ASHOK LILADHAR SHAH, MUMBAI V. ACIT 18(2), MUMBAI

ITA 2985/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2746 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NEHA PARANJPE SHRI
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Revised return
• Section: 234B; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.2985/MUM/2013 ( %' ( / ASSESSMENT YEAR: 2009-10) SHRI ASHOK LILADHAR SHAH 29, IDEAL INDUSTRIAL ESTATE, LOWER PAREL, MUMBAI - 400013 ' / VS. ASSISTANT COMMISSIONER OF INCOME TAX 18(2) ROOM NO.115, 1 ST FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400012 ./ ./ PAN/GIR NO. : AMNPS2327M. ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 11.05.2016 !' /DATE OF PRONOUNCEMENT:23.09.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 04.01.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 29, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2009-10. ASSESSEE BY: SHRI K. GOPAL AND MS. NEHA PARANJPE DEPARTMENT BY: SHRI R.P.RASTOGI ITA NO.2985/M/2013 A.Y. 2009-10 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-29 , MUMBAI [HEREINAFTER REFERRED TO AS LD. CIT(A)] ER RED IN PASSING THE ORDER DATED 04.01.2013 UNDER SECTION 25 0 OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO A S OF THE ACT] CONFIRMING THE ACTION OF THE A.O. IN MAKI NG FOLLOWING ADDITIONS AND DISALLOWANCES WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E: SR. NO. PARTICULARS AMOUNT ( ) A DISALLOWANCE OF UNDER SECTION 14A 1,32,944/- B ADDITION OF INCOME FROM OTHER SOURCES 49,71,900/- A. DISALLOWANCE OF UNDER SECTION 14A - 1,32,944/- 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. A.O. IN MAKING DISALLOWANCE OF 1,32,944/- UNDER SECTION 14A OF THE ACT BY INVOKING THE PROVISIONS OF RULE 8D OF INCOME TAX RULES, 1962. THE APPELLANT, THEREFORE, PRAYS T HAT DISALLOWANCE OF 1,32,944/- UNDER SECTION 14A R.W.RULE 8D IS NOT JUSTIFIED AND HENCE, THE SAME MAY BE DELE TED. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE LD. A.O. HAS NOT GIVEN ANY REASONS WHY HE CONSIDERS THAT APPELLA NT HAS INCURRED EXPENDITURE TO EARN EXEMPT INCOME OVER AND ABOVE 2,65,068/-. THUS, THE PROVISION OF RULES 8D ARE NOT APPLICABLE. HENCE, THE DISALLOWANCE OF RS.1,32 ,944/- IS NOT JUSTIFIED. 4. THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THAT THE APPELLANT HAS INCURRED 2,65,068 AS EXPENDITURE WITH RESPECT TO THE EXEMPT INCOME AND DISALLOWED THE SAM E IN HIS RETURNS. THEREFORE, DISALLOWANCE OF 1,32,944/- IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE DELETED. B. ADDITION OF INCOME FROM OTHER SOURCES - 49,71,900/- 5. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN ADDITION OF 49,71,900/-. THE APPELLANT, THEREFORE, PRAYS THAT ITA NO.2985/M/2013 A.Y. 2009-10 3 THE ADDITION OF 49,71,900/- IS NOT AT ALL JUSTIFIED AND HENCE, THE SAME MAY BE DELETED. 6. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SHO RT TERM CAPITAL GAINS ON ACCOUNT OF TRANSFER OF DEPRECIABLE ASSET A RE NOT TENABLE AS THE BLOCK OF ASSET CONTINUES TO EXIST IN THE BOOKS OF THE APPELLANT. THUS, ADDITION OF 49,71,900/- IS NOT JUSTIFIED. C. LEVY OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT NOT JUSTIFIED 7. THE APPELLANT DENIES ANY LIABILITY TO PAY INTERE ST UNDER SECTION 234A, 234B AND 234C OF THE ACT. HENCE, THE SAME AR E NOT LEVIABLE. 3. THE BRIEF FACTS OF THE CASE ARE THE AT THE ASSES SEE FILED HIS RETURN OF INCOME FOR THE A.Y.2009-10 ON 16.09.2009 DECLARI NG TOTAL INCOME TO THE TUNE OF RS.49,37,912/-. THE RETURN WAS PROC ESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). TH EREAFTER, THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICE U /S.143(2) DATED 18.08.2010 WAS ISSUED AND SERVED UPON THE ASSESSEE. FURTHER, NOTICE U/S.142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSING OFFICER ASSESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME TO THE TUNE OF RS.3,98,012/- WHEREAS THE ASSESSEE DISALLOWED THE EXPENDITURE TO THE TUNE OF RS 2,65,068 AND ADDED THE DIFFERENCE TO THE TUNE OF RS 1,32,944 TO THE INCOME OF ASSESSEE AND ALSO ASSESSED THE INCOME FROM OTHER SO URCES ON ACCOUNT OF SALE OF PIECE OF LAND BY THE ASSESSEE BUT THE AS SESSEE WAS NOT SATISFIED, THEREFORE AN APPEAL WAS FILED BEFORE CIT (A) WHO CONFIRMED ITA NO.2985/M/2013 A.Y. 2009-10 4 THE ORDER OF THE ASSESSING OFFICER, THEREFORE THE A SSESSEE FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 TO 4:- 4. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF EXPENDITURE TO THE TUNE OF R.1,32,944/-. IT IS NEC ESSARY TO ADVERT THE FINDING OF THE ASSESSING OFFICER IN THIS REGARD ON RECORD:- 6. DISALLOWANCE U/S.14A : ON PERUSAL OF RECORDS, IT IS SEEN THAT THE ASSESSEE HAS EARNED THE FOLLOWING EXEMPT INCOME FROM THE INVESTM ENTS:- (1) SHARE OF PROFIT 10(2) ASHOK L. SHAH : 8,931/- (2) -DO- - FIRST FASHION : 6,91,969/- (3) LONG TERM CAPITAL GAIN : 3,33,594/- (4) DIVIDEND ON SHARES : 5,489/- (5) DIVIDEND ON MUTUAL FUND : 11,24,415/- (6) PPF INTEREST : 6,20,544/- TOTAL : 27,85,042/- THE CIT(A) HAS CONFIRMED THE SAID ORDER. THE CONTE NTION OF THE ASSESSEE IS THAT THE RULE 8D OF THE ACT IS NOT APPL ICABLE TO THE FACTS OF THE CASE BECAUSE THE ASSESSEE HIMSELF HAS DISALLOWE D THE EXPENDITURE TO THE TUNE OF RS.2,65,068/- TO EARN THE EXEMPT INC OME. NO BIFURCATION OF THE EXPENSES IS ON RECORD. IF THE B IFURCATION OF THE EXPENSES TO EARN THE EXEMPT INCOME IS NOT ON RECOR D THEREFORE IT IS QUITE CLEAR THAT THE EXPENSES WOULD BE ALLOWED IN V IEW OF THE OTHER ITA NO.2985/M/2013 A.Y. 2009-10 5 PROVISIONS OF THE SECTION 14A READ WITH RULE 8D OF THE ACT. ON APPRAISAL OF THE ORDER PASSED BY THE ASSESSING OFFI CER WE FOUND NOTHING AMBIGUITY FOR THE APPLICATION OF THE RULE 8 D OF THE ACT FOR CALCULATION OF THE EXPENSES TO EARN THE EXEMPT INCO ME. THE ASSESSING OFFICER HAS ASSESSED THE EXPENDITURE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN NO SPECIFIC EXPEN DITURE HAS BEEN SHOWN TO BE EXPLAINED TO EARN EXEMPT INCOME. THERE FORE, IN THE SAID CIRCUMSTANCES THE CIT(A) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE WHICH DOES NOT REQU IRE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ISSUE NO.5 & 6:- 5. THE ASSESSEE HAS CHALLENGED THE ADDITION OF INCO ME FROM OTHER SOURCES TO THE TUNE OF RS.49,71,900/-. BEFORE GOIN G FURTHER IT IS NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON TH IS ISSUE ON RECORD:- 6. I HAVE CONSIDERED THE FACTS OF THE CASE, FINDING S IN ASSESSMENT ORDER AND SUBMISSION MADE DURING APPELLA TE PROCEEDINGS. THE CONTENTION OF THE APPELLANT CANNO T BE ACCEPTED FOR THE FOLLOWING REASONS:- (I) APPELLANTS CLAIM THAT AS PER PARTNERSHIP DEED DATED 01.12.1996, THE RIGHT AND OWNERSHIP OF THE INDUSTRIAL GALA BELONG TO THE APPELLANT CANNOT BE ACCEPTED FOR THE SIMPLE REASON THAT THIS ASSET HAS ITA NO.2985/M/2013 A.Y. 2009-10 6 BEEN CONSTANTLY SHOWN BY THE FIRM, M/S. ASHOK L. SHAH IN THE BALANCE SHEET FILED FROM A.Y.1996-97. (II) THERE WAS NO TRANSFER OF THIS ASSET IN THE BOO KS OF THE FIRM. (III) THE FIRM HAS BEEN SHOWING THIS ASSET REGULARL Y IN ITS BALANCE SHEET AND HAS ALSO BEEN CLAIMING DEPRECIATION THEREON. (IV) EVEN THE REGISTRATION OF THE PROPERTY HAS BEEN DONE IN THE NAME OF FIRM, M/S.ASHOK L. SHAH AND NOT IN THE NAME OF THE INDIVIDUAL I.E., ASHOK L. SHAH. (V) THE OWNERSHIP OF IMMOVABLE PROPERTIES CANNOT BE TRANSFERRED BY ANY INTERNAL AGREEMENT BETWEEN THE PARTNERS. THERE HAS TO BE REGISTERED LEGAL AGREEMENT FOR TRANSFER OF ASSET. (VI) NOBODY CAN CLAIM OWNERSHIP BY INSERTING A CLAU SE TO THAT EFFECT IN THE PARTNERSHIP DEED. THE SANCTI TY OF A LEGAL DOCUMENT CANNOT BE CHALLENGED BY ANY INTERNAL FAMILY ARRANGEMENT. (VII) THE CAPITAL GAIN CAN ARISE ONLY WHEN THE CAPI TAL ASSET OWNED BY THE ASSESSEE IS TRANSFERRED. WHEN THE ASSET ITSELF IS NOT OWNED BY THE APPELLANT, THE ITA NO.2985/M/2013 A.Y. 2009-10 7 QUESTION OF CAPITAL GAINS IN THE HAND OF THE APPELLANT DOES NOT ARISE. THE ABOVE FACTS CLEARLY PROVE THAT THE ASSET BELONG TO THE FIRM AND NOT TO THE APPELLANT. THEREFORE, THE CAP ITAL GAIN CANNOT BE ASSESSED IN THE HAND OF THE APPELLANT. HOWEVER, SINCE THE AMOUNT HAS BEEN CREDITED IN THE BOOKS OF THE APPELLANT, THIS IS UNDOUBTEDLY INCOME IN HIS HANDS. IT IS NOT A CASE WHERE CAPITAL GAIN IS OFFE RED IN THE HANDS OF THE FIRM BY FILING A REVISED RETURN. THUS , IT IS NOT A CASE OF DOUBLE TAXATION. THE GAIN/INCOME HAS TO BE TAXED AT SOME PLACE EITHER IN THE CASE OF FIRM OR IN THE CASE OF APPELLANT. AS NO INCOME HAS BEEN OFFERED I N CASE OF FIRM M/S.ASHOK L .SHAH, THIS INCOME IS RIGHTLY T AXED BY THE ASSESSING OFFICER IN THE HANDS OF THE APPELL ANT AS INCOME FROM OTHER SOURCES. THUS, THE ACTION OF T HE ASSESSING OFFICER IS UPHELD. THIS GROUND IS DISMI SSED. 6. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSES SEE IS THE OWNER OF THE PROPERTY AND THE SAID PROPERTY NEVER BECOME THE PROPERTY OF THE FIRM M/S.ASHOK L. SHAH AND ACCORDING TO THE AGREEME NT OF THE PARTNERSHIP, IT IS ALSO APPARENT ON RECORD THAT THE SAID PROPERTY WOULD NEVER BECAME PART OF THE PARTNERSHIP FIRM OF M/S. A SHOK L. SHAH. THEREFORE, IN THE SAID CIRCUMSTANCES THE OWNERSHIP OF THE PROPERTY LIES WITH THE ASSESSEE AND THE SALE OF THE SAID PROPERTY IS LIABLE TO BE ITA NO.2985/M/2013 A.Y. 2009-10 8 ASSESSED AS LONG TERM CAPITAL GAIN. THEREFORE, IN THE SAID CIRCUMSTANCES THE ORDER PASSED BY THE CIT(A) IS WRO NG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. HOWEVER TH E LD REPRESENTATIVE OF THE DEPARTMENT REFUTED THE SAID CONTENTION. THE ORDER PASSED BY THE CIT(A) SPEAKS ABOUT THIS FACTS THAT THE SAID LAND W AS BELONGING TO THE FIRM M/S. ASHOK L. SHAH WHICH CANNOT BE TREATED AS THE PROPERTY OF THE ASSESSEE, THEREFORE ON ACCOUNT OF THE SALE, THE PROCEED WAS ASSESSED AS INCOME FROM OTHER SOURCES ON THE PART OF THE ASSESSEE I.E. RS.49,71,900/-. NO DOUBT THE CIT(A) HAS GIVEN THE SOME REASONS WHICH HAS BEEN REPRODUCED ABOVE BUT IT IS REQUIRED TO BE SEEN THAT THE PROPERTY SOLD BY THE ASSESSEE IS BELONGING TO THE P ARTNERSHIP FIRM M/S. ASHOK L. SHAH OR NOT. THE AGREEMENT ON RECORD SPEA KS ABOUT THIS FACTS THAT THE PROPERTY WAS GIVEN FOR THE PURPOSE O F THE FIRM BUT THE OTHER PARTNERS HAVE NO RIGHT OF ANY KIND ON THIS PR OPERTY. THE CIT(A) HAS RAISED THE ISSUE WITH REGARD TO THE OWNERSHIP O F THE PROPERTY AND HELD THAT THE PROPERTY WAS OWNED BY THE FIRM THEREF ORE, ON ACCOUNT OF THE SALE OF THE SAID PROPERTY THE CIT(A) HAS TREATE D THE SALE PROCEED AS INCOME FROM OTHER SOURCES. ANYHOW, THIS ISSUE HAS NOT BEEN PROPERLY ADJUDICATED ON THE BASIS OF THE OWNERSHIP OF THE PR OPERTY. UTILIZATION OF LAND AND SALE OF LAND IS QUITE DIFFERENT. ACCORD INGLY THE INCOME OF ASSESSEE IS REQUIRED TO BE ASSESSED. IT IS NOT A CA SE OF DOUBLE TAXATION WHEN THE INCOME OF THE ASSESSEE WAS ASSESSED ON THE BASIS OF UTILIZATION AND SALE OF LAND. SINCE THE MATTER OF CONTROVERSY HAS NOT BEEN ADJUDICATED BY THE CIT(A) ON THE BASIS TITLE, THEREFORE, WE SET ITA NO.2985/M/2013 A.Y. 2009-10 9 ASIDE THE FINDING OF THE CIT(A) IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH IN VIEW OF THE SAID OBSERVATIONS AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE A SSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY, THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE . ISSUE NO.7:- 7. THIS ISSUE IS CONSEQUENTIAL THEREFORE THERE IS N O NEED NOT BE DECIDE THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 23 RD SEPTEMBER, 2016 MP MP MP MP * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI