RAJKUMAR DAMANI, MUMBAI V. CIT 2, MUMBAI

ITA 3354/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2984 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Business income; Earning of tax free income; Assessment record
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 3354/MUM/2013 (ASSESSMENT YEAR:2008-09) SHRI RAJKUMAR DAMANI SURYA MAHAL, 1 ST FLOOR, 5, BURJORJI BHARUCHA MARG, MUMBAI 400 023 APPELLANT VS. C.I.T. -2, MUMBAI RESPONDENT PAN: AGQPD1310C /BY APPELLANT : SHRI HIRO RAI, A.R. /BY RESPONDENT :SHRI ALOK JOHRI, CIT D.R. /DATE OF HEARING : 28.09.2015 /DATE OF PRONOUNCEMENT : 27.10.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX - 2, MUMBAI, DATED 28.03 .2013 FOR A.Y. 2008-09 ON FOLLOWING GROUNDS: ITA NO.3354/MUM/13 A.Y. 08-09 [SHRI RAJKUMAR DAMANI VS. CIT] PAGE 2 1. THE HONBLE C.I.T. ERRED IN TREATING THE ASSESS MENT ORDER PASSED U/S 143(3) AS PREJUDICIAL AND ERRONEOU S TO THE INTEREST OF THE REVENUE AND FURTHER ERRED IN INVOKING THE PROVISION OF SECTION 263. 2. THE HONBLE CIT ERRED IN SETTING ASIDE THE ORDER WITH THE DIRECTION TO THE LD. I.T.O FOR RECONSIDERING TH E ISSUE RELATING TO THE DISALLOWANCE U/S 14A R.W. RUL E 8D IN RESPECT OF THE INTEREST EXPENDITURE OF RS.57,80,070/-. 3. THE HONBLE C.I.T. ERRED IN HOLDING/DIRECTING TH E ASSESSING OFFICER TO CALCULATE THE AMOUNT OF DISALLOWANCE U/S 14A R.W. RULE 8D BY TAKING THE ENT IRE AMOUNT OF INTEREST PAID INCLUDING THE INTEREST WHIC H WAS HAVING DIRECT NEXUS WITH BUSINESS INCOME AND NO T EARNING EXEMPT INCOME. 2. IN THIS CASE, ASSESSING OFFICER COMPLETED ASSESS MENT ORDER U/S.143(3) ASSESSING THE TOTAL INCOME AT RS.3,48,55,447/-. WHILE COMPUTING INCOME, ASSESSIN G OFFICER WORKED OUT THE DISALLOWANCE U/S.14A READ WITH RULE 8D AT RS.2,80,272/- AS UNDER:- I EXPENSES DIRECTLY ATTRIBUTABLE TO EXEMPT INCOME NIL II INTEREST NOT DIRECTLY ATTRIBUTABLE TO EXEMPT INCOME (A X B/C) N.A. III 0.5% OF AVERAGE VALUE OF INVESTMENTS 0.5% OF RS.5,60,55,329/- RS.2,80,277/- TOTAL DISALLOWANCE U/S.14A R.W.R. 8D RS.2,80,277/- LATER ON, IT WAS OBSERVED THAT ASSESSEE HAD INCURRE D INTEREST EXPENDITURE OF RS.57,80,070/- WHICH WAS NOT CONSIDE RED FOR DISALLOWANCE U/S.14A. IN VIEW OF ABOVE, DISALLOWAN CE U/S.14A WORKED OUT TO RS.16,35,646/- IN CASE, SAID INTEREST ITA NO.3354/MUM/13 A.Y. 08-09 [SHRI RAJKUMAR DAMANI VS. CIT] PAGE 3 EXPENDITURE INCURRED TAKEN INTO CONSIDERATION. THE REFORE, ASSESSMENT PASSED BY ASSESSING OFFICER WAS CONSIDER ED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN RESPONSE TO NOTICE U/S.263, ASSESSEE FILED WRITTEN SUBMISSIONS INTER ALIA SUBMITTING THAT IT IS AN INVESTOR AS WEL L AS TRADER IN SHARES. DURING YEAR, ASSESSEE PURCHASED AND SOLD S HARES FROM SHARE BROKER, NAMELY, IL&FS INVESTMENT FINANCIAL SE RVICES LTD. AS PER TERMS AND CONDITIONS, IF THERE WAS A D ELAY IN PAYMENT TOWARDS THE PURCHASE CONSIDERATION OF SHARE S, ASSESSEE WAS REQUIRED TO PAY INTEREST FOR THE PERIO D OF SUCH DELAY. IT WAS SUBMITTED ON BEHALF OF ASSESSEE THAT OUT OF INTEREST OF RS.57,80,070/- DEBITED TO PROFIT AND LO SS ACCOUNT, THE AMOUNT OF RS.57,76,041/- WAS PAID TO IL&FS. IN THIS REGARD A COPY OF INTEREST ACCOUNT APPEARING IN BOOK S OF ASSESSEE WAS ENCLOSED FOR READY REFERENCE. SINCE, SHARES PURCHASED THROUGH IL&FS HAVE BEEN TREATED AS STOCK IN TRADE AND PROFIT THERE FROM HAS BEEN DULY SHOWN IN PROFIT AND LOSS ACCOUNT, THE PROVISIONS CONTAINED IN SECTION U/S 14 A WOULD NOT BE APPLICABLE TO THE INTEREST PAID IN RESPECT O F THESE SHARES. CIT HAVING CONSIDERED THE SUBMISSION ON BEHALF OF A SSESSEE OBSERVED THAT ASSESSING OFFICER HAS NOT APPLIED HIS MIND ON THE ISSUE. HE HAS NOT GIVEN ANY REASON EITHER IN B ODY OF THE ASSESSMENT ORDER OR IN ASSESSMENT RECORDS AS TO WHY THE ABOVE INTEREST EXPENDITURE OF RS.57,80,070/- WAS NOT CONS IDERED FOR DISALLOWANCE U/S.14A. CIT WAS OF THE VIEW THAT ASS ESSING OFFICER HAS MADE ASSESSMENT WITHOUT MAKING PROPER I NQUIRY, ITA NO.3354/MUM/13 A.Y. 08-09 [SHRI RAJKUMAR DAMANI VS. CIT] PAGE 4 SO, THE ORDER WAS TO BE HELD ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGL Y, SAME WAS SET ASIDE. THE MATTER WAS RESTORED TO ASSESSING OF FICER WITH DIRECTION TO CONSIDER THE ISSUE RELATING TO DISALLO WANCE U/S.14A R.W. RULE 8D OF INCOME TAX RULES IN RESPECT OF INTE REST EXPENDITURE OF RS.57,80,070/-. 3. BEFORE US, LEARNED AUTHORIZED REPRESENTATIVE SUB MITTED THAT ALL THE DETAILS WERE FILED BEFORE THE ASSESSIN G OFFICER DURING ASSESSMENT PROCEEDING AND ALL DETAILS OF INT EREST WERE ALSO PLACED ON PAGE 14 OF PAPER BOOK, CERTIFIED BY BOTH AUTHORITIES INCLUDING ASSESSING OFFICER AND HE ALSO FILED FINAL ACCOUNTS AS PLACED ON PAGE 3 TO 13 OF THE PAPER BOO K DULY CERTIFIED AND RELIED UPON THE WRITTEN SUBMISSIONS M ADE BEFORE CIT DATED 21.03.2013 AND SUBMITTED THAT CIT WAS NO T JUSTIFIED IN DELETING THE ORDER OF ASSESSING OFFICE R. THE REVISION OF THE ORDER PASSED U/S.143 AND SETTING ASIDE IT BY CIT WITH DIRECTION TO ITO FOR RE-CONSIDERING THE ISSUE RELAT ED TO DISALLOWANCE U/S.14A R.W. RULE 8D IN RESPECT OF INT EREST EXPENDITURE IS BAD IN LAW. SIMILARLY, SAME SHOULD BE QUASHED. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTAT IVE SUPPORTED THE ORDER OF CIT. 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT ASSESSEE IS AN INDIVIDUAL REGU LARLY ASSESSED TO TAX BY CONCERNED INCOME TAX OFFICER. T HE RETURN OF INCOME FOR YEAR UNDER CONSIDERATION WAS FILED ON 26 .09.2008 ITA NO.3354/MUM/13 A.Y. 08-09 [SHRI RAJKUMAR DAMANI VS. CIT] PAGE 5 FOR TOTAL INCOME OF RS.3,45,10,910/-. ASSESSMENT W AS COMPLETED ON 30.12.2010 FOR A TOTAL INCOME OF RS.3,48,55,447/- AND DEMAND OF RS.4,46,810/- WAS RA ISED. THE DIFFERENCE IN TOTAL INCOME AS PER RETURN OF INC OME AND AS PER ASSESSMENT ORDER WAS DUE TO AN ADDITION OF RS.2 ,80,277/- BY DISALLOWING EXPENDITURE U/S.14 R.W. RULE 8D . T HE BASIS OF CALCULATION OF DISALLOWANCE U/S.14A R.W. RULE 8D WA S STATED IN THE ASSESSMENT ORDER IN PARA 8. WHILE WORKING OUT THE AMOUNT OF DISALLOWANCE U/S.14A R.W. RULE 8D, ITO HAS LOOKE D INTO THE MATTER THOROUGHLY WITH REGARD TO DISALLOWANCE U/S.1 4A R.W. RULE 8D AND HE RESTRICTED THE AMOUNT OF DISALLOWANC E UP TO 0.5% OF AVERAGE VALUE OF INVESTMENT I.E. 0.5% OF RS.5,60,55,329/-. IT IS NOT IN DISPUTE THAT ASSESS EE HAS PLACED ALL DETAILS WITH REGARD TO INTEREST AS APPEARING ON PAGE 14 OF THE PAPER BOOK AND ASSESSEE HAS REACHED TO THE CERT AIN CONCLUSION AFTER APPRECIATING THE FACTS ON RECORD. WE FIND THAT HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. FINE J EWELLERY (INDIA) LTD. [2015] 372 ITR 303 (BOM), WHEREIN ASSE SSING OFFICER DURING ASSESSMENT PROCEEDINGS, SOUGHT DETAI LS IN RESPECT OF EXPENDITURE INCURRED FOR BUILDING BRAND. AFTER EXAMINING THE DETAILS HOLDING PART ALONE WAS IN CAP ITAL NATURE. IN PROCEEDINGS UNDER PROVISIONS OF 263 OF ACT, ASSE SSING OFFICERS ORDER WAS NOT FOUND ERRONEOUS AND PREJUDI CIAL TO INTERESTS OF REVENUE AND REVISION ON GROUND THAT EN TIRE EXPENSES FOR BUILDING BRAND CAPITAL IN NATURE, REVI SION U/S.263 WAS HELD NOT JUSTIFIED. ALL DETAILS CALLED FOR WER E FURNISHED IN ITA NO.3354/MUM/13 A.Y. 08-09 [SHRI RAJKUMAR DAMANI VS. CIT] PAGE 6 ASSESSMENT STAGE. REVISION IS NOT JUSTIFIED ON THE GROUND THAT ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THE FACTS BEFORE HIM ON ACCOUNT OF SAID NO APPLICATION OF MIND BY AS SESSING OFFICER. ASSESSING OFFICER HAS APPRECIATED THE FAC TS AS PER FACTS BEFORE HIM. IMPROPER APPRECIATION OF FACTS BY ASSE SSING OFFICER CANNOT BE HELD PROPER GROUND FOR HOLDING THE ORDER OF ASSESSING OFFICER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE UNDER THE PROVISIONS OF SECTION 263. PROVISIONS OF 263 OF ACT CAN BE INVOKED. IN CASE OF NO ENQUIRY ON ISSUE BY ASSESSING OFFICER. THE IMPROPER OR LESS ENQUIRY CANNOT BE VALID BASIS OF INVOKING PROVISIONS 263 OF ACT. INQUIRY ON PARTICULAR ISSUE IS SUBJECT OUTLOOK OF CONCERN A SESSING OFFICER. SUBJECT OUTLOOK MAY VARY PERSON TO PERSON. IN VIEW OF ABOVE DISCUSSION, ORDER OF CIT CANNOT BE SUSTAINED SAME IS QUASHED. 5. AS A RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS THE 27TH DAY OF OCTOBER, 2015. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 27/10/2015 S.K.SINHA ITA NO.3354/MUM/13 A.Y. 08-09 [SHRI RAJKUMAR DAMANI VS. CIT] PAGE 7 / COPY OF ORDER FORWARDED TO:- / REVENUE !# / ASSESSEE $ %&%'( ) / CONCERNED CIT * )+ / CIT (A) ,-./00'(1 '( 1 2 %& / DR, ITAT, MUMBAI 3/4567 / GUARD FILE. BY ORDER / #8 1 9: ;% 1 '( 12 %&<