ACIT, New Delhi V. Sh. Ravinder Kumar Ahuja (HUF), New Delhi

ITA 338/DEL/2013

• Counselvise Citation: 33820114 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Assessee Lawyers: P J KHANNA
• Keywords: Business income; Business expenditure; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, NEW DELHI BEFORE SMT.DIVA SINGH, JUDICIAL MEMBER AND SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 33 8/DEL/2013 ASSESSMENT YEAR 200 9 - 10 ACIT, CIRCLE 33(1) VS. SH.RAVINDER KUMAR AHUJA(HUF) NEW DELHI R 534, NEW RAJENDER NAGAR NEW DELHI 110 060 PAN: AAAHR 2891 E (APPELLANT) (RESPONDENT) APPELLANT BY: - SH. MANOJ KUMAR CHOPRA, SR.DR RESPONDENT BY: - SHRI P.J.KHANNA, C.A. O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD.CIT(A) - XXVI, DELHI DT. 30.10.2012 PERTAINING TO THE ASSESSMENT YEAR 2009 - 10, ON THE FOLLOWING GROUNDS. 1. THE CIT(APPEALS) HAS ERRED IN DELETING ADDITION OF RS.10,12,788/ - U/S 14A R.W.RULE 8D BY HOLDING THAT THE ASSESSING OFFICER HAS NOT ESTABLISHED ANY NEXUS OF EXPENDITURE WITH EXEMPT INCOME. 2. THE CIT(APPEALS) HAS ERRED IN DELETING ADDITION OF RS.18,53,496/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PRIOR PERIOD PURCHASES. 3. THE CIT(A PPEALS) HAS ERRED IN RESTRICTING THE ADDITION TO RS.35,306/ - OUT OF TOTAL ADDITION OF RS.1,94,372/ - MADE BY ASSESSING OFFICER ON ACCOUNT OF NOTIONAL RENT. 4. THE ORDER OF THE CIT(APPEALS) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 5. THE APPELLAN T CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 2 OF 14 2. WE HAVE HEARD SHRI MANOJ KUMAR CHOPRA, LD.SR.D.R. ON BEHALF OF THE REVENUE AND SHRI P.J.KHANNA, C.A. THE LD.COUNSEL FOR THE ASSESSEE. 3. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD AND ORDERS OF THE LOWER AUTHORITIES, AS WELL AS CASE LAWS CITED, WE HOLD AS FOLLOWS. 4. THE ASSESSEE IS A HUF AND ITS MAIN SOU RCE OF INCOME IS FROM BUSINESS OF MANUFACTURE AND EXPORT OF READYMADE GARMENTS AND OTHER SOURCES. THE ASSESSEE CARRIES ON ITS BUSINESS IN THE NAME AND STYLE OF M/S SONA R INTERNATIONAL. WE NOW TAKE UP THE ISSUES GROUND WISE. 5. GROUND NO.1 IS AGAINST TH E DELETION OF AN ADDITION OF RS.10,12,788/ - MADE U/S 14 A READ WITH RULE 8 D . THE CONTENTION OF THE ASSESSEE WAS THAT THE INVESTMENTS WERE MADE OUT OF PERSONAL FUNDS AND ACCUMULATION WHICH HAVE NO NEXUS WITH THE BUSINESS ACTIVITY CARRIED OUT BY THE AS SESSEE UNDER THE NAME AND STYLE M/S SONA R INTERNATIONAL. THE LD.CIT(APPEALS) NOTED THAT THE OPENING VALUE OF THE INVESTMENTS IS RS.20.43 CRORES AND THE CLOSING VALUE IS RS.20.07 CRORES. SHE HAS ALSO HELD THAT THE ASSESSING OFFICER MERELY ADOPTED THE FIGU RE CALCULATED BY THE ASSESSEE, WITHOUT RECORDING ANY FINDING THAT THE EXPENDITURE IN QUESTION HAS NEXUS WITH THE EXEMPT INCOME. THIS FINDING OF THE LD.CIT(A) IS CORRECT. THE ASSESSEE IN THIS CASE HAD PERSONAL FUNDS AND ACCUMULATION WHICH HAVE NOTHING TO DO WITH THE BUSINESS FUNDS. 5.1. THE MUMBAI J BENCH OF THE TRIBUNAL IN THE CASE OF JK INVESTORS (BOMBAY) LTD., FOR THE ASSESSMENT YEAR 2008 - 09 HELD AS FOLLOWS. 12. THUS THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO INVOKING OF PROVISIONS OF SECTION 14A(2) AND RULE 8D. THE HON'BLE BOMBAY HIGH COURT WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY OF THE SECTION 14A AND ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 3 OF 14 RULE 8D HAS THIS TO OBSERVE WITH REFERENCE TO SUB SECTION 2 & 3 OF SECTION 14A: SUB - SECTIONS (2) AND (3) OF SECTION 14A WERE INSERTED BY AN AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2006 WITH EFFECT FROM APRIL 1, 2007. UNDER SUB - SECTION (2), THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED BY AN ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. SUB - SECTION (2) WAS INSERTED SO AS TO PROVIDE A UNIFORM METHOD APPLICABLE WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. PARLIAMENT HAS PROVIDED AN ADEQUATE SAFEGUARD TO THE INVOCATION OF THE POWER TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO THE EARNING OF NON - TAXABLE INCOME BY ADOPTION OF THE PRE SCRIBED METHOD. THE INVOCATION OF THE POWER IS MADE CONDITIONAL ON THE OBJECTIVE SATISFACTION OF THE ASSESSING OFFICER IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THESE SAFEGUARDS WHICH ARE IMPLICIT IN THE REQUIREMENTS OF FAIRNESS AND FAIR PROCEDURE UNDER ARTICLE 14 MUST BE OBSERVED BY THE ASSESSING OFFICER WHEN HE ARRIVES AT HIS SATISFACTION UNDER SUB - SECTION (2) OF SECTION 14A. SUB - RULE (1) OF RULE 8D OF THE INCOME - TAX RULES, 1962, HAS ALSO INCORPORATED THE ESSENTIAL REQUIREMENTS OF SUB - SECTION (2) OF SECTION 14A BEFORE THE ASSESSING OFFICER PROCEEDS TO APPLY THE METHOD PRESCRIBED UNDER SUB - RULE (2) .. (EMPHASIS SUPPLIED) 13. THE SAME OPINION WAS EXPRESSED BY THE HON'BLE DELHI HIG H COURT IN THE CASE OF MAXOPP INVESTMENT LTD AND OTHERS V. CIT 247 CTR 162 WHEREIN RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS PVT. LTD 326 ITR 1 (SC) AND THE DECISION OF THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE COMPANY LTD VS. DCIT (328 ITR 81). THE RELEVANT PORTIONS OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT ARE AS UNDER: 29. SUB - SECTION (2) OF SECTION 14 A OF THE SAID ACT PROVIDES THE MANNER IN WHICH T HE ASSESSING OFFICER IS TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, IF WE EXAMINE THE PROVISION CAREFULLY, WE WOULD FIND THAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE ONLY IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. IN OTHER WORDS, THE REQUIREMENT OF THE ASSESSING OFFICER EMBARKING UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 4 OF 14 TO EXEMPT INCOME WOULD BE TRIGGERED ONLY IF THE ASSESSING OFFICER RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THEREFORE, THE CONDITION PRECEDENT FOR THE ASSESSING OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN R ELATION TO EXEMPT INCOME IS THAT THE ASSESSING OFFICER MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB - SECTION (3) IS NOTHING BUT AN OFFSHOOT OF SUB - SECTION (2) OF SECTION 14A. SU BSECTION (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. IN OTHER WORDS, SUB - SECTION (2) DEALS WITH CASES WHERE THE ASSESSEE SPECIFI ES A POSITIVE AMOUNT OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT AND SUB - SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE ASSERTS THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXEMPT INCOME . IN BOTH CASES, THE ASSESSING OFFICER, IF SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCORDANCE W ITH ANY PRESCRIBED METHOD, AS MENTIONED IN SUB - SECTION (2) OF SECTION 14A OF THE SAID ACT. IT IS ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTIO N TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT IN ACCORDANCE WITH THE PRESCRIBED METHOD. THE PRESCRIBED METHOD BEING THE METHOD STIPULATED IN RULE 8D OF THE SAID RULES. WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. RULE 8D. 30. AS WE HAVE ALRE ADY NOTICED, SUB - SECTION (2) OF SECTION 14A OF THE SAID ACT REFERS TO THE METHOD OF DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. THE EXPRESSION USED IS - 'SUCH METHOD AS MAY BE PRESCRIBED'. WE HAVE ALREADY MENTIONED ABOVE THAT BY VIRTUE OF NOTIFICATION NO.45/2008 DATED 24/03/2008, THE CENTRAL BOARD OF DIRECT TAXES INTRODUCED RULE 8D IN THE SAID RULES. THE SAID RULE 8D ALSO MAKES IT CLEAR THAT WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESS EE OF A PREVIOUS YEAR, IS NOT SATISFIED WITH (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 5 OF 14 TOTAL INC OME UNDER THE SAID ACT FOR SUCH PREVIOUS YEAR, THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF THE EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SUB - RULE (2) OF RULE 8D. WE MAY OBSERVE THAT RULE 8D(1) PLACES THE PROVISI ONS OF SECTION 14A(2) AND (3) IN THE CORRECT PERSPECTIVE. AS WE HAVE ALREADY SEEN, WHILE DISCUSSING THE PROVISIONS OF SUB - SECTIONS (2) AND (3) OF SECTION 14A, THE CONDITION PRECEDENT FOR THE ASSESSING OFFICER TO HIMSELF DETERMINE THE AMOUNT OF EXPENDIT URE IS THAT HE MUST RECORD HIS DISSATISFACTION WITH THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE OR WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. IT IS ONLY WHEN THIS CONDITION PRECEDE NT IS SATISFIED THAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INCLUDABLE IN TOTAL INCOME IN THE MANNER INDICATED IN SUB - RULE (2) OF RULE 8D OF THE SAID RULES. 31. IT IS, THEREFORE, CLEAR THA T DETERMINATION OF THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME UNDER RULE 8D WOULD ONLY COME INTO PLAY WHEN THE ASSESSING OFFICER REJECTS THE CLAIM OF THE ASSESSEE IN THIS REGARD. IF ONE EXAMINES SUB - RULE (2) OF RULE 8D, WE FIND THAT THE METHOD FOR DETERMINING THE EXPENDITURE IN RELATION TO EXEMPT INCOME HAS THREE COMPONENTS. THE FIRST COMPONENT BEING THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE SECOND BEING COMPUTED ON THE BASIS OF THE FORMULA GIVEN THEREIN IN A CASE WHERE THE ASSESSEE INCURS EXPENDITURE BY WAY OF INTEREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. THE FORMULA ESSENTIALLY APPORTIONS THE AMOUNT OF EXPENDITURE BY WAY OF INTEREST [OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I)] INCURRED DURING THE PREVIOUS YEAR IN THE RATIO OF THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, TO THE AVERAGE OF THE TOTAL ASSETS OF THE ASSESSEE. THE THIRD COMPONENT IS AN ARTIFICIAL FIGURE - ONE HALF PERCENT OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEETS OF ASSESSEE, ON THE FIRST DAY AND THE LAST DAY O F THE PREVIOUS YEAR, IT IS THE AGGREGATE OF THESE THREE COMPONENTS WHICH WOULD CONSTITUTE THE EXPENDITURE IN RELATION TO EXEMPT INCOME AND IT IS THIS AMOUNT OF EXPENDITURE WHICH WOULD BE DISALLOWED UNDER SECTION 14A OF THE SAID ACT. IT IS, THEREFORE, C LEAR THAT IN TERMS OF THE SAID RULE, THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME HAS TWO ASPECTS (A) DIRECT AND (B) INDIRECT. THE DIRECT EXPENDITURE IS STRAIGHTAWAY TAKEN INTO ACCOUNT BY VIRTUE OF CLAUSE (I) OF SUB - RULE (2) OF RULE 8D. THE INDIRECT EXPENDITURE, WHERE IT IS BY WAY OF INTEREST, IS COMPUTED THROUGH THE ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 6 OF 14 PRINCIPLE OF APPORTIONMENT, AS INDICATED ABOVE, AND, IN CASES WHERE THE INDIRECT EXPENDITURE IS NOT BY WAY OF INTEREST, A RULE OF THUMB FIGURE OF ONE HALF PERCENT OF THE AVE RAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, IS TAKEN. 41. SUB - SECTION (2) OF SECTION 14A, AS WE HAVE SEEN, STIPULATES THAT THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME 'IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED'. OF COURSE, THIS DETERMINATION CAN ONLY BE UNDERTAKEN IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THIS PART OF SECTION 14A(2) WHICH EXPLICITLY REQUIRES THE FULFILLMENT OF A CONDITION PRECEDENT IS ALSO IMPLICIT IN SECTION 14A(1) [AS IT NOW STANDS] AS ALSO IN ITS INITIAL AVATAR AS SECTION 14A. IT IS ONLY THE PRESCRIPTION WITH REGARD TO THE METHOD OF DETERMINING SUCH EXPENDITURE WHICH IS NEW AND WHICH WILL OPERATE PROSPECTIVELY. IN OTHER WORDS, SECTION 14A, EVEN PRIOR TO THE INTRODUCTION OF SUB - SECTIONS (2) AND (3) WOULD REQUIRE THE OFFICER TO FIRST REJECT THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXTENT OF SUCH EXPENDITURE AND SUCH REJECTION MUST BE FOR DISCLOSED COGENT REASONS. IT IS THEN THAT THE QUESTION OF DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER WOULD ARISE. THE REQUIREMENT OF ADOPTING A SPECIFIC METHOD OF DETERMINING SUCH EXPENDITURE HAS BEEN INTRODUCED BY VIRTUE OF SUB - SECTION (2) OF SECTION 14A. PRIOR TO THAT, THE ASSESSING WAS FREE TO ADOPT ANY REASONABLE AND ACCEPTABLE METHOD. 14. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. HERO CYCLES LTD 323 ITR 518 (P&H) HAS ALSO HELD THAT DISALLOWANCE UNDER SECTION 14A COULD NOT STAND WHERE IT WAS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED: HELD - DISMISSING THE APPEAL, THAT THE EXPENDITURE ON INTEREST WAS SET OFF AGAINST THE INCOME FROM INTEREST AND THE INVESTMENT IN THE SHARES AND FUNDS WERE OUT OF THE DIVIDEND PROCEEDS. IN VIEW OF THIS FINDING OF FACT, DISALLOWANCE UNDER SECTION 14A WAS NOT SUSTAINABLE. WHET HER, IN A GIVEN SITUATION, ANY EXPENDITURE WAS INCURRED WHICH WAS TO BE DISALLOWED, WAS A QUESTION OF FACT. THE CONTENTION OF THE REVENUE THAT DIRECTLY OR INDIRECTLY SOME EXPENDITURE WAS ALWAYS INCURRED WHICH MUST BE DISALLOWED UNDER SECTION 14A AND THE I MPACT OF EXPENDITURE SO INCURRED COULD NOT BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE OF SECTION 14A, COULD NOT BE ACCEPTED. DISALLOWANCE UNDER SECTION 14A REQUIRED FINDING OF INCURRING OF EXPENDITURE AND WHERE IT WAS FOUND THAT FOR EARNING EXEMPTED INCOME ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 7 OF 14 NO EXPENDITURE HAD BEEN INCURRED, DISALLOWANCE UNDER SECTION 14A COULD NOT STAND. CONSEQUENTLY, THE DISALLOWANCE WAS NOT PERMISSIBLE. 15. THE COORDINATE BENCH IN THE CASE OF JUSTICE SAM P BHARUCHA VS. ADDL. CIT IN ITA NO.3889/MUM/2011 DATED 25.07.2012 HAS ANALYZED SIMILAR ISSUE AND CAME TO THE FOLLOWING CONCLUSION: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. SECTION 14A HAS WITHIN IT IMPLICIT NOTION OF APPORTIONME NT IN THE CASES WHERE THE EXPENDITURE IS INCURRED FOR THE COMPOSITE/INDIVISIBLE ACTIVITIES IN WHICH TAXABLE AND NON - TAXABLE INCOME IS RECEIVED. BUT WHEN IT IS POSSIBLE TO DETERMINE THE ACTUAL EXPENDITURE IN RELATION TO THE EXEMPT INCOME OR WHEN NO EXPEND ITURE HAS BEEN INCURRED IN RELATION TO THE EXEMPT INCOME, THEN PRINCIPLE OF APPORTIONMENT EMBEDDED IN SECTION 14 A HAS NO APPLICATION. THE OBJECTIVE OF SECTION 14 A IS NOT ALLOWING TO REDUCE TAX PAYABLE ON THE NORMAL EXEMPT INCOME BY DEBITING THE EXPEN DITURE INCURRED TO EARN THE EXEMPT INCOME. THUS, THE EXPENSES INCURRED TO EARN EXEMPT INCOME CANNOT BE ALLOWED AND THE EXPENSES SHALL BE ALLOWED ONLY TO THE EXTENT THEY ARE RELATED TO THE EARNING OF TAXABLE INCOME. IF THERE IS EXPENDITURE DIRECTLY OR INDIRECTLY INCURRED IN RELATION TO EXEMPT INCOME, THE SAME CANNOT BE CLAIMED AGAINST THE INCOME, WHICH IS TAXABLE AS IT IS HELD BY THE HON'BLE SUPREME COURT IN CASE OF COMMISSIONER OF INCOME - TAX V. WALFORT SHARE AND STOCK BROKERS P. LTD. REPORTED IN 32 6 ITR 1 THAT FOR ATTRACTING THE PROVISIONS OF SECTION 14 A, THERE SHOULD BE PROXIMATE CAUSE FOR DISALLOWANCE WHICH AS RELATIONSHIP WITH THE TAX EXEMPT INCOME. 5.1 THE EXPENDITURE INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME HAS TO BE DISALLOWED. HOWEVER, IT SHOULD BE PROXIMATE RELATIONSHIP BETWEEN THE EXPENDITURE AND THE INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME. ONCE SUCH PROXIMITY RELATIONSHIPS EXIST, THE DISALLOWANCE IS TO BE EFFECTED. IN CASE THE ASSES SEE HAD CLAIMED THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME, IT WAS FOR THE ASSESSING OFFICER TO DETERMINE AS TO WHETHER THE ASSESSEE HAD INCURRED ANY EXPENDITURE IN RELATION TO INCOME WHICH DID NOT FORM PART OF TOTAL INCOME AND IF SO TO QUANTIFY THE EXTENT OF DISALLOWANCE. THUS, IN ORDER TO DISALLOW THE EXPENDITURE UNDER SECTION 14A, THERE MUST BE A LIVE NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INCOME NOT FORMING PART OF TOTAL INCOME. NO NOTIONAL EXPENDITURE CAN BE APPORTIONED FOR THE PURPOSE OF EARNING EXEMPT INCOME UNLESS THERE IS AN ACTUAL EXPENDITURE IN RELATION TO EARNING THE INCOME NOT FORMING PART OF TOTAL INCOME. IF THE EXPENDITURE IS INCURRED WITH A VIEW TO EARN ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 8 OF 14 TAXABLE INCOME AND THERE IS APPARENT DOMINANT AND IMMEDIA TE CONNECTION BETWEEN THE EXPENDITURE INCURRED AND TAXABLE INCOME, THEN NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A MERELY BECAUSE SOME TAX EXEMPT INCOME IS RECEIVED BY THE ASSESSEE. 5.2 AVERTING TO THE FACTS OF THE CASE IN HAND, THE ASSESSEE HAD MAD E A CLAIM THAT NO EXPENDITURE HAS BEEN INCURRED OR CLAIMED FOR EARNING THE EXEMPT INCOME. FROM THE DETAILS OF THE EXPENDITURE, IT IS CLEAR THAT THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE HAS DIRECT NEXUS WITH THE PROFESSIONAL INCOME OF THE ASSESS EE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS USED HIS OFFICIAL MACHINERY AND ESTABLISHMENT FOR EARNING THE EXEMPT INCOME. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING THAT ANY OF THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE IS ATT RIBUTABLE FOR EARNING THE EXEMPT INCOME. IN OTHER WORDS WHEN THE ASSESSING OFFICER HAS NOT POINTED OUT THAT CERTAIN EXPENDITURE IS NOT INCURRED FOR EARNING THE PROFESSIONAL INCOME; BUT ARE INCURRED IN RELATION TO DIVIDEND INCOME OR SUCH EXPENDITURE IS INCU RRED FOR INSEPARABLE AND INDIVISIBLE ACTIVITIES COMPRISING PROFESSIONAL AS WELL AS THE ACTIVITIES ON WHICH IS EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE, THEN IN THE ABSENCE OF ANY SUCH INSTANCE OF EXPENDITURE, FINDING OF ASSESSING OFFICER OR ANY MAT ERIAL TO SHOW THAT THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE AGAINST THE TAXABLE INCOME HAS ANY RELATION FOR EARNING THE EXEMPT INCOME, THE PROVISIONS OF SECTION 14A CANNOT BE APPLIED. 5.3 IN THE CASE OF SHRI PAWAN KUMAR PARAMESHWAR LAL V S. ACIT (SUPRA) THIS TRIBUNAL HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN PARA 4 AS UNDER: 4. AFTER HEARING THE ASSESSEE IN PERSON AND ARGUMENTS OF THE LEARNED D.R. WE ARE OF THE OPINION THAT NO DISALLOWANCE IS CALLED FOR UNDER SECTION 14A. OBVIOUSL Y THE ASSESSEE IS MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR PURPOSE OF BUSINESS AND THESE INVESTMENTS ARE IN HIS PERSONAL CAPACITY. THE A.O. ALSO HAS NOT DISALLOWED ANY EXPENDITURE OF PERSONAL NATURE OUT OF THE INCOME FROM BUSINESS OR PROFESSION IN THE CO MPUTATION OF INCOME IN THE ASSESSMENT ORDER. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE EXPENDITURE CLAIMED IN THE BUSINESS OF SHARE DEALINGS CANNOT BE CORRELATED TO THE INCOMES EARNED IN PERSONAL CAPACITY THAT TOO ON DIVIDEND, PPF INTEREST AND TAX F REE INTEREST ON RBI BONDS. IN VIEW OF THIS, WE ARE OF THE OPINION THAT ESTIMATION OF EXPENDITURE OF RS.20,000/ - OUT OF BUSINESS EXPENDITURE CLAIMED IN BUSINESS ACTIVITY CANNOT BE CONSIDERED FOR BEING INCURRED FOR THIS EARNING OF TAX FREE INCOME OF ABOVE NA TURE. IN VIEW OF THIS DISALLOWANCE ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 9 OF 14 SO MADE UNDER SECTION 14A OF RS..2O,OOO/ - IS DELETED. NOT ONLY THAT THE CIT(A) DIRECTED THE A.O. TO CONSIDER THE ALLOWANCE INVOKING RULE 8D. THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 81 HAS CONSIDERED RULE 8D TO BE APPLICABLE PROSPECTIVE AND SINCE THE ASSESSMENT YEAR INVOLVED IS BEFORE THE INTRODUCTION OF SUB - SECTION (2) & (3) OF SECTION 14A, THERE IS NO QUESTION OF DISALLOWING THE AMOUNTS INVOKING RULE8D. THEREFORE, THE CIT(A) S DIRECTION ON THIS IS SET ASIDE AND THE ADDITIONS SO MADE BY THE A.O. IN THE COMPUTATION OF BUSINESS INCOME IS DELETED. GROUND IS CONSIDERED ALLOWED. 5.4 SIMILARLY IN CASE OF AUCHTEL PRODUCTS LTD (SUPRA), IT WAS HELD BY THIS TRIBUNAL IN PARA 15 HAS UNDER: 15. A BARE PERUSAL OF THE ABOVE PROVISIONS DISALLOWABLE AS PER RULE 8D, IF HE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO EXEMPT INCOME . EVEN IF THE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED IN RESPECT OF EXEMPT INCOME, THE AO IS SUPPOSED TO FOLLOW THE MANDATE OF RULE 8D IF HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE ASSESSEE S CLAIM. TO PUT IT SIMPLY, THE FURTHER DISALLOWANCE U/S.14A IS CALLED FOR WHEN THE AO IS NOT SATISFIED WITH THE ASSESSEE S CLAIM OF HAVING INCURRED NO EXPENDITURE OR SOME AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME. SATISFACTION OF THE AO AS TO THE INCORRECT CLAIM MADE BY THE ASSESSEE IN THIS REGARD IS SINE QUA NON FOR INVOKING THE APPLICABILITY OF RULE 8D. SUCH SATISFACTION CAN BE REACHED AND RECORDED ONLY WHEN THE CLAIM OF THE ASSESSEE IS VERIFIED. IF THE ASSESSEE PROVES BEFORE THE AO THAT IT INCURRED A PARTICULAR EXPENDITURE IN RESPECT OF EARNING T HE EXEMPT INCOME AND THE AO GETS SATISFIED, THEN THERE IS NO REQUIREMENT TO STILL PROCEED WITH THE COMPUTATION OF AMOUNT DISALLOWABLE AS PER RULE 8D. FROM THE ASSESSMENT ORDER, IT IS OBSERVED THAT THE AO SIMPLY KEPT THE ASSESSEE S SUBMISSIONS ON RECORD WIT HOUT APPRECIATING AS TO WHETHER THESE WERE CORRECT OR NOT. HE PROCEEDED ON THE PREMISE AS IF THE DISALLOWANCE AS PER RULE 8D IS AUTOMATIC IRRESPECTIVE OF THE GENUINENESS OF THE ASSESSEE S CLAIM IN RESPECT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. IT IS AN INCORRECT COURSE ADOPTED BY THE AO. THE CORRECT SEQUENCE, IN OUR CONSIDERED OPINION, FOR MAKING ANY DISALLOWANCE U/S. 14A IS TO, FIRSTLY, EXAMINE THE ASSESSEE S CLAIM OF HAVING INCURRED SOME EXPENDITURE OR NO EXPENDITURE IN RELATION TO EXEMPT INC OME, IF THE AO GETS SATISFIED WITH THE SAME, THEN THERE IS NO NEED TO COMPUTE DISALLOWANCE AS PER RULE 8D. IT IS ONLY WHEN THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE HAVING BEEN IN CURRED IN RELATION TO ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 10 OF 14 EXEMPT INCOME, THAT THE MANDATE OF RULE 8D WILL OPERATE. IN THE INSTANT CASE, THE AUTHORITIES BELOW HAVE DIRECTLY GONE TO THE SECOND STAGE OF COMPUTING DISALLOWANCE U/S. 14A AS PER RULE 8D WITHOUT RENDERING ANY OPINION ON THE CORRECTN ESS OR OTHERWISE OF THE ASSESSEE S CLAIM IN THIS REGARD. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF AO TO RE - COMPUTE DISALLOWANCE, IF ANY, IN ACCORDANCE WITH OUR ABOVE OBSERVATIONS AFTER DULY EXAMINING T HE ASSESSEE S CLAIM IN THIS REGARD. 6. IN VIEW OF THE ABOVE DISCUSSION AND FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT NO DISALLOWANCE UNDER SECTION 14A IS CALLED FOR WHEN THE ASSESSEE HAS NOT INCURRED AND CLAIMED ANY EX PENDITURE FOR EARNING THE EXEMPT INCOME. 16. SIMILAR VIEWS WERE ALSO EXPRESSED BY THE COORDINATE BENCHES IN THE CASE OF RELAXO FOOTWEARS LTD, VS. ADDL. CIT (2012) 50 SOT 102 AND PRIYA EXHIBITORS (P) LTD VS. ACIT (2012) 54 SOT 356. IN THE CASE OF RELAX O FOOTWEARS LTD, IT WAS HELD AS UNDER: THE ASSESSING OFFICER SHOULD HAVE CONSIDERED THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO EARNING THE EXEMPT INCOME. IF THE CLAIM WAS NOT FOUND TO BE IN CONSONANCE WITH THE FACTS ON RECORD, IT COULD HAVE BEEN REJECTED AND DISALLOWANCE COULD HAVE BEEN MADE AS PER RULE 8D. HOWEVER, IT IS FOUND THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AT ALL AND HE HAS STRAIGHTWAY EMBARKED UPON COMPUTING DISALLOWANCE UNDER RULE 8D. THE COMMISSIONER (APPEALS) MADE AN ASSUMPTION THAT WHENEVER EXEMPT INCOME IS EARNED THERE WILL BE SOME EXPENDITURE INCURRED IN RELATION THERETO. SUCH PRESUMPTION CANNOT FORM THE BASIS FOR MAKING DISALLOWANCE UNDER RULE 8D. 17. IN THE CASE OF PRIYA EXHIBITORS (P) LTD VS. ACIT (2012) 54 SOT 356 IT WAS HELD AS UNDER: FROM THE CAREFUL STUDY OF THE OBSERVATIONS MADE BY THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA), IT IS APPARENT THAT FIRST THE ASSESSING OFFICER HA S TO DETERMINE THE CLAIM OF THE ASSESSEE REGARDING EXPENSES WHICH NEITHER THE ASSESSING OFFICER NOR THE COMMISSIONER (APPEALS) HAS DONE IN THE INSTANT CASE. IN FACT, THE SAID DECISION GOES AGAINST THE DEPARTMENT ITSELF IN SO FAR AS THEIR LORDSHIPS HAS HEL D THAT THE ASSESSING OFFICER MUST IN THE FIRST INSTANCE DETERMINE WHETHER THE CLAIM OF THE ASSESSEE IS CORRECT AND DETERMINATION MUST BE MADE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE LEGISLATURE DIRECTS HIM TO FOLLOW RULE 8D ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 11 OF 14 ONLY WHERE THE ASSESS ING OFFICER IS NOT SATISFIED WITH THE CLAIM OF ASSESSEE. 18. AFTER CONSIDERING THE PRINCIPLES LAID DOWN BY VARIOUS JUDGMENTS, IT IS IMPERATIVE THAT THE ASSESSING OFFICER CAN INVOKE RULE 8D ONLY WHEN HE RECORDS SATISFACTION IN REGARD TO THE CORRECTNES S OF THE CLAIM OF THE ASSESSEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE CONDITION PRECEDENT FOR THE ASSESSING OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE ASSESSING OFFI CER MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMP T INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. THEREFORE, IT IS ALL THE MORE NECESSARY THAT AO HAS TO EXAMINE THE ACCOUNTS OF ASSESSEE FIRST AND THEN IF HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM, ONLY HE CAN INVOKE RULE 8D. NO SUCH EXAMINATION WAS MADE OR SATISFACTION WAS RECORDED BY AO IN THIS CASE. IT WAS NOTICED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AT ALL AND HE HAS STRAIGHTWAY EMBARKED UPON COMPUTING DISALLOWANCE UND ER RULE 8D ON THE PRESUMPTION THAT PORT FOLIO MANAGEMENT INVOLVES ATLEAST 2% OF CHARGES. DISALLOWANCE UNDER SECTION 14A REQUIRED FINDING OF INCURRING OF EXPENDITURE AND WHERE IT WAS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAD BEEN INCURRED, D ISALLOWANCE UNDER SECTION 14A COULD NOT STAND. WE NOTICE THAT ASSESSEE ITSELF DISALLOWED THE INTEREST WHICH IS DIRECTLY APPLICABLE, DMAT CHARGES AND ADMINISTRATIVE EXP ON ESTIMATION TOTALING TO RS.1,55,44,610. ASSESSEE IS A HUNDRED CRORE TURNOVER COMPANY . AO HAS NOT EXAMINED ANY EXPENDITURE CLAIMED IN P& L ACCOUNT SO AS TO RELATE TO EXEMPT INCOME, NOR GAVE A FINDING THAT ASSESSEE CLAIM IS NOT CORRECT FOR ANY REASON. RULE 8D CAN NOT BE INVOKED DIRECTLY WITHOUT SATISFYING ABOUT THE CLAIMS OR OTHERWISE. CONSEQUENTLY, THE DISALLOWANCE WAS NOT PERMISSIBLE. WE THEREFORE, ALLOW THE GROUND OF APPEAL. 5.2. CONSISTENT WITH THE VIEW TAKEN THEREIN, AS THE ASSESSING OFFICER HAS NOT RECORDED AS TO HOW THE SAID EXPENDITURE CAN BE SAID TO HAVE BEEN INCURRED IN RELATION WITH EARNING OF EXEMPT INCOME, THE QUESTION OF DISALLOWANCE U/S 14A R.W. RULE 8D DOES NOT ARISE. IN THE RESULT THE FINDING OF THE FIRST APPELLATE AUTHORITY IS UPHELD AND THIS GROUND IS DISMISSED. ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 12 OF 14 6. GROUND NO.2 IS ON THE ISSUE OF HIRE PURCHASES . THE LD.CIT(APPEALS) AT PARA 8.3 HELD AS FOLLOWS. 8.3. I HAVE CONSIDERED THE FACTS OF THE CASE, GROUNDS OF APPEAL, PERUSED THE ASSESSMENT ORDER U/S 143(3), WRITTEN SUBMISSIONS AND ALSO THE RETURNS AND ORDER OF ASSESSMENT PASSED UNDER D - VAT RULES WHICH IS PLACED ON RECORD. IT IS NOTED THAT AN ADVERSE INFERENCE WAS DRAWN BY THE ASSESSING OFFICER BASED ON THE PRESUMPTION THAT THE TITLE PASSES ON THE DATE OF THE INVOICE AND NOT ON THE DATE WHEN THE GOODS ARE ACTUALLY RECEIVED BY THE APPELLANT. THE DATE O F INVOICE MERELY INDICATES THAT THE GOODS WERE UNDER DISPATCH BY THE SUPPLIER OR IN TRANSIT FOR THE SAID ULTIMATE DESTINATION. AN INVOICE OR BILL IS COMMERCIAL DOCUMENT ISSUED BY A SELLER TO THE BUYER INDICATING THE PRODUCTS, QUANTITIES AND AGREED PRICES FOR PRODUCTS OR SERVICES THAT HAS BEEN PROVIDED TO THE BUYER. AN INVOICE INDICATES THE SALE TRANSACTION ONLY. PAYMENT TERMS ARE INDEPENDENT AND ARE USUALLY INCLUDED ON THE INVOICE. IN SHORT IT IS MONEY OWED OR OWING. FURTHER, THE AR OF THE APPELLANT A RGUED THAT THESE PURCHASES WERE DULY ACCOUNTED FOR BY THE APPELLANT IN FROM NO.D - VAT 30 RETURN AND DULY ASSESSED TO D - VAT AS PER THE ASSESSMENT ORDER PLACED ON RECORD WHEREBY THE PURCHASES WERE ASSESSED AS PER THE PURCHASES MADE BY THE APPELLANT FOR THE A SSESSMENT YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE DISCUSSION, THE DISALLOWANCE OF RS.18,53,496/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PRIOR PERIOD PURCHASES IS DELETED. 6.1. THE ASSESSING OFFICER HAS MADE THE ADDITIONS IN QUESTION BASED O N THE DATES OF INVOICES. THE DATE OF INVOICE IS THE DATE OF DISPATCH BY THE SUPPLIER AND NOT THE DATE OF RECEIPT BY THE ASSESSEE. THE ASSESSEE HAD SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE GOODS IN QUESTION WERE RECEIVED RUING THE P.Y. AND HENCE R ECORDED AS PURCHASES. THIS SUBMISSION, IN OUR VIEW, WAS WRONGLY REJECTED BY THE ASSESSING OFFICER. THE FIRST APPELLATE AUTHORITY HAS RIGHTLY RELIED ON THE VAT RETURNS OF THE ASSESSEE AND THE SALES TAX ASSESSMENTS AND UPHELD THE CONTENTIONS OF THE ASSESS EE. ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 13 OF 14 6.2. EVEN OTHERWISE, IF THESE PURCHASES WERE TO BE TREATED AS PREVIOUS YEAR PURCHASES, THEN THE LOGICAL CONCLUSION WOULD BE THAT THE CLOSING STOCK OF THE P.Y. WOULD BE HIGHER BY THAT AMOUNT OF PURCHASES AND CONSEQUENTLY THE OPENING STOCK OF THE CURRENT YEAR SHOULD ALSO BE INCREASED BY AN EQUAL AMOUNT. IF SUCH AN INCREASE IS MADE THEN THERE IS NO EFFECT ON THE PROFIT AND LOSS ACCOUNT. THUS WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE ASSESSE E. 7. GROUND NO.3 IS ON THE ISSUE OF ADDITION OF NOTIONAL RENT ON THE PROPERTY AT HYDERABAD. THE LD.CIT(APPEALS) HAS GIVEN A FINDING THAT THE PROPERTY AT HYDERABAD IS SUBJECT TO RENT CONTROL LEGISLATION AND UNDER THOSE CIRCUMSTANCES MUNICIPAL VALUATION IS ADOPTED AS THE ANNUAL VALUE U/S 23(1)(A) OF THE ACT . WE FIND NO INFIRMITY IN THIS FINDING. IN THE RESULT THIS GROUND IS DISMISSED. 8. IN THE RESULT REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H SEPTEMBER , 2014. S D / - S D / - (DIVA SINGH) ( J.SUDHAKAR REDDY ) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: THE 2 4 T H SEPT. 2014 *MANGA ITA NO. 338/DEL/2013 ASSESSMENT YEAR 2009 - 10 RAVINDER KUMAR AHUJA (HUF), NEW DELHI PAGE 14 OF 14 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR