Mr. Ajay Vohra, New Delhi V. ACIT, Delhi

ITA 2891/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9726 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN
• Keywords: Depreciation; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2891/DEL/2017 (ASSESSMENT YEAR: 2012 - 13 ) AJAY VOHRA, 13, TOLSTOY MARG, MOHAN DEV BUILDING, FIRST FLOOR, NEW DELHI PAN: AABPV9622L VS. ACIT, CIRCLE - 61(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ROHIT JAIN, ADV REVENUE BY: SHRI ARUN KUMAR YADAV, SR. DR DATE OF HEARING 03/07 / 201 9 DATE OF PRONOUNCEMENT 1 8 / 09 / 2019 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 20, NEW DELHI DATED 14.03.2017 FOR THE ASSESSMENT YEAR 2012 - 13 , WHEREIN THE DISALLOWANCE U/S 14A READ WITH RULE 8 D OF THE ACT OF RS. 234213/ - WAS UPHELD. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALSO CHALLENGING THE SAME ON THE ISSUE OF SATISFACTION OF LD AO AS WELL AS ABSENCE OF ANY EXPENDITURE INCURRED IN RELATION TO EARNING EXEMPT INCOME. 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS.2,34,213 MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT) READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES). 1.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE AFORESAID DISALLOWANCE WITHOUT APPRECIATING THAT MANDATORY SATISFACTION ABOUT EXPENDITURE HAVING BEEN ACTUALLY CLAIMED/ INCURRED IN RELATION TO EARNING OF EXEMPT INCOME, WAS NOT RECORDED BY THE ASSESSING OFFICER. 1.2. THAT THE CIT(A)/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT NO EXPENDITURE RELATING TO EARNING OF EXEMPT INCOME WAS CLAIMED AS DEDUCTION BY THE APPELLANT. PAGE | 2 1.3. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN MAKING THE AFORESAID DISALLOWANCE WITHOUT APPRECIATING THE FACTUAL POSITION AND MERELY PROCEEDINGS ON CONJECTURES AND SURMISES. 2. THA T THE CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING LEVY OF INTEREST UNDER SECTION 234C OF THE ACT. 3 . THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A SR. ADVOCATE BY PROFESSION AND DERIVED INCOME FROM BUSINESS OR PROFESSION, INCOME FROM HOUSE PROPERTY, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 234213/ - AS DIVIDEND INCOME IN THE RETURN OF INCOME FILED ON 28.09.2012 OF RS. 37619840/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , ASSESSEE WAS ASKED TO FURNISH DETAILS OF EXPENSES INCURRED TO EARN EXEMPT INCOME. THE ASSESSEE VIDE LETTER DATED 05.02.2015 WAS STATED THAT NO EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME. A SSESSEE SUB MITTED DETAILS OF TOTAL EXPENDITURE OF RS. 1118354/ - UNDER EACH OF THE HEAD INCURRED BY HIM AND STATED THAT NONE OF THAT EXPENDITURE IS IN RELATION TO EARNING OF EXEMPT INCOME. THE LD AO VIDE PARA NO. 3.7 NOTED THAT AS NO DISALLOWANCE HAS BEEN MADE BY THE ASSESSEE , HE HAS REASON TO ARRIVE AT THE SATISFACTION THAT DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D IS REQUIRED TO BE MADE . TH US, HE WORKED OUT RS. 234213/ - A S DISALLOWABLE EXPENDITURE U/S 14 A OF THE ACT APPLYING RULE 8D, CONSEQUENTLY, ASSESSM ENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 25.03.2015 . 4 . THAT ORDER WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD CIT ( A). LD CIT(A) CONFIRMED THE ABOVE ADDITION FOR THE REASON THAT IN EARLIER YEARS THE ORDERS PASSED BY THE LD CIT(A) FOR ASSESSMENT YEA R 2010 - 11 ON IDENTICAL ISSUE HAS BEEN ACCEPTED BY ASSESSEE . SHE FURTHER CONFIRMED THE ADDITION ON THE MERITS. WITH RESPECT TO THE SATISFACTION OF THE LD AO SHE HELD THAT PARA 3.7 OF THE ORDER THE LD AO HAS RECORDED THE SATISFACTION CORRECTLY. THE ASSESSEE AGGRIEVED WITH THE ORDER HAS PREFERRED AN APPEAL BEFORE US. 5 . THE LD AR SUBMITTED THAT LD AO FAILED TO RECORD ANY SATISFACTION WITH RESPECT TO THE EXPLANATION OF THE ASSESSEE THAT OUT OF THE TOTAL EXPENDITURE OF RS. 1 118354/ - NO EX PENSES HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME. HE FURTHER SUBMITTED THAT IN PARA 3.7 OF THE ORDER OF THE LD AO , IT IS STATED THAT THERE IS NO IOTA OF EVIDENCE PLACED BY THE LD AO WHICH PAGE | 3 EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INC OME. EVEN OTHERWISE THE EXPENDITURE OF RS. 234213/ - MADE BY THE LD AO UNDER RULE 8D(2)(III) OF THE ACT IS NOT BASED ON ANY WORKING. HE EXTENSIVELY REFERRED TO HIS SUBMISSION BEFORE LD AO AND CIT (A). HE ALSO REFERRED TO THE DETAILS OF EXPENDITURE INCURRED BY THE ASSESSEE. HE OTHERWISE SUBMITTED THAT ASSESSEE HAS NOT INCURRED TOTAL EXPENDITURE OF THE SUM DISALLOWED BY THE LD AO AND CONFIRMED BY THE LD CIT (A). 6 . THE LD AR SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IN THE PRESENT CASE, THE ASSESSEE HAS SPECIFICALLY STATED THAT IT HAS NOT INCURRED ANY EXPENDITURE TO EARN EXEMPT INCOME. THE ASSESSEE FURTHER SUBMITTED BEFORE THE LD AO THE DETAILS OF EACH A ND EVERY EXPENDITURE OUT OF RS. 1118354/ - WHICH HAS BEEN DEBITED IN THE BOOKS OF ACCOUNT. THE NATURE OF EXPENDITURE SHOWN BY THE ASSESSEE IN THE INCOME AND EXPENDITURE CLEARLY SHOWS THAT THE MAJOR EXPENDITURE IS OF DONATION OF RS. 801000/ - AND DEPRECATION OF RS. 1,99,694/ - . ALL OTHER EXPENDITURE IN THE FORM OF INSURANCE, BOOKS, AUDIT FEES, SUBSCRIPTION AND TELEPHONE ETC , EACH OF THEM BEING LESS THAN RS. 20000/ - WAS CLAIMED. THE LD AO WITHOUT POINTING OUT ANY INSTANCE OF EXPENDITURE INCURRED BY THE ASSESSEE WITH REGARD TO BOOKS OF ACCOUNT OF THE ASSESSEE , ADOPTED THE DISALLOWANCE COMPUTATION U/R 8D OF THE IT RULES. LD AO COULD NOT SHOW THAT ANY OF THE EXPENDITURE IS INCURRED FOR EARNING EXEMPT INCOME. PARA 3.7 OF THE AO IS MERELY A BALD SATISFACTION OF GENERAL EXPENSES WHICH BY NO STRETCH OF IMAGINATION CAN BE SAID TO A PROPER SATISFACTION IN TERMS OF SECTION 14 A (2) OF THE ACT. FURTHER THE DONATION EXPENSES OF RS 801000/ - IS NOT AN ALLOWABLE EXPENSES SO NO DISALLOWANCE CAN BE MADE OUT OF IT. . THE DEPRECIATION OF RS. 199694/ - CANNOT BE HELD TO BE AN EXPENDITURE BUT A CLAIM OF DEPRECIATION , HENCE, IN VIEW OF THE DECISION OF THE SPECIAL BENCH [ 137 ITD 189 ] SAME CANNOT BE CONSIDERED FOR DISALLOWA NCE U/S 14A AND RULE 8D. ALL OTHER EXPENDITURE ARE FOR SPECIFIC PURPOSES , SUCH AS BOOKS, STATIONERY, AUDIT FEES ETC. IN VIEW OF THE ABOVE FACTS, IT IS APPARENT T HAT CLAIM OF THE ASSESSEE THAT HE HAS NOT INCUR RED ANY EXPENDITURE FOR EARNING EXEMPT INCO ME IS CORRECT. THE LD AO DID NOT DISPUTE THIS FACT BUT APPLIED THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES, 1962. IN VIEW OF PAGE | 4 THIS, THE SATISFACTION IN PARA NO. 3.7 IS NOT THE PROPER SATISFACTION RECORDED BY THE LD AO FOR INVOKING RULE 8D. FURTHER, THE LD CIT (A) ALSO DID NOT APPRECIATE THIS ARGUMENT IN PROPER PERSPECTIVE AND ERRONEOUSLY HELD THAT LD AO HAS CORRECTLY RECORDED THE SATISFACTION. FURTHER LD CIT (A) HAS ALSO CONFIRMED THE ADDITION M ERELY BECAUSE THE ASSESSEE HAS ACCEPTED THE ORDER OF THE LD CIT (A) FOR EARLIER YEARS . ACCORDING TO US MERELY ON THIS BASIS, DISALLOWANCE CANNOT BE CONFIRMED IN TH IS YEAR . THERE MAY BE INNUMERABLE REASON S WITH THE ASSESSEE TO NOT TO AGITATE AN ISSUE IN ONE YEAR BUT TO AGITATE IT IN ANOTHER YEAR. MERELY THAT CANNOT BE A GROUND TO CONFIRM THE DISALLOWANCE. ACCORDINGLY, WE DIRECT THE LD AO TO DELETE THE DISAL LOWANCE OF RS. 234213/ - MADE U/S 14A OF THE ACT READ WITH RULE 8D AND CONFIRMED BY THE LD CIT(A). A CCORDINGLY, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW GROUND NO. 1 OF THE APPEAL ALONG WITH ITS SUB GROUNDS. 8 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 / 09 / 2019 . - SD/ - - SD/ - ( BHAVNESH SAINI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 8 / 09 / 2019 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI