AJAY GIRDHARILAL BHARTIYA, MUMBAI V. DEPUTY COMMISSIONER OF INCOMETA-TAX 7(3)(2), MUMBAI

ITA 2856/MUM/2022

AI Insights

The case involves Ajay Giridharilal Bhartiya, the appellant, who contested the disallowance of Rs. 3,10,686 made under section 14A of the Income-tax Act by the Assessing Officer. The disallowance was based on the perception that the assessee, being a salaried employee with income from various sources including salary and rental, had not disclosed any related expenditures which could have been disallowed under section 14A. The Tribunal examined the nature of the assessee's income and expenditures and concluded that since no expenditures were claimed by the assessee, the disallowance under section 14A was inappropriate.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123104 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 09-11-2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A”, MUMBAI BEFORE SHIR KULDIP SINGH, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO.2856/MUM/2022 (A.Y: 2014-15) Ajay Giridharilal Bhartiya 22(1), Bombay Cotton Mills Compound Dattaram Lad Path, Kalachowky Mumbai -- 400033 PAN: AABPB2887R v. DCIT – 7(3)(2) Room No. 1265, 1 st Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee Represented by : Shri Harsh Kothari Department Represented by : Shri Manoj Kumar Sinha Date of Hearing : 02.01.2023 Date of Pronouncement : 31.03.2023 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 19.09.2022 for the A.Y.2014-15. 2 ITA NO.2856/MUM/2022 (A.Y: 2014-15) Ajay giridharilal Bhartiya 2. Brief facts of the case are, assessee filed return of income for the A.Y. 2014-15 declaring total income of ₹.89,65,270/- on 30.09.2011. The return was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). The case was selected for scrutiny under CASS and notice u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response AR of the assessee attended and submitted the relevant information as called for. 3. During the assessment proceedings, Assessing Officer observed that assessee has exempt income and also investments which yielded exempt income as well as business assets in the balance sheet. He observed that assessee has not shown any disallowance u/s. 14A of the Act and the assessee was asked to explain why the disallowance u/s. 14A should not be made. In this regard, Assessing Officer proceeded to make the disallowance applying section 14A r.w. Rule 8D by treating average value of total investments and applying 0.5% of the average value of investments as expenses relating to exempt income under Rule 8D2(iii) of I.T. Rules. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) sustained the addition made by the Assessing Officer. 3 ITA NO.2856/MUM/2022 (A.Y: 2014-15) Ajay giridharilal Bhartiya 4. Aggrieved assessee is in appeal before us raising following grounds in its appeal: - “1. The Learned Commissioner of Income-tax (Appeals) ("CIT(A)") erred in not deleting the disallowance of Rs. 3,10,686 made by the Assessing Officer under section 14A of the Income-tax Act, 1961 (the Act). 2. The Learned CIT(A) erred in not appreciating that the appellant has not claimed any expenditure while computing his income chargeable to tax under any heads of income and, therefore, there is no question of making any disallowance under section 14A of the Act. 3. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal.” 5. At the time of hearing, Ld. AR of the assessee submitted that assessee is a salaried employee and having income from salary, rental income and income from other sources. He submitted that there is no dispute that assessee has earned income as declared in return of income and nowhere assessee has claimed any expenditure relating to any income. Therefore, the provisions of section 14A has no application. 6. On the other hand, Ld.DR relied on the orders of the lower authorities. 7. Considered the rival submissions and material placed on record, we observe from the record that assessee is an individual earning income from salary, rental income and income from other sources. On going 4 ITA NO.2856/MUM/2022 (A.Y: 2014-15) Ajay giridharilal Bhartiya through return of income we observe that assessee has not claimed any expenditure pertaining to any income earned by the assessee. When there is no expenditure claimed by the assessee either on taxable and non-taxable income the Assessing Officer cannot proceed to make disallowance without there being any claim from the assessee. Therefore, the disallowance made by the Assessing Officer is far-fetched and without any material on record to suggest that assessee has actually claimed expenditure. From the assessment record, we observe that Assessing Officer proceeded to make the disallowance with the perception that assessee is running a business and assessee has not offered any disallowance u/s. 14A of the Act. Therefore, the finding of the tax authorities is not proper. Accordingly, ground raised by the assessee is allowed and we direct the Assessing Officer to delete the disallowance made u/s. 14A of the Act. 8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 31 st March, 2023 Sd/- Sd/- (KULDIP SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 31/03/2023 Giridhar, Sr.PS 5 ITA NO.2856/MUM/2022 (A.Y: 2014-15) Ajay giridharilal Bhartiya Copy of the Order forwarded to: 1. The Assessee 2. The Respondent. 3. CIT 4 DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum