Smt. Ila Saurabh Dalal, Ahmedabad V. The Income tax Officer,Ward-1(1), Ahmedabad

ITA 2771/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1356 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 14-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A L THAKKAR
• Keywords: Unexplained investment; Business income; Opportunity of being heard; Earning of tax free income; Additional evidence
• Section: 14A; 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO. 2688 /AHD/201 1 / ASSESSMENT YEAR : 2008 - 09 INCOME - TAX OFFICER, WARD - 1(1) , AHMEDABAD VS SMT. ILA SAURABH DALAL, VIMAL HOUSE, NR. LAKHUDI TALAV, NAVRANG SCHOOL ROAD, AHMEDABAD - 380014 PAN : AAEPD 6 826 F ./ ITA NO. 2771 /AHD/201 1 / ASSESSMENT YEAR : 2008 - 09 SMT. ILA SAURABH DALAL, VIMAL HOUSE, NR. LAKHUDI TALAV, NAVRANG SCHOOL ROAD, AHMEDABAD - 380014 PAN : AAEPD 6826 F VS INCOME - TAX OFFICER, WARD - 1(1), AHMEDABAD / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI K MADHUSUDAN, SR DR ASSESSEE BY : SHRI A L THAKKAR, AR / DATE OF HEARING : 14 / 0 6 /201 6 / DATE OF PRONOUNCEMENT: 17 / 06 /201 6 / O R D E R PER R.P. TOLANI , JUDICIAL MEMBER: - THESE CROSS APPEALS BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 6 , AHMEDABAD DATED 05 . 09 .201 1 FOR ASSESSMENT YEAR 200 8 - 0 9 . 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL READ AS UNDER : - 1 . THE CIT(A) HAS ERRED IN LAW AND FACTS BY HOLDING THAT SHARES/SECURITIES HELD FOR MORE THAN 30 DAYS BE TREATED AS INVESTMENT AND CHARGED AS STCG/LTCG. THE CIT(A) OUGHT TO HAVE UPHELD THE TREATMENT AS BUSINESS INCOME CONSIDERING THE FACTS OF THE CASE. 2 . THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.50,80,000/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 AFTER ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46A. ITA NOS. 2688 & 2771/AHD/ 2011 ITO VS. SMT. ILA SAURABH DALAL - CROSS APPEALS AY : 2008 - 09 2 3 . ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN TREATING THE INCOME OF THE APPELLANT AS BUSINESS INCOME WHERE THE SHARES HAVE BEEN HELD FOR A PERIOD LESS THAN 30 DAYS EVEN THOUGH THE SHARES HAVE BEEN HELD AS INVESTMENT & NOT STOCK IN TRADE. 2 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF EXPENSES OF RS.12,02,447/ - WORKING OUT THE SAME APPLYING THE RULE 8C(2)(II) & 8D(2)(III) AS PER THE PROVISIONS OF SECTION 14A OF THE I.T. ACT, 1961 HOLDING THAT THE SAME ARE RELATED TO THE EARNING OF EXEMPT INCOME OF RS.5,86,028/ - . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE NOTIONAL EXPENSES AS COMPUTED AND DISALLOWED BY THE ASSESSING OFFICER IS FAR IN EXCESS/EXCEEDS THE TOTAL EXPENSES CLAIMED BY THE APPELLANT IN THE PROFIT & LOSS ACCOUNTS OF THE PERSONAL AS WELL AS PROPRIETARY CONCERNS HENCE THE SAME BEING MERE ABSURDITY NOT SUSTAINABLE IN LAW. 3 . THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE ASSESSING OFFICER HAS ADOPTED DOUBLE STANDARDS AND PROCEEDED TO MAKE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 WHEN HE HIMSELF HAS TREATED THE LONG TERM CAPITAL GAINS (EXEMPT INCOME) AS B USINESS INCOME. 4 . APROPOS GROUND NO.1 OF REVENUES APPEAL, THE LD. COUNSEL AT THE OUTSET CONTENDS THAT FOR THE ASSESSEE CONTENDS THAT THE ASSESSING OFFICER WRONGLY TREATED THE LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE AS BUSINESS PROFIT ON THE GROUND THAT THE ASSESSEE WAS NOT MAKING INVESTMENT BUT TRADING IN SHARES. L D. CIT(A), FOLLOWING THE DECISION OF CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI SUGAM CHAND C SHAH VS. ACIT IN ITA NO.3554/AHD/2008 FOR AY 2005 - 06 AND ITA NO. 1932/AHD/2009 FOR AY 2006 - 97 , HELD THAT WHENEVER THE ASSESSEE HAS HELD THE SHARES FOR THE PERIOD MORE THAN 30 DAYS, THE SAME IS TREATED AS INVESTMENT RESULTING IN LONG TERM AND SHORT TERM CAPITAL GAIN AND WHEREVER SHARES ARE HELD UP TO 30 DAYS, THE INCOME ARISING THERE FROM IS TREATED AS BUSINESS INCOME OF THE ASSESSEE. THEREFORE, THERE IS NO INFIRMITY IN LD. CIT(A)S ORDER. ITA NOS. 2688 & 2771/AHD/ 2011 ITO VS. SMT. ILA SAURABH DALAL - CROSS APPEALS AY : 2008 - 09 3 5. APROPOS REVENUES GROUND NO.2, THE ASSESSING OFFICER MADE ADDITION OF RS.50,80,000/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT, WHICH WAS DELETED BY CIT(A) IN FIRST APPEAL HOLDING THAT THE ASSESSEE WAS 50% CO OWNER OF IMPUGNED PROPERTY ALONG WITH HER SISTER - IN - LAW, WHO HAD DULY DISCLOSED HER PART OF INVESTMENT IN HER RETURN . 5.1 BRIEF FACTS ARE FO R THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER GOT INFORMATION FROM THE SUB - REGISTRAR OFFICE THAT THE ASSESSEE HAD PURCHASED IMMOVABLE PROPERTY AMOUNTING TO RS.1.008 CRORES, FOR WHICH THE ASSESSEE WAS ASKED TO FURNISH THE SOURCE OF INVESTMENT. IN C OMPLIANCE WITH THE SHOW - CAUSE NOTICES ISSUED, THE ASSESSEE FURNISHED SALE DEED AS WELL AS PAYMENT DETAILS OF RS.50,00,000/ - FROM HDFC BANK ACCOUNT AND RS.40,000 / - IN CASH AS PER THE SALE DEED. AO MISTAKENLY HELD THAT ASSESSEE WAS SOLE OWNER OF THE PROPERTY , CONSEQUENTLY THE REMAINING AMOUNT OF RS.50,40,000/ - AND CASH OF RS.40,000/ - AGGREGATING TO RS . 50,80,000/ - AS UNEXPLAINED INVESTMENT U/S 69 IN RESPECT OF ACQUISITION OF THE SAID IMMOVABLE PROPERTY. 5.2 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, T HE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION MADE BY ASSESSING OFFICER U/S 69, BY FOLLOWING OBSERVATIONS: - 5.5 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER, APPELLANT'S SUBMISSION, REMAND REPORT AND APPELLANT'S REJOINDER TO REMAND REPORT. ASSESSING OFFICER MADE THE ADDITION OF UNEXPLAINED INVESTMENT IN PROPERTY ON THE GROUND THAT APPELLANT DISCLOSED O NLY 50% INVESTMENT IN HER BOOKS. HOWEVER APPELLANT SUBMITTED THAT THE PROPERTY WAS PURCHASED IN JOINT NAME WITH HER SISTER - IN - LAW. ACCORDINGLY THE APPELLANT'S SHARE WAS 50% AND IT WAS CORRECTLY REFLECTED IN HER BOOKS. HOWEVER ASSESSING OFFICER IGNORED THIS AGREEMENT AND TREATED 100% PROPERTY AS BELONGING TO THE APPELLANT. THE ADDITIONAL EVIDENCES APPELLANT SUBMITTED DURING APPEAL HEARING WERE ONLY SUPPORTING THE PURCHASE AGREEMENT SUBMITTED BEFORE T HE AO. THESE EVIDENCES WERE NEVER CALLED BY THE ASSESSING O FFICER AND ACCORDINGLY THE SAME COULD NOT HAVE BEEN FILED. WHEN ASSESSING OFFICER CALLED SOURCE OF ITA NOS. 2688 & 2771/AHD/ 2011 ITO VS. SMT. ILA SAURABH DALAL - CROSS APPEALS AY : 2008 - 09 4 INVESTMENT, APPELLANT SUBMITTED SOURCE FOR HER 50% PART ON THE BELIEF THAT REMAINING 50% BELONG TO HER SISTER - IN - LAW. IN VIEW OF THESE FACTS THE ADDITIONAL EVIDENCES SUBMITTED BY THE APPELLANT DURING APPEAL ARE ONLY CORROBORATING THE FACTS STATED AND REFLECTED FROM THE DOCUMENTS FILED DURING ASSESSMENT PROCEEDINGS. IN VIEW OF THIS, ADDITIONAL EVIDENCES ARE ADMISSIBLE UNDER RULE 46A AND THE SAME ARE ADMITTED IN THE INTEREST OF JUSTICE. IN THE REMAND REPORT, ASSESSING OFFICER ACCEPTED THE OWNERSHIP OF 50% PROPERTY IN THE HANDS OF APPELLANT'S SISTER - I N - LAW. HE HAD ALSO VERIFIED THE INCOME TAX RECORDS AND BALANCE - SHEET FOR THE RELEVAN T PERIOD. ASSESSING OFFICER HAS ALSO VERIFIED THE SO URCE OF INVESTMENT. WITH THE VERIFICATION, ASSESSING OFFICER WAS CONVINCED THAT 50% OF THE PROPERTY BELONGED TO APPELLANT'S SISTER - IN - LAW A ND THEREFORE ADDITION OF UNEXPLAINED INVESTMENT ON ACCOUNT OF THI S CANNOT BE MADE IN THE HANDS OF APPELLANT. ACCORDINGLY THE ADDITION OF RS. 50,40,000 MADE BY THE ASSESSING OFFICER IS DELETED. ASSESSING OFFICER ALSO MADE ADDITION OF R S. 40,000 WHICH WAS PAID IN CASH IGNORING THE FACT THAT THE SAME IS REFLECTED IN THE BO OKS. ACCORDINGLY THIS ADDITION WILL ALSO NOT SURVIVE. THESE GROUNDS ARE ACC ORDINGLY ALLOWED. 5.3 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER AND CONTENDS THAT ADDITIONAL EVIDENCE HAS NOT BEEN ADMITTED AS PER RULE 46A. 7. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THERE IS NO VIOLATION OF RULE 46A INASMUCH AS THE NAM ES OF CO OWNERS WERE MENTIONED IN THE SALE DEED ITSELF, THE SISTER IN LAW IS ALSO ASSESSED TO TAX, A FACT WHICH IS ACCEPTED BY LD. AO IN REMAND REPORT AND HAS NOT OFFERED ANY ADVERSE COMMENT IN THIS BEHALF CONSEQUENTLY. L D. CIT(A) HAS NEITHER VIOLATED RULE 46A NOR COMMITTED ANY ERROR IN DELETING THE IMPUGNED ADDITION ON MERITS . 8 . WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. APROPOS REVENUES GROUND NO.1, W E FIND THAT T HE LD. CIT(A) HAS FOLLOWED THE DECISION OF CO - ORDINATE BENCH OF THIS TRIBUNAL RENDERED IN THE CASE OF SHRI SUGAM CHAND C. SHAH VS. ACIT (SUPRA) AND THE REVENUE HAS NOT PLACED ANY CONTRARY JUDGMENT . THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF ITA NOS. 2688 & 2771/AHD/ 2011 ITO VS. SMT. ILA SAURABH DALAL - CROSS APPEALS AY : 2008 - 09 5 THE LD. CIT(A), THE SAME IS HEREBY UPHELD. THUS, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 8.1 APROPOS R EVENUE S G ROUND N O. 2 ALSO, I N THE REMAND REPORT, LD. AO ACCEPTED THE FAC T OF PURCHASE OF PROPERTY IN CO - OWNERSHIP OF 50% WITH SISTER - IN - LAW WHOSE INCOME TAX RECORDS AND BALANCE - SHEET FOR THE RELEVANT PERIOD IS ALSO VERIFIED. THUS, LD. AO IN REMAND PROCEEDING HAS ALSO VERIFIED THE SOURCE OF INVESTMENT. SINCE AO WAS SATISFIED THAT 50% OF THE PROPERTY BELONGED TO APPELLANT'S SISTER - IN - LAW , CONSEQUENTLY THERE IS NO CONSISTENCY IN THE ORDER OF LD. CIT(A) HOLDING THAT THE ADDITION OF ALLEGED UNEXPLAINED INVESTMENT CANNOT BE MADE IN THE HANDS OF APPELLANT. ACCORDINGLY WE UPHOLD HIS ORDER DELETING THE IMPUGNED ADDITION OF RS.50,40,000 / - . WE ALSO FIND NO MERIT IN THE R EVENUE S GROUND THAT RULE 46A HAS BEEN VIOLATED BY LD. CIT(A). 8.2 IN THE RESULT , R EVENUE S APPEAL IS DISMISSED. 9. ADVERTING TO ASSES S EES APPEAL, G ROUND N O. 1 IS NOT PRESSED ; HENCE DISMISSED ACCORDINGLY . APROPOS 2 ND G ROUND , LD. COUNSEL CONTENDS THAT LD. CIT(A) WRONGLY CONFIRMED THE NOTIONAL DISALLOWANCE OF EXPENSES OF RS.12,02,447/ - IN THE GUISE OF APPLYING RULE 8C(2)(II) & 8D(2)(III) R/W SECTION 14A OF THE I.T. ACT, 1961 HOLDING THAT THE SAME ARE RELATED TO THE EARNING OF EXEMPT INCOME OF RS.5,86,028/ - . LD. CIT (APPEALS) FAILED TO CONSIDER THAT THE NOTIONAL EXPENSES AS DISALLOWED BY THE ASSESSING OFFICER ARE DISPROPORTIONAT E, ILLOGICAL AND FAR IN EXCESS AS COMPARED TO EXEMPT INCOME. ASSESSING OFFICER HAS ADOPTED AN APPROACH OF BLOWING HOT AND COLD THOUGH HE TREATED THE LONG TERM CAPITAL GAINS (EXEMPT INCOME) AS BUSINESS INCOME AND STILL APPLIED SEC. 14A. R ELIANCE IS PLACED O N HONBLE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT II V. HITACHI HOME AND LIFE SOLUTIONS CASE [2014] 41 TAXMANN.COM 540 HOLDING THAT WHEN THE INTEREST FREE FUNDS FAR ITA NOS. 2688 & 2771/AHD/ 2011 ITO VS. SMT. ILA SAURABH DALAL - CROSS APPEALS AY : 2008 - 09 6 EXCEED THE INVESTMENT REQUIRED FOR EARNING EXEMPT INCOME IN QUESTION AND AO FAILS TO ESTABLISH NEXUS, NO DISALLOWANCE U/S 14A CAN BE MADE. 9.1 LD. D EPARTMENTAL R EPRESENTATIVE RELIED ON THE ORDER OF LD. CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AS THE FACTS EMERGE ASSESSEE EARNED DIVIDEND INCOME ON AN INVESTMENT OF RS. 1654 LACS. THE EXCESS OF INTEREST EXPENSES DR. TO P&L A/C IS CLAIMED TO BE RS. 6.47 LACS IN RESPECT OF BUSINESS INCOME AND EXEMPT INVESTMENTS, HOWEVER THE DETAILS OF RECEIPT AND TOTAL EXPENSES OF INTEREST HAVE NOT BEEN SEGREGATED AN D JUSTIFIED IN THIS BEHALF. T HE RELEVANT FACTS ABOUT NEXUS, APPORTIONMENT, QUANTUM OF INTEREST FREE FUNDS IS NEITHER EMERGING FROM THE ORDERS NOR HAS BEEN EXPLAINED BY EITHER PARTIES. IN VIEW THERE OF WE ARE INCLINED TO SET ASIDE THE MATTER BACK TO THE FILE OF LD. AO. BY NOW PLETHORA OF JUDGMENTS HAS BEEN RENDERED ON THIS ISS UE, LD. AO WILL CONSIDER THE RELEVANT JUDICIAL PRECEDENTS AND AFFORD ADEQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE. CONSEQUEN TLY THIS GROUND IS REMITTED BACK TO LD. AO ACCORDINGLY . 10.1 I N THE RESULT , ASSESSEES APPEAL IS PARTLY ALLOWED FOR STA TI STICAL PURPOSES. 11. IN THE RESULT , RE VENUE S APPEAL IS DISMISSED AND ASSESSEES APPEAL IS PARTLY ALLOWED FOR STA TI STICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 1 7 T H JUNE , 201 6 AT AHMEDABAD. SD/ - SD/ - ANIL CHATURVEDI ( ACCOUNTANT MEMBER ) R.P. TOLANI ( JUDICIAL MEMBER ) AHMEDABAD; DATED 1 7 / 0 6 /201 6 *BIJU T. ITA NOS. 2688 & 2771/AHD/ 2011 ITO VS. SMT. ILA SAURABH DALAL - CROSS APPEALS AY : 2008 - 09 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD