GIRDHARILAL AGRAWAL, MUMBAI V. ASST CIT RG 12(3), MUMBAI

ITA 2979/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0484 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 23-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Earning of tax free income; Source of fund; Proportionate interest
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 2979 / MUM/ 201 5 ( / ASSESSMENT YEAR: 2006 - 07 ) SHRI GIRDHARILAL AGRAWAL, 302, VIKAS BUILDING 11, BANK STREET FORT, MUMBAI - 400001 VS. THE ASSISTANT COMMISSIONER OF INCOME TAX RANGE 12(3), ROOM NO. 435, 4 TH FLOOR, AAYAKAR BHAVAN, M.K . ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AABPA 1275 E ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : NONE /REVENUE BY : MS. ARJU GARO DIA (DR) / DATE OF H EARING : 23/05 /2017 / DATE OF PRONOUNCEMENT : 31 /05 /2017 / O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST ORDER DATED 06/02/2015 PASSED BY THE LD. CIT (A), 28 , MUMBA I PERTAI NI NG TO THE ASSESSMENT YEAR 2006 - 07 , WHEREBY THE LD. CIT (A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATED 26/03/2013 PASSED U/S 143 (3) READ WITH SECTION 254 OF THE INCOME TAX ACT, 1961 ( FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A SOLE PROPRIETOR CARRYING ON THE BUSINESS OF TRADING IN STEEL BARS AND STRUCTURED STEELS IN THE NAME OF M/S GIRDHARILAL AGRAWAL & COMPANY, STOCKIEST FOR MAJOR STEEL PRODUCTS AND HAVING FINANCE DIVISION IN THE NAME OF M/S 2 ITA NO. 2979/MUM/2015 ASSESSMENT YEAR: 2006 - 07 GL CONSULTANTS , FILED ITS RETURN OF INCOME FOR THE A.Y. 2006 - 07 DECLARING THE TOTAL INCOME OF RS. 13,44,73,126/ - . THE ASSESSMENT U/S 143 (3) WAS COMPLETED AFTER MAKING DISALLOWANCE OF RS. 23,33,698/ - U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES. IN A PPEAL, THE CIT(A) UPHELD THE ADDITION AGAINST WHICH THE ASSESSEE FILED SECOND APPEAL BEFORE THE ITAT. THE ITAT AFTER HEARING THE ASSESSEE SET ASIDE THE MATTER BACK TO THE AO TO FIND OUT REASONABLE METHOD OF DISALLOWANCE U/S 14A SINCE RULE 8D WAS APPLICABLE ONLY FROM THE A.Y. 2008 - 09. ACCORDINGLY, THE AO PASSED THE ASSESSMENT ORDER AND RESTRICTED THE DISALLOWANCE U/S 14A AT RS. 9,80,425/ - . THE ASSESSEE CHALLENGED THE ORDER HOWEVER , THE LD. CIT (A) DISMISSED THE APPEAL HOLDING THAT THE ORDER PASSED U/S 143 (3 ) R.W.S. 254 HAS BEEN PASSED BY THE AO IN ACCORDANCE WITH THE DIRECTION S OF THE ITAT. AGAINST THE SAID ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE PROPORTIONATE INTEREST DISALLOWANCE OF RS. 9,80,425/ - U/S. 14A OF THE INCOME - TAX ACT, 1961. YOUR APPELLANT SUBMITS THAT THE SAID DISALLOWANCE IS NOT WARRANTED AND THAT THE SAME BE DELETED. WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLA NT SUBMITS THAT THE DISALLOWANCE IS EXCESSIVE AND THE SAME IS REQUIRED TO BE REDUCED SUBSTANTIALLY. 2. YOUR APPELLANT FURTHER RESERVES THE RIGHTS TO ADD, AMEND OR ALTER THE AFORESAID GROUNDS OF APPEAL AS THEY MAY THINK FIT BY THEMSELVES OR BY THEIR REPRESENT ATIVES. 3. THIS CASE W AS FIXED FOR HEARING FOR TODAY. H OWEVER, WHEN THE CASE WAS CALLED FOR HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE . WE NOTICE THAT SINCE THE REGISTRATION OF THIS APPEAL THE ASSESSE E NEVER 3 ITA NO. 2979/MUM/2015 ASSESSMENT YEAR: 2006 - 07 APPEARED BEFORE THE TRIBUNAL. THREE SUC CESSIVE NOTICES SENT THROUGH RPAD HAVE RETURNED BACK UNDELIVERED AS THE ASSESSEE WAS NOT FOUND AT THE GIVEN ADDRESS. WE FURTHER OBSERVED THAT THE NOTICES WERE SENT ON THE ADDRESS MENTIONED IN FORM 36 OF THE MEMORANDUM OF APPEAL. HENCE WE ARE CONVINCED THAT NO FRUITFUL PURPOSE WOULD BE SERVED IN CASE FRESH NOTICE IS SENT TO THE ASSESSEE. ACCORDINGLY , WE DECIDED TO DISPOSE OF THE APPEAL ON THE BASIS OF MATERIAL ON RECORD AFTER HEARING THE DEPARTMENTAL REPRESENTATIVE. ACCORDINGLY , WE ASKED THE DEPARTMENTAL REP RESENTATIVE TO ARGUE ITS CASE. 4. THE LD. D EPARTMENTAL REPRESENTATIVE RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW SUBMITTED THAT THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO AND THERE IS NO MERIT IN THE ASSESSEES APPEAL. 5. WE HAVE PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE AO HAS PASSED THE ORDER U/S 143(3) R.W.S. 254 IN ACCORDANCE WITH THE DIRECTIONS OF THE CO - ORDINATE BENCH. THE AO HAS CALCULATED THE PROPORTIONATE INTEREST DISALLOWANCE ON THE BASIS OF E VIDENCE ON RECORD. THE LD. CIT(A) HAS CONFIRMED THE SAME HOLDING THAT THE FUNDS OF THE ASSESSEE ARE MIXED AND THE ASSESSEE HAS FAILED TO DEMONSTRATE DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE STAGE THAT THE SOURCE OF FUNDS FOR THE INVESTMEN T WAS INTEREST FREE FUNDS IN THE FORM OF CAPITAL AND RESERVES . THE LD. CIT(A) HAS HELD THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH IT IN THE FORM OF CAPITAL AND RESERVES FOR MAKING INVESTMENTS FOR EAR NING EXEMPT INCOME. UNDER THESE CIRCUMSTANCES WE HAVE NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). 4 ITA NO. 2979/MUM/2015 ASSESSMENT YEAR: 2006 - 07 6. SINCE, NO EVIDENCE WAS BROUGHT TO OUR NOTICE TO ESTABLISH THAT THE IMPUGNED ORDER IS PERVERSE, WE ARE INCLINED TO AGREE WITH THE LD. C IT(A). HENCE, WE UPHOLD THE ORDER PASSED BY THE LD. CIT(A) AND DISMISS THE APPEAL OF THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 2007 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAY , 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 0 5 / 2017 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI