RAMANKANTA PANDA, MUMBAI V. JT CIT RG 11(3), MUMBAI

ITA 3102/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0189 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Business income; Rule of consistency; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 3102 / MUM/ 201 5 ( / ASSESSMENT YEAR: 2011 - 12 ) DR. RAMAKANT PANDA, 302, DOCTOR HOUSE, 14, PEDDAR ROAD, MUMBAI - 400026 VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE 11(3), (NOW JCIT 16(3), AAYAKAR BHAVAN, M.K. MARG, CHURCHGATE, MUMB AI - 400020 ./ ./ PAN/GIR NO. : AAOPP 2308 N ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI VIMAL PUN MIYA (AR) /REVENUE BY : MS. ARJU GARO DIA (DR) / DA TE OF HEARING : 05/04 /2017 / DATE OF PRONOUNCEMENT: 03/07 /2017 / O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST ORDER DATED 30/01/2015 PASSED BY THE LD. CIT (A), 7 , MUMBA I PERTAI NING TO THE ASSESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT (A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 ( FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A PRACTICING CARDIO THORACIC SURGEON HAVING INCOME FROM PROFESSION, CAPITAL GAINS AND INCOME FROM OTHER SOURCES FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING THE TOTAL INCOME OF RS. 11,62,43,040/ - . THE RETURN WAS PROCESSED AND AS SESSMENT ORDER WAS PASSED BY THE AO U/S 143(3) OF THE ACT, DETERMINING THE TOTAL INCOME 2 ITA NO. 3102/MUM/2015 ASSESSMENT YEAR: 2011 - 12 OF THE ASSESSEE AT RS.11,74,34,890/ - AFTER MAKING DISALLOWANCE OF RS. 11,91,854/ - U/S 14A OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE ASSAILED THE ASS ESSMENT ORDER BEFORE THE CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE AND UPHELD THE DISALLOWANCE MADE BY THE AO. 4 . STILL A GGRIEVED , THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFF ECTIVE GROUND : - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS. 11,91,854/ - BEING DISALLOWANCE U/S. 14A OF THE INCOME TAX ACT, 1961. 5 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE LD. CIT(A) HAS WRONGLY AFFIRMED THE ORDER PASSED BY THE AO WITHOUT RECORDING THE SATISFACTION AS PER SUB - SECTION (2) OF SECTION14A OF THE ACT. ON FACTS, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAD A TOTAL INVESTMENT OF RS. 28,41,09,824/ - AS ON 31.03. 2010 WHICH WAS REDUCED TO RS. 22,16,34,661/ - AS ON 31.03.2011. THE ASSESSEE HAS NOT MADE ANY INVESTMENT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. OUT OF THE INVESTMENT OF RS. 22,16,34,661/ - RS. 19,33,68,400/ - HAD BEEN MADE IN ASIAN HEART GRO UP IN WHICH THE ASSESSEE WAS HOLDING APPROXIMATELY 56% STAKE. SINCE, THE INVESTMENT HAS BEEN MADE IN ASSESSEES OWN COMPANY, THE ASSESSEE NEED NOT REQUIRE TO INCUR ANY KIND OF DIRECT OR INDIRECT EXPENDITURE IN CONNECTION WITH THE SAID INVESTMENT. THEREFORE , SECTION 14A DOES NOT APPLY IN THE CASE OF THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS MAINTAINED SEPARATE LIST OF MEDICAL EXPENSES AS WELL AS GENERAL EXPENSES. OUT OF THE TOTAL THE TOTAL EXPENDITURE OF 84,04,089/ - , AN AMOUNT OF RS. 76,94,657/ - WAS DIRECTLY INCURRED TO EARN PROFIT FROM BUSINESS AND PROFESSION AND AN AMOUNT OF 3 ITA NO. 3102/MUM/2015 ASSESSMENT YEAR: 2011 - 12 RS. 7,09,432/ - WAS INCURRED FOR BUSINESS AND PROFESSION AS WELL AS FOR OTHER PURPOSES. HENCE, THE LD. CIT(A) OUGHT TO HAVE DISALLOW ED THE EXPENDITURE U/S 14A AS PER THE RATIO OF PROFESSIONAL RECEIPTS AND EXEMPT INCOME TO THE COMMON EXPENDITURE. 6. WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS, THE LD. COUNSEL SUBMITTED THAT THE COMMON EXPENDITURE IS RS. 7,09,432/ - WHEREAS DISALLOWANCE U/S 14A IS 11,91,854/ - UNDER THE IDENTICAL FACTS FOR THE ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 IN ASSESSEES OWN CASE THE LD CIT(A) HAS GIVEN THE FINDINGS THAT UNDER NO CIRCUMSTANCES RULE 8D CAN BE INVOKED AND WHAT MAXIMUM CAN BE DISALLOWED IS AN AMOUNT FROM COMMON EXPENDITURE IN THE P ROPORTION OF BUSINESS INCOME TO EXEMPT INCOME. THE LD. COUNSEL WITHOUT PREJUDICE SUBMITTED THAT THE IMPUGNED ORDER MAY BE SET ASIDE AND AO MAY BE DIRECTED TO FOLLOW THE FINDINGS OF THE LD. CIT(A) GIVEN IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 AND 2010 - 11. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW SUBMITTED THAT THERE IS NO MERIT IN THE ASSESSEES APPEAL AND THE SAME IS LIABLE TO BE SET ASIDE . 8. WE HAVE H EARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE FACTS AND THE ISSUE INVOLVED IN THE ASSESSEES OWN APPEAL FOR THE ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 WERE SIMILAR TO THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT CASE . TH E L D. CIT(A) AFTER TAKING INTO CONSIDERATION THE CONTENTION OF THE ASSESSEE , PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED BY THE AO FOR THE ASSESSMENT YEAR 2009 - 10 HOLDING AS UNDER: 3.4. .. THE TOTAL COMMON EXPENSES ITSELF IS LESS THAN WHAT IS DISALLOWED BY THE AO WHICH SHOWS THAT RULE 8D(2)(III) CANNOT BE 4 ITA NO. 3102/MUM/2015 ASSESSMENT YEAR: 2011 - 12 APPLIED IN THIS CASE AND IF IT IS APPLIED, IT WILL NOT BE THE CORRECT AMOUNT OF DISALLOWANCE CONTEMPLATED IN SECTION 14A OF THE I.T. ACT. IN VIEW OF THIS, I HOLD T HAT RULE 8D(2)(III) CANNOT BE APPLIED IN THIS CASE. 3.5 I DIRECT THE AO TO ALLOCATE THE COMMON EXPENSES IN THE RATIO OF PROFESSIONAL RECEIPTS TO THE EXEMPTED INCOME AND DISALLOW THE EXPENSES RELATED TO THE EXEMPT INCOME U/S 14A OF THE I.T. ACT INSTEAD OF THE DISALLOWANCE MADE OF RS. 12,44,322/ - 9. WE FURTHER NO TICE THAT THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PERTAINING TO THE ASSESSMENT YEAR 2010 - 11 BY FOLLOWING THE ORDER OF CIT(A) PASSED BY THE C IT(A) IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10. IN VIEW OF THE FACT THAT UNDER THE SIMILAR SETS OF FACTS THE LD. CIT(A) HAS TAKEN A CONSISTENT VIEW IN ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11, WE DO NOT FIND ANY REASON FOR TAKING INCONSISTENT VIEW IN RESPECT OF THE APPEAL PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 10. IN THE CASE OF RADHA SWAMI SATSANG VS. CIT(1992) 193 ITR 321 SC , THEIR LORDSHIPS OF THE HON' BLE SUPREME COURT WHILE DEALING W ITH THE PRINCIPL E OF CONSISTE NCY AND PRINCIPLE OF RES JUDICATA HAS OBSERVED THAT UNLESS THERE IS A MATERIAL CHANGE JUSTIFYING THE REVENUE TO TAKE DIFFERENT VIEW OF THE MATTER, IT SHALL NOT BE PROPER FOR THE REVENUE TO TAKE CONTRARY VIEW. IN THE PRESENT CASE WE DO NOT FIN D ANY MATERIAL CHANGE TO TAKE A VIEW CONTRARY TO THE VIEW TAKEN BY THE DEPARTMENT IN ASSESSEES OWN CASE IN THE IMMEDIATE PRECEDING YEARS. ACCORDINGLY , WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL. HENCE, FOLLOWING THE PRINCIPLE OF CONSISTENCY WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO RE - COMPUTE THE AMOUNT OF DISALLOWANCE IN ACCORDANCE WITH THE DIRECTION S GIVEN BY THE LD. CIT(A) IN ASSESSEES OWN APPEALS FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 DISCUSSED ABOVE. 5 ITA NO. 3102/MUM/2015 ASSESSMENT YEAR: 2011 - 12 IN THE RESULT, APPEA L FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 2012 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JULY , 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 03 / 0 7 / 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