERMS OF RULE 8D(1) OF THE RULES HAVING REGARD TO THE ACCOUN TS OF THE ASSESSEE WHEN THERE WAS A SPECIFIC CLAIM MADE BY THE ASSESSEE THAT NO EXPENDI TURE WAS INCURRED BY HIM FOR THE PURPOSE OF EARNING EXEMPT INCOME. HE ARGUED THAT A LL THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT ARE ONLY ATTRIBUTABLE TO TH E BUSINESS INCOME OF THE ASSESSEE AND NOT RELATABLE TO INVESTMENT ACTIVITY. HENCE, HE ARG UED THAT ADOPTION OF RULE 8D(2) MECHANICALLY IS NOT PERMISSIBLE AND ACCORDINGLY PRA YED FOR DELETION OF THE DISALLOWANCE U/S 14A OF THE ACT. IN RESPONSE TO TH IS, THE LD DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REPRODUCED HE REIN FOR THE SAKE OF BREVITY. WE FIND FROM THE FACTS OF THE INSTANT CASE THAT THE LD AO HAS NOT EXAMINED THE ACCOUNTS OF THE ASSESSEE AND THERE IS NO SATISFACTION RECORDED BY THE LD AO ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AND WITHOUT THE SAME , HE INVOKED RULE 8D(2) OF IT RULES. WHILE REJECTING THE CLAIM OF ASSESSEE WITH REGARD T O NON-INCURRING OF ANY EXPENDITURE IN RELATION TO EXEMPT INCOME, THE LD AO HAS TO INDI CATE COGENT REASONS FOR THE SAME. WE FIND THAT THE LD AO HAD STRAIGHT AWAY EMBRAKED U PON COMPUTING DISALLOWANCE UNDER RULE 8D(2) OF THE RULES WHICH IS NOT PERMISSI BLE AS PER LAW. WE DRAW SUPPORT FROM THE FOLLOWING DECISIONS OF THE JURISDICTIONAL HIGH COURT WHICH ARE DIRECTLY ON THIS POINT IN FAVOUR OF THE ASSESSEE :- CIT VS ASHISH JHUNJHUNWALA IN G.A.NO. 2990 OF 2013 IN ITAT NO. 157 OF 2013 DATED 8.1.2014 RENDERED BY CALCUTTA HIGH COURT WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REG ARD TO EXPENDITURE OR NO EXPENDITURE , AS THE CASE MAY BE, IN RELATION TO EXEMPTED INCOME, TH E AO HAS TO INDICATE COGENT REASONS FOR THE SAME. FROM THE FACTS OF THE PRESENT CASE, IT I S NOTICED THAT THE AO HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AND STRAIGHT AWAY EMBARKE D UPON COMPUTING DISALLOWANCE UNDER RULE 8D OF THE RULES ON PRESUMING THE AVERAGE VALUE OF INVESTMENT AT 0.5% OF THE TOTAL VALUE. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLO WING THE COORDINATE BENCH DECISION IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD , SUPRA, WE UPH OLD THE ORDER OF CIT(A). 3 ITA NO.2743/K/2013 PARESH NATH MAITY, AY 2009-10 CIT VS R.E.I. AGRO LTD IN GA 3022 OF 2013 IN ITAT 1 61 OF 2013 DATED 23.12.2013 RENDERED BY CALCUTTA HIGH COURT THE ASSESSING OFFICER ALSO DISALLOWED THE EXPENDITU RE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 WITHOUT FIRST RECORDING THAT HE WAS NOT S ATISFIED WITH THE CORRECTNESS OF THE CLAIM AS REGARDS THE CLAIM THAT NO EXPENDITURE WAS MADE BY THE ASSESSEE. CHALLENGING THE ORDER OF THE TRIBUNAL, THE PRESENT APPEAL HAS BEEN FILED. WE HAVE HEARD MR.BHOWMIK AND ARE OF THE OPINION THA T NO POINT OF LAW HAS BEEN RAISED. THEREFORE, THIS APPEAL IS DISMISSED. THE AFORESAID TWO DECISIONS OF THE JURISDICTIONAL H IGH COURT ARE BINDING ON THIS TRIBUNAL AND HENCE THE CASE LAW ADDRESSED BY THE LE ARNED CITA IN HIS ORDER IS NOT CONSIDERED IN THIS ORDER. HENCE WE HOLD THAT THE A CTION OF THE LEARNED AO IN DIRECTLY EMBARKING ON RULE 8D(2) OF THE RULES IS NOT APPRECI ATED AND HENCE NO DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE IN THE FACTS OF THE IN STANT CASE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07.2 016. SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 8 TH JULY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI PARESH NATH MAITY, C/O K. K. SARK AR, AR., 96, KANKULIA ROAD, BLOCK-8, FLAT-5, KOLKATA-700 029. 2 RESPONDENT ADDL. CIT, RANGE-52, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .