Smt. Sapnaben Jiteshkumar Patel, RAJKOT-GUJARAT V. The Assistant Commr. Income Tax,Cen.Cir-1, RAJKOT-GUJARAT

ITA 297/RJT/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2303 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH PANDEY
• Assessee Lawyers: HARISH RANPURA
• Keywords: Earning of tax free income; Proportionate interest
• Section: 143(3); 153A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER [CONDUCTED THROUGH E - C OURT AT AHMEDABAD] SMT. SAPNABEN JITESHKUMAR PATEL, 61, AMI APARTMENT, OPP. GIRNAR CINEMA, RAJKOT PAN: AAOPP4653 (APPELLANT) VS THE ACIT, CENTRAL CIRCL E - 1, RAJKOT (RESPONDENT) REVENUE BY : S H RI YOGESH PANDEY , D . R. ASSESSEE BY: S H RI HARISH RANPURA , A.R. DATE OF HEARING : 04 - 12 - 2 015 DATE OF PRONOUNCEMENT : 10 - 02 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THE ASSESEEE HAS FILED INSTANT BATCH OF SIX APPEALS FOR A.Y. 2006 - 07 AND 2008 - 09 TO 2012 - 13 AGAINST DIFFERENT ORDERS OF THE CIT(A) - 11 , AHMEDABAD DATED 2 6 - 03 - 2015, 25 - 03 - 2015, 27 - 03 - 2015, I T A NO S . 294,295,296,297,298 & 299 / RJT /20 12 A Y 200 6 - 07 & 2008 - 09 TO 2012 - 13 I.T.A NO. 294 TO 299 /RJT /20 12 A.Y. 2006 - 07 & 20 0 8 - 09 TO 2012 - 13 PAGE NO SMT. SAPNABEN JITESHKUMAR PATEL VS. ACIT 2 13 - 03 - 201 5 (IN L AST THREE ASSESSMENT YEARS) IN APPEAL NO S . CIT(A) - 11/583 - R/CC.1/2014 - 15, CIT(A) - 11/585 - R/CC.1/2014 - 15, CIT(A) - 11/586 - R/CC.1/2014 - 15 , CIT(A) - 11/587 - R/CC.1/2014 - 15 , CIT(A) - 11/588 - R/CC.1/2014 - 15 AND CIT(A) - 11/589 - R/CC.1/2014 - 15 ; RESPECTIVELY. THE RELEVANT P ROCEEDINGS ARE U/S. 153A R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 IN SHORT THE ACT IN FIRST FIVE ASSESSMENT YEARS AND THAT U/S. 143(3) OF THE ACT IN THE LAST ASSESSMENT YEAR HEREINABOVE . 2. BOTH PARTIES FILE BEFORE US A TABULATION CHART OF THEIR RESPE CTIVE WRITTEN SUBMISSIONS AND COMPRISING OF THE RELEVANT ISSUES RAISED IN THIS BATCH OF SIX APPEALS IN THE COURSE OF HEARING. IT EMERGES THAT ASSESSEE S APPEALS ITAS 294 - 296/RJT/2015 RAISE S A LEGAL ISSUE OF VALIDITY OF INITIATION OF SECTION 153A PROCEEDING S. THE ASSESSEE S CASE IS THAT THE S AME ARE NOT INVOKABLE BY REVIEW ING OR REVISITING ASSESSMENTS ALREADY FINALIZED/COMPLETED U/S. 143(1) OF THE ACT. HIS CASE IS THAT SECOND PROVISO TO SECTION 153A CONTEMPLATES ABATEMENT OF ONLY PENDING ASSESSMENTS AND NOT T HE ONES HAVING ATTAINED FINALITY U/S. 143(3) OR 143(1) OF THE ACT. A CATENA OF CASE LAW IS ALSO QUOTED. THE REVENUE STRONGLY SUPPORTS THE LOWER APPELLATE FINDINGS. ITS CASE IS THAT THE ASSESSING OFFICER HAS RIGHTLY INVOKED THE IMPUGNED PROCEEDINGS AS UPH ELD IN THE LOWER APPELLATE ORDER. ITS ARGUMENTS FURTHER RELY UPON SOME JUDICIAL PRECEDENTS WHICH WOULD BE DISCUSSED HEREUNDER. I.T.A NO. 294 TO 299 /RJT /20 12 A.Y. 2006 - 07 & 20 0 8 - 09 TO 2012 - 13 PAGE NO SMT. SAPNABEN JITESHKUMAR PATEL VS. ACIT 3 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL CONTENTIONS. THE ASSESSEE - INDIVIDUAL DERIVES INCOME FROM PROFITS OF A F IRM, CAPITAL GAINS AND OTHER SOURCES. THE DEPARTMENT CARRIED OUT A SEARCH ACTION AT HIS PREMISES ON 08 - 09 - 2011. THIS CULMINATED AN ISSUANCE OF SECTION 153A NOTICE DATED 12 - 06 - 2012. WE TREAT ITA 294/RJT/2015 AS THE LEAD CASE IN ABSENCE OF ANY DISTINCTI ON ON FACTS BEING POINTED OUT. THE ASSESSEE FILED HIS RETURN ON 29 - 01 - 2013 SHOWING TOTAL INCOME OF RS. 10,04,480/ - . THE ASSESSING OFFICER FRAMED AS SEARCH ASSESSMENT ON 31 - 01 - 2014 MAKING SECTION 14A DISALLOWANCE OF RS. 1,01,796/ - BY APPLYING RULE 8D OF T HE INCOME TAX RULES AS RELATING TO EXEMPT INCOME OF RS. 2,57,781/ - . 4. THE ASSESSEE PREFERRED APPEAL. HE WOULD ARGUE THAT NO EXPENSES QUA EARNING OF THE ABOVE STATED EXEMPT INCOME HAD BEEN DEBITED IN HI S BOOKS OF ACCOUNTS. THE CIT(A ) REJECTS THE SAME QUOTING LACK OF SUBSTANTIVE EVIDENCE. THIS LEAVES THE ASSESSEE AGGRIEVED. 5. WE HAVE HEARD BOTH THE PARTIES. WE COME TO ASSESSEE S LEGAL ARGUMENT FIRST THAT THE AUTHORITIES BELOW OUGHT NOT TO HAVE INVOKED SECTION 153A PROCEEDINGS IN ABSENCE OF ANY IN CRIMINATING MATERIAL THEREBY TREATING THE ASSESSMENTS ALREADY FRAMED U/S. 143(1) AND 143(3) TO HAVE BEEN ABATED. WE FIND THAT NEITHER OF THESE THREE CASE FILE S PLACED ON RECORD ANY SUCH E VIDENCE THAT ASSESSEE HAD EARLIER FILED ANY RETURN U/S. 139(1) OR THAT LEA DING TO FRAMING OF ANY SUMMARY OR REGULAR ASSESSMENT. THE ASSESSEE RELIES UPON CASE LAW OF CIT VS. I.T.A NO. 294 TO 299 /RJT /20 12 A.Y. 2006 - 07 & 20 0 8 - 09 TO 2012 - 13 PAGE NO SMT. SAPNABEN JITESHKUMAR PATEL VS. ACIT 4 MGF AUTOMOBILES LTD (2015) 63 TAXMANN.COM 137 (DEL), CIT VS. KABUL CHAWLA IN (2015) 61 TAXMANN.COM 412 (DEL), CIT - II VS. CONTINENTAL WAREHOUSING CORP. LTD ( 2015) 58 TAXMANN.CM 78, CIT VS. JAYABEN RATILAL SORATHIA IN TAX APPEAL NO. 914 OF 2012(GUJ) , ALL CARGO GLOBAL LOGISTIC LTD. VS. DCI T (2012) 23 TAXMANN.COM 103 (MUM), SANJAY AGARWAL VS. DCIT (2014) 47 TAXMANN.COM 210 AND ITAT AHMEDABAD BENCH D IN THE CA SE OF SAUMYA CONSTRUCTION PVT. LTD VS. ACIT CENTRAL CIRCLE - 1(3), AHMEDABAD IN ITA NO. 3/AHD/2014 . THE REVENUE QUOTES CASE LAW OF (2014) 367 ITR 0517 (ALL) IN THE CASE OF CIT RAJ KUMAR ARORA, (2012) 346 ITR 016 (AP) IN THE CASE OF GOPAL LAL BHADRUKA V. DCI T AND (200 0) 362 ITR 0664 (KER) IN THE SAME OF SUNNY JACOB JEWELLERS & WEDDING CENTRE VS. DCIT. HAVING HEARD BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE ASSESSEE S ARGUMENTS ARE DEVOID OF MERITS. NONE O F THE ABOVE STATED CASE LAW QUOT ED DEALS WITH SU CH A PROPOSITION THAT SECOND PROVISO TO SECTION 153A APPLIES EVEN CASE OF NOT FILING OF A RETURN AND NOR THAT OF FRAMING OF ANY ASSESSMENT. WE ARE OF THE VIEW IN THESE FACTS AND CIRCUMSTANCES THAT NON OBSTANTE CLAUSE IN SECTION 153A IS VERY MUCH APPLICABL E IN FACTS OF THE INSTANT CASE. WE REJECT ASSESSEE S LEGAL ARGUMENTS IN ALL THESE THREE APPEALS ITAS 294, 295, AND 296/RJT/2015. 6 . WE PROCEED TO DEAL WITH ASSESSEE S GROUNDS PLEADED ON MERITS THEREIN. HE SEEMS TO HAVE DECLARED EXEMPT INCOME OF RS. 2, 57,781/ - IN ASSESSMENT YEAR 2006 - 07 WITHOUT DEBITING ANY EXPENDITURE AGAINST THE SAME. THE ASSESSEE S INTEREST CLAIM IN THE IMPUGNED ASSESSMENT I.T.A NO. 294 TO 299 /RJT /20 12 A.Y. 2006 - 07 & 20 0 8 - 09 TO 2012 - 13 PAGE NO SMT. SAPNABEN JITESHKUMAR PATEL VS. ACIT 5 YEAR ON THE OTHER HAND WAS OF RS. 4,14,990/ - AND LEGAL FEES OF RS. 2,000/ - . WE FIND FROM ASSESSMENT ORDER THAT THE ASSESSING OFFICER SIMPLY OBSERVED THAT SECTION 14A PROVISIONS ARE VERY MUCH APPLICABLE IN THIS CASE. HE THEREAFTER COMPUTED THE IMPUGNED DISALLOWANCE OF RS. 1,01,796/ - BY INVOKING RULE 8D OF THE INCOME TAX RULES. THE CIT(A) AFFIRMS THE SAID ACTION. 7 . HEARD RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT THE ASSESSING OFFICER NOWHERE REJECTS ASSESSEE S BOOKS OF ACCOUNT BEFORE BRINGING TO OPERATION DISALLOWING PROVISION U/S. 14A IN QUESTION . THERE IS FURTHER NO ISSUE THAT RULE 8D (SUPRA) APPLIES ONLY FROM ASSESSMENT YEAR 2008 - 09 AND NOT IN THE IMPUGNED ASSESSMENT YEAR 2006 - 07 AS HELD BY HON BLE BOMBAY HIGH COURT IN CASE OF GODREJ AND BOYC COM. LTD VS. DCIT 328 ITR 81. WE FURTHER TAKE NOTICE OF HON BLE DELHI HIGH COURT DECISION IN MAXOPP INVESTMENT LTD & OTHERS VS. CIT 247 CTR 162 IN HOLDING THAT AN ASSESSING OFFICER HAS TO RECORD A SATISFACTION ABOUT CORRECTNESS OF ASSESSEE S CLAIM IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FALL PART OF THE TOTAL INCOME. THE REVENUE FAILS TO P OINT OUT ANY EXCEPTION THERE TO. WE HOLD IN THESE CIRCUMSTANCES THAT THE IMPUGNED SECTION 14A DISALLOWANCE OF RS. 1,01,796/ - DESERVES TO BE DELETED. ORDERED ACCORDINGLY. ITA 294/RJT/2015 IS PARTLY ALLOWED ON MERITS. 8 . WE COME TO ITA 295/RJT/2015 CHA LLENGING SECTION 14A R.W. RULE 8D DISALLOWANCE OF RS. 2, 12,088/ - IN RELATION TO ASSESSEE S EXEMPT INCOME OF RS. 3,61,069/ - . THE ASSESSEE HAD NOT CLAIMED ANY I.T.A NO. 294 TO 299 /RJT /20 12 A.Y. 2006 - 07 & 20 0 8 - 09 TO 2012 - 13 PAGE NO SMT. SAPNABEN JITESHKUMAR PATEL VS. ACIT 6 CORRESPONDING EXPENDITURE IN THIS ASSESSMENT YEAR AS WELL. THERE IS NO DISPUTE THAT THE ASSESSIN G OFFICER INVOKED RULE 8D TO COMPUTE THE DISALLOWANCE IN QUESTION WHICH IS OTHERWISE APPLICABLE W.E.F. IMPUGNED ASSESSMENT YEAR. IT EMERGES THAT THE ASSESSING OFFICER NOWHERE RECORDED ANY SATISFACTION SO FAR AS RELEVANT BOOKS OF ACCOUNT ARE CONCERNED. WE DRAW SUPPORT FROM OUR CORRESPONDING FINDING ON THIS ISSUE IN PRECEDING ASSESSMENT YEAR AND HOLD THAT BOTH THE LOWE R AUTHORITIES HAVE ERRED IN MAKING THE IMPUGNED DISALLOWANCE OF RS. 2,12,088/ - IN QUESTION . THE SAME STANDS DELETED. ITA 295/RJT/2015 IS PA RTLY ALLOWED ON MERITS. 9 . NEXT IS ASSESSEE S APPEAL ITA 296/RJT/2015 RAISING A SOLITARY ISSUE OF SECTION 14A R.W. RULE 8D DISALLOWANCE OF RS. 2,66,393/ - IN RELATION TO HIS EXEMPT INCOME OF RS. 2,99,174/ - . IT IS TO BE SEEN THAT THE ASSESSING OFFICER S FINDINGS NOWHERE SPECIFICALLY ADVERT TO ASSESSEE S BOOKS AS INDICATED IN PRECEDING ASSESSMENT YEARS SO AS TO RECORD A SATISFACTION STIPULATED U/S. 14A(2) OF THE ACT. WE ACCORDINGLY FOLLOW OUR DISCUSSION HEREINABOVE ON THE VERY ISSUE AND DELETE THE IMPUGNE D DISALLOWANCE. ITA 296/RJT/2015 IS PARTLY ACCEPTED ON MERITS. 10 . NEXT THREE ASSESSMENT YE A RS 2010 - 11 TO 2012 - 13 COMPRIS E OF ASSESSEE S APPE ALS ITA NOS. 297 TO 299 /RJT/2015 RAISE SOLITARY SUBSTANTIVE GROUND IN CHALLENGING DISALLOWANCES MADE U/S. 14A R.W. RULE 8D OF RS. 2,54,675/ - , RS. 3,86,617/ - AND RS. 4,46,480/ - ; RESPECTIVELY MADE BY THE ASSESSING OFFICER AS AFFIRMED IN CIT(A) S I.T.A NO. 294 TO 299 /RJT /20 12 A.Y. 2006 - 07 & 20 0 8 - 09 TO 2012 - 13 PAGE NO SMT. SAPNABEN JITESHKUMAR PATEL VS. ACIT 7 ORDERS UNDER CHALLENGE. IT IS TO BE SEEN THAT THE ASSESSEE HAD SHOWN EXEMPT INCOMES THEREIN INCLUDING PPF INTEREST OF RS. 2,88,432/ - , RS. 3,20,373/ - AND RS. 3,59,460/ - ACCRUED ON ACCUMULATED FUNDS STATED TO HAVE BEEN INVESTED IN PRECEDING ASSESSMENT YEARS. THE ASSESSEE FILES A CHART BEFORE US . THE REVENUE IS FAIR ENOUGH IN NOT DISPUTING CORRECTNESS THEREOF. IT IS TO BE S EEN THAT THE ASSESSEE HAD CLAIMED INTEREST EXPENSES INTER ALIA AMOUNTING TO RS. 11,51,596/ - , RS . 17,16,935/ - AND RS. 18,02,062/ - ;RESPECTIVELY. THE ASSESSING OFFICER APPLIED RULE 8D WITHOUT REJECTING ASSESSEE S SPECIFIC CONTENTION FOR HAVING INCURRED ANY E XPENDITURE. THIS RESULTED IN PROPORTIONATE INTEREST DISALLOWANCE IN QUESTION. 11 . WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE STRONGLY ARGUED HER GROSS SURPLUS INTEREST INCOME IN THE THREE IMPUGNED ASSESSMENT YEAR ARE OF RS. 5,77,857/ - , RS. 1,36,957/ - AND RS. 9,03,735/ - . AND NON INTEREST BEARING CAPITAL AVAILABLE IS STATED TO BE OF RS. 79,30,908/ - , RS. 81,60,952/ - AND RS. 95,23,964/ - ; RESPECTIVELY. THE RE V EN UE IS UNABLE TO REBUT THIS FACTUAL POSITION. WE ARE OF THE VIEW IN THESE FACTS AND CIRCUMSTA NC ES A PRESUMPTION CAN SAFELY BE DRAWN THAT ALL THE ABOVE STATED INVESTMENTS HAVE BEEN MADE FROM SURPLUS NON - IN TERE ST BEARING FUND. HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE FERTILIZERS & CHEMICALS LTD (2013) 217 TAXMANN . 343 (GUJ) ALSO PROPOUNDS THE VERY PREPOSITION. WE DELETE THE IMPUGNED SECTION 14A R.W. RULE 8D DISALLOWANCES IN QUESTION ACCORDINGLY. THE ASSESSEE S THREE APPEALS I TAS 297 TO 299/RJT/2015 SUCCEED . I.T.A NO. 294 TO 299 /RJT /20 12 A.Y. 2006 - 07 & 20 0 8 - 09 TO 2012 - 13 PAGE NO SMT. SAPNABEN JITESHKUMAR PATEL VS. ACIT 8 12 . THE ASSESSEE S ITAS 294 - 296/RJT/2012 ARE PARTLY ALLOWED AND ITAS 297 - 299/RJT/2012 ARE ALLOWED . ORDER PR ONOUNCED IN THE OPEN C OUR T ON 10 - 02 - 201 6 SD/ - SD/ - (PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 10 /02 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT