Shri Dhirejlal Kasalchand Shah, Ahmedabad V. The Dy.CIT(OSD), Ahmedabad

ITA 3158/AHD/2010

• Counselvise Citation: 315820514 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: S N DIVATIA
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 14A

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , . .!'#$, % & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.3158/AHD/2010 ( ( ) ( ) ( ) ( ) / / / / ASSESSMENT YEAR : 2007-08) DHIRAJLAL KASALCHAND SHAH 602/B, PRAKRUTI ANNEXE NEW SHARDA MANDIR ROAD PALDI, AHMEDABAD-380007 ( ( ( ( / VS. THE DCIT (OSD) CIRCLE-8 AHMEDABAD * % ./+, ./ PAN/GIR NO. : AEFPS 1934 J ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY : SHRI S.N.DIVATIA, A.R. ./*- 1 0 / RESPONDENT BY : SHRI C.K.MISHRA, SR. D.R. (2 1 3% / / / / DATE OF HEARING : 04/01/2012 4') 1 3% / DATE OF PRONOUNCEMENT : 13.1.12 5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XIV , AHMEDABAD DATED 06/10/2010. THE SUBSTANTIVE GROUNDS WHICH AR E ARGUED BEFORE US ARE GROUND NOS.1.1, 1.2, 2.1 & 2.3; REPRODUCED BELO W: 1.1. THE ORDER PASSED U/S.250 ON 6.10.2010 FOR A.Y. 2007-08 BY CIT(A)-XIV, AHMEDABAD, CONFIRMING THE DISALLOWANCE MADE U/S.14A BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRIN CIPLES OF NATURAL JUSTICE. ITA NO.3158/AHD /2010 DHIRAJLAL KASALCHAND SHAH VS. DCIT (OSD) ASST.YEAR -2007-08 - 2 - 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN NOT CONS IDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGNED DISALLOWANCE. 2.1. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.5,74,343 MADE U/S .14A RWS RULE 8D. 2.3. THAT IN THE FACTS AND CIRCUSMTNC3ES OF THE CAS E AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLOW ANCE MADE U/S.14A OF RS.5,74,343. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 18/1 2/2009 WERE THAT THE ASSESSEE IS IN INDIVIDUAL CAPACITY HAS SALARY INCOM E, INCOME FROM OTHER SOURCES AND CAPITAL GAIN FOR THE YEAR UNDER CONSIDE RATION. IT HAS ALSO BEEN NOTED THAT THE ASSESSEE WAS ENGAGED IN TRADING OF COMMODITIES. DIVIDEND INCOME OF RS.59,422/- WAS EARNED AND CLAI MED AS EXEMPT U/S.10(34) AND U/S.10(35) OF THE I.T.ACT. THE TOTA L INVESTMENT WAS AT RS.1,31,40,682/- AS ON 31/03/2007. IT WAS ALSO NOT ED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD TAKEN LOAN OF RS.2,14 ,92,234/- ON WHICH INTEREST PAID OF RS.19,74,855/-. AS PER ASSESSING OFFICER, SUBSTANTIAL FUNDS WERE INVESTED IN SCRIPS, HOWEVER, THERE WAS I NTER-MINGLING OF OWN FUNDS AND BORROWED FUNDS. BY INVOKING THE PROVISIO NS OF SECTION-14A READ WITH RULE 8D OF IT RULES, A PROPOSED DISALLOWA NCE OF RS.5,74,343/- WAS MADE. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED CIT(APPEALS) HAS UPHELD THE ACTION OF T HE ASSESSING OFFICER. 3. AT THE OUTSET, PARTIES APPEARING BEFORE US HAVE INFORMED THAT ON IDENTICAL FACTS, ITAT A BENCH AHMEDABAD IN ITA NO .3159/AHD/2010 ITA NO.3158/AHD /2010 DHIRAJLAL KASALCHAND SHAH VS. DCIT (OSD) ASST.YEAR -2007-08 - 3 - FOR A.Y. 2007-08 IN THE CASE OF NIKHILKUMAR DHIRAJL AL SHAH VS. ACIT VIDE AN ORDER DATED 30/09/20111 HAS RESTORED THE IS SUE BACK TO THE FILE OF THE ASSESSING OFFICER, FOLLOWING HON'BLE GUJARAT H IGH COURT IN THE CASE OF CIT-II VS. M/S.LUBI SUBERSIBLES LTD. AND RELEVA NT PORTION IS REPRODUCED BELOW:- 3. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HO NBLE GUJARAT HIGH COURT IN THE CASE OF M/S. LUBI SUBMERSIBLES LT D. (SUPRA) HAS HELD AS UNDER: AS CAN BE SEEN FROM THE TREATMENT ACCORDED TO THE SAID ISSUE BY THE TRIBUNAL, THE TRIBUNAL DECIDED ON THE BASIS OF PROVISIONS CONTAINED IN SECTION 14A OF THE INCOME-TAX ACT, 196 1 {'ACT' FOR SHORT} WHICH STATES THAT NO DEDUCTION COULD BE ALLO WED IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO INCO ME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID AC T. K CONCLUDED THAT THE FUNDS OF THE ASSESSEE-RESPONDENT WERE MIX FUNDS IN AS MUCH AS INVESTMENT WAS MADE IN THE PREC EDING YEARS AND THERE WAS NO FRESH INVESTMENT DURING THE YEAR UNDER CONSIDERATION. IT ALSO DID NOT AGREE WITH THE FINDI NGS OF THE ASSESSING OFFICER THAT THE INVESTMENT WAS MADE BY T HE ASSESSEE OUT OF BORROWED FUNDS. THUS, FROM (HE ENTI RE GAMUT OF FACTS, THE TRIBUNAL HELD THAT THERE WAS SUFFICIENT SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE TO INVEST AND THERE WAS NO NEXUS THAT COULD BE ESTABLISHED WITH THE EXPENDITURE INCU RRED BY THE ASSESSEE FOR EARNING THE DIVIDEND INCOME. BY DISCUS SING AT LENGTH THE SIMILAR VIEW TAKEN BY THE COGNATE BENCH IN THE CASE OF A.C.U.I.T VS. JUPITER CORPORATE SERVICES LIMITED , IT CONCLUDED THAT IN ABSENCE OF ANY MATERIAL, IT WAS EVIDENT THA T NO EXPENDITURE HAD BEEN INCURRED BY WAY OF INTEREST WH ICH COULD BE RELATED TO DIVIDEND INCOME, NOR WAS BROUGHT ANY MATERIAL TO SUGGEST THAT THE BORROWED FUNDS WERE UTILIZED FOR I NVESTMENT IN SHARES. WHILE THERE WAS NO DISALLOWANCE OF INTEREST PAID ON BORROWED FUNDS WAS MADE IN THE PRECEDING ASSESSMENT YEAR, THERE WAS NO MATERIAL AVAILABLE BEFORE THE TRIBUNAL TO TAKE A DIFFERENT VIEW THAN ALREADY TAKEN IN THE EARLIER AS SESSMENT YEAR. LOGIC GIVEN FOR CONCLUSION REQUIRES NO INTERF ERENCE. IT WAS ON THE BASIS OF EVIDENCE WHICH WAS PRESENTED BEFORE THE TRIBUNAL THAT THE CONCLUSION HAD BEEN ARRIVED AT WI TH REGARD TO AVAILABILITY OF ME FREE-FUNDS FOR INVESTMENT, AND T HEREFORE, THIS ITA NO.3158/AHD /2010 DHIRAJLAL KASALCHAND SHAH VS. DCIT (OSD) ASST.YEAR -2007-08 - 4 - APPEAL MERITS NO CONSIDERATION. ACCORDINGLY, THE PR ESENT TAX APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 3.1 ADMITTEDLY, THE AFORESAID JUDGEMENT WAS NOT AVA ILABLE WHEN THE LD. CIT(A) PASSED THE IMPUGNED ORDER. WE, THEREFORE, IN THE INTEREST OF JUSTICE, SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WI TH THE DIRECTION THAT THE AO WILL RE-WORK OUT THE DISALLOWANCE UNDER SECTION 14A R.W.S. 8D, KEEPING IN VIEW THE RATIO LAID DOWN BY T HE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S. LUBI SUBMERSIBLES LTD. (SUPRA), AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4. SINCE A VIEW HAS ALREADY BEEN TAKEN ON IDENTICAL FACTS AND THE PARTIES APPEARING BEFORE US HAVE PLACED RELIANCE ON THE SAID VIEW OF THE RESPECTED CO-ORDINATE BENCH, THEREFORE RESPECTFULLY FOLLOWING THE SAME, WE HEREBY REVERT THESE GROUNDS BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE ACCORDINGLY AS PER LAW. THESE GROUNDS OF THE ASSESSEE MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES ONLY. 5. IN THE RESULT, APPEAL OF THE ASSESSEE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. SD/- SD/- ( . .!'#$ ) ( ) % ( A.K. GARODIA ) ( M UKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13 / 01 /2012 63..(, .(../ T.C. NAIR, SR. PS ITA NO.3158/AHD /2010 DHIRAJLAL KASALCHAND SHAH VS. DCIT (OSD) ASST.YEAR -2007-08 - 5 - 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-XIV, AHMEDABAD 5. 7 >> >/ // / + + + + ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..9/1/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 9/1/2012 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S .13.1.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.1.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER