ITO 1(1)(1), MUMBAI V. ASTOR CORPORATION P.LTD, MUMBAI

ITA 3075/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8881 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERAJ PRADHAN
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI B.RAMAKOTAIAH (ACCOUNTANT MEMBER) ITA NO.3075/MUM/2011 ASSESSMENT YEAR: 2007 -08 ITO 1(1)-1, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. M/S. ASTOR CORPORATION PVT LTD., KASTURI BUILDING, 171/172, J TATA ROAD, MUMBAI-20 PA NO.AAECA 0015G (APPELLANT) VS. (RESPONDENT) APPELLANT BY : MS NEERAJ PRADHAN RESPONDENT BY: NONE DATE OF HEARING: 21.8.2012 DATE OF PRONOUNCEMENT: 5. 9.2012 ORDER PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2007-08 AGAINST ORDER DATED 2.11.2010 OF LD CIT(A)-1, MUMBAI ON FOLLOWIN G GROUNDS 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, LD CIT(A) IS JUSTIFIED IN REJECTING THE AOS WORKING O F EXPENSES U/S.14A AS PER RULE 8D BY OBSERVING THAT JURISDICTIONAL HIGH C OURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD., HAS DECIDED THIS ISSUE THAT RULE 8D WILL BE APPLICABLE ONLY FROM A.Y. 2008-09 ONWARDS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF LOSS FROM SHARE TRADING BUSINESS AMOUNTING TO RS.3,93,339. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF LOSS F ROM FUTURE AND OPTIONS COMMODITY BUSINESS AMOUNTING TO RS.6,58,751. 2. NONE APPEARED ON BEHALF OF ASSESSEE IN SPITE OF NOTICE SERVED THROUGH LD D.R. AS PER THE REPORT OF THE ASSESSING OFFICER DATED 20.7 .2012 PLACED ON RECORD. HENCE, WE PROCEED TO DISPOSE OF THE APPEAL AFTER CONSIDERING SUBMISSIONS OF LD D.R. AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. ITA NO.3075/MUM/2011 ASSESSMENT YEAR: 2007 -08 2 3. IN RESPECT OF GROUND NO.1 OF APPEAL, RELEVANT FA CTS ARE THAT ASSESSEE DETERMINED THE TOTAL EXPENSES AT RS.77,873 IN RESPE CT OF EARNING EXEMPT INCOME. THE AO WAS NOT SATISFIED AND WORKED OUT THE DISALLOWANC E AT RS.18,32,905 UNDER RULE 8D R.W. SECTION 14A OF THE I.T.ACT. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD CIT(A). LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE VIDE PARA 4.4 HAS RESTORED THE ISSUE TO THE FILE OF AO WITH A DIRECTION TO DEC IDE THE EXPENSES RELATING TO EXEMPT INCOME BY FOLLOWING THE DECISION OF HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO LTD VS DCIT, 328 ITR 81(BOM). THE RELEVANT PARA OF THE ORDER OF LD CIT(A) READS AS UNDER: I HAVE CONSIDERED THE AOS ORDER AS WELL AS THE AP PELLANTS A.R. SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT TH E AO HAS MADE THIS ADDITION AS PER CLAUSE (III) OF RULE 8D (2) OF THE I.T.ACT, 1961. TAKING NOTE OF THE APPELLANT A.RS SUBMISSION, I AM OF THE CONSIDERED VIEW THAT IN VIEW OF RECENT JUDGMENT OF JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO LTD., WHEREIN, IT HAS BEEN HELD THAT RULE 8D IS APPLICABLE FROM A.Y. 2008-09 ONWARDS ONLY. HENC E, IN VIEW OF THIS DECISION, I CONSIDER IT PROPER TO HOLD THAT THE AO S ACTION IN MAKING DISALLOWANCE UNDER RULE 8D R.W.S 14A WAS NOT JUSTIF IED IN PRESENT ASSESSMENT YEAR I.E. A.Y. 2007-08. BUT, HOWEVER, I ALSO FIND THAT IN THE SAME ORDER, THE JURISDICTIONAL HIGH COURT HAS HELD THAT THE AO SHOULD PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE FOR WORKING OUT THE EXPENDITURE RELATED TO EXEMPT INCOME FOR MAKING DIS ALLOWANCE U/S.14A OF THE I.T.ACT, 1961. IN VIEW OF THE SAME, I CONSIDER IT PROPER AND APPROPRIATE TO DIRECT THE AO TO PROVIDE A REASONABL E OPPORTUNITY TO THE APPELLANT AND THEREAFTER AFTER TAKING NOTE OF APPEL LANTS SUBMISSION AO SHOULD WORK OUT THE DISALLOWANCE U/S.14A OF THE I.T .ACT, 1961 IN RESPECT OF EXPENSES RELATED TO EXEMPT INCOME IN ACCORDANCE TO DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ BOY CE MFG CO. LTD. HENCE, DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL . 4. ON CONSIDERATION OF ORDERS OF AUTHORITIES BELOW, WE AGREE WITH LD CIT(A) THAT RULE 8D IS NOT APPLICABLE TO ASSESSMENT YEAR UNDER CONSIDERATION AS HELD BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ BOY CE MFG. CO. LTD (SUPRA). THE HONBLE HIGH COURT HAS HELD THAT RULE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 ONWARDS. THEREFORE, WE HOLD THAT THERE IS NO INFIRMITY IN TH E ORDER OF LD CIT(A). ACCORDINGLY, WE UPHOLD HIS ORDER AND REJECT THE GROUND NO.1 OF APPE AL TAKEN BY DEPARTMENT. 5. IN RESPECT OF GROUND NO.2 OF APPEAL, RELEVANT FA CTS ARE THAT AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FROM PROFIT AND LOSS ACCOUNT THAT ASSESSEE HAS CLAIMED SHARE TRADING LOSS OF RS.3,93,339. THE AO STATED THAT AS PER CLOSING STOCK STATEMENT FILED, ASSESSEE HAS SHOWN CLOSING STOCK A T RS.1,13,12,992. HOWEVER, IN THE ITA NO.3075/MUM/2011 ASSESSMENT YEAR: 2007 -08 3 BALANCE SHEET, THE STOCK WAS SHOWN AT RS.1,83,09,64 0. ASSESSEE WAS ASKED TO RECONCILE THE DIFFERENCE. ASSESSEE VIDE LETTER DATED 12.12.2 009 STATED THAT THERE ARE TWO SHARE DIVISIONS, IN ONE DIVISION CLOSING STOCK IS RS.1,13 ,12,992 AND IN ANOTHER DIVISION IT IS RS.69,96,648. AO HAS STATED THAT SINCEASSESSEE HA S NOT GIVEN SCRIP- WISE TRADING ACCOUNT OF BOTH THE DIVISIONS, ITS CLAIM OF SHARE T RADING LOSS OF RS.3,93,339 IS NOT VERIFIABLE. ACCORDINGLY, AO DISALLOWED THE CLAIM O F SHARE TRADING OF RS.3,93,339. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD CIT(A). LD CIT(A) CONSIDERED THE SUBMISSIONS OF ASSESSEE AND VIDE PARA 5.3 HAS DELETED THE DISAL LOWANCE MADE BY THE AO, WHICH READS AS UNDER: I HAVE CONSIDERED THE AOS ORDER AS WELL AS APPELL ANT ARS SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT THE AO HAS GIVE N MERELY REASON FOR THIS DISALLOWANCE THAT THE APPELLANT HAS NOT GIVEN ANY SUPPORTING EVIDENCES, SCRIP NAMES, DATE OF TRADE ETC AND HENCE HE DENIED THE CLAIM OF THE APPELLANT. I FIND THAT THE APPELLANT HAS GI VEN A DETAILED SUBMISSION IN SUPPORT OF ITS CONTENTION. DURING THE APPELLANT PROCEEDINGS, THE APPELLANT HAS FILED DETAILS THEREOF WHICH WERE FILE D BEFORE THE AO WHICH CLEARLY SUGGESTS THE DETAILS OF LOSS INCURRED IN SH ARE TRADING. ACCORDINGLY, I DIRECT THE AO TO ALLOW THE LOSS SO INCURRED BY TH E APPELLANT. THUS, APPELLANTS THIS GROUND OF APPEAL IS ALLOWED. HENCE, DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL . 6. DURING THE COURSE OF HEARING, LD D.R. RELIED ON ORDER OF AO AND SUBMITTED THAT ASSESSEE FILED NEW DOCUMENTS BEFORE LD CIT(A) WHICH WERE NOT MADE AVAILABLE TO THE AO. IN REPLY TO A QUERY WHAT ARE THE DOCUMENTS WHI CH HAVE BEEN FILED BY THE ASSESSEE, LD D.R. COULD NOT SUBSTANTIATE HER SUBMISSIONS. 7. ON THE OTHER HAND, WE OBSERVE THAT ASSESSEE SUBM ITTED THAT THE DETAILS OF WORKING OF SHARE TRADING LOSS WERE MADE AVAILABLE T O THE AO AND SUPPORTING DOCUMENTS VIS; CONTRACT NOTES, ETC WERE NOT CALLED FOR ALSO D UE TO HIGH VOLUMINOUS DOCUMENTS AND SUBMITTED THAT ASSESSEE COULD PRODUCE THE SAME. LD CIT(A) HAS STATED THAT ASSESSEE FILED DETAILS RELATING TO SHARE TRADING LOSS WHICH WERE FILED BEFORE THE AO AND SAID DETAILS CLEARLY SUGGEST THE DETAILS OF LOSS INCURRED BY THE ASSESSEE IN SHARE TRADING. CONSIDERING THE SAID FACTS, WE HOLD THAT LD CIT(A) HAS NOT ACCE PTED ANY NEW DOCUMENTS WHILE DELETING THE DISALLOWANCE OF SHARE TRADING LOSS OF RS.3,93,339 DISALLOWED BY THE AO. HENCE, WE UPHOLD HIS ORDER AND REJECT GROUND NO.2 O F APPEAL TAKEN BY DEPARTMENT. ITA NO.3075/MUM/2011 ASSESSMENT YEAR: 2007 -08 4 8. IN RESPECT OF GROUND NO.3 OF APPEAL, AO HAS STAT ED THAT AS PER PROFIT AND LOSS ACCOUNT, ASSESSEE HAS CLAIMED LOSS ON FUTURE & OPTI ONS COMMODITY OF RS.6,58,751. ASSESSEE WAS ASKED TO FURNISH COMMODITY TRADING ACC OUNT WITH DOCUMENTARY EVIDENCES. HOWEVER, ASSESSEE FURNISHED THE BREAK-UP OF THIS LO SS BUT NO SUPPORTING EVIDENCE, SCRIP NAMES, DATES OF TRADE ETC WERE FURNISHED. THEREFOR E, AO DISALLOWED THE CLAIM OF FUTURE & OPTIONS COMMODITY LOSS OF RS.6,58,751. BEING AGG RIEVED, ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 9. BEFORE LD CIT(A), ASSESSEE FILED THE DETAIL WORK ING OF LOSS WITH SUPPORTING DOCUMENTS I.E. CONTRACT NOTES, ETC. LD CIT(A) AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND COPIES OF THE DETAILS WHICH DEPICTED S UCH LOSS, DELETED THE DISALLOWANCE MADE BY THE AO. THE RELEVANT PARA 6.2 OF THE IMPUG NED ORDER READS AS UNDER: I HAVE CONSIDERED THE AOS ORDER AS WELL AS APPELL ANT ARS SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT THE AO HAS MADE THE ADDITION MERELY ON THE PRETEXT THAT THE APPELLANT HAS NOT FURNISHED DOCUMENTS TO SUBSTANTIATE ITS CLAIM OF LOSS FROM FUTURE AND OPTI ON COMMODITY. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED COPY OF DETAILS WHICH DEPICTS SUCH LOSS. THE SAID DETAILS HAVE BEEN CLEA RLY DEPICTED SUCH LOSS OCCURRED TO THE APPELLANT COMPANY OF RS.6,58,751. IN SUPPORT OF ITS CONTENTION, THE APPELLANT HAS FILED CONTRACT NOTE I SSUED BY KOTAK COMMODITY SERVICES LTD ON VARIOUS DATES. TAKING NO TE OF THE SAME, I AM OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIE D IN HIS ACTION. ACCORDINGLY, I DIRECT THE AO TO ALLOW SUCH LOSS CLA IMED BY THE APPELLANT ON BUSINESS OF FUTURE AND OPTIONS. HENCE, DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL 10. DURING THE COURSE OF HEARING, LD D.R. SUBMITTED THAT AO SPECIFICALLY ASKED FOR THE DETAILS OF LOSS CLAIMED BY THE ASSESSEE BUT NO SUPPORTING DOCUMENTS WERE FILED. HOWEVER, ASSESSEE FILED THE SAID DETAILS OF LOSS AN D LD CIT(A) CONSIDERED THE THOSE DOCUMENTS WITHOUT SEEKING REMAND REPORT FROM THE AO . 11. IN VIEW OF ABOVE, WE FIND SUBSTANCE IN THE SAID SUBMISSION OF LD D.R. THAT LD CIT(A) HAS ALLOWED THE CLAIM OF LOSS OF FUTURE & OP TIONS COMMODITY BY CONSIDERING THE DETAILS WHICH WERE NOT FILED BY THE ASSESSEE BEFOR E THE AO. THEREFORE, LD CIT(A) HAS VIOLATED RULE 46A OF I.T.RULES, 1962 IN ADMITTING N EW DOCUMENTS WITHOUT SEEKING REMAND REPORT FROM THE AO. WE ARE OF THE CONSIDERE D VIEW THAT ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE BE SET ASIDE AND TH E MATTER BE RESTORED TO THE FILE OF AO FOR HIS FRESH CONSIDERATION. ACCORDINGLY, WE SET A SIDE THE ORDERS OF AUTHORITIES BELOW ITA NO.3075/MUM/2011 ASSESSMENT YEAR: 2007 -08 5 AND RESTORE BACK THE MATTER TO THE FILE OF AO WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSE E. HENCE, GROUND NO.3 OF APPEAL TAKEN BY DEPARTMENT IS ALLOWED FOR STATISTICAL PURP OSES. 12. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS AL LOWED IN PART. PRONOUNCED IN THE OPEN COURT ON 5 TH SEPTEMBER, 2012 SD/- (B.RAMAKOTAIAH ) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 5 TH SEPTEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),1, MUMBAI 4. COMMISSIONER OF INCOME TAX, 1 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI