RAJENDRAPRASAD JHUNJHUNWALA, MUMBAI V. ITO 12(1)(2), MUMBAI

ITA 348/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3461 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-05-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJARSHI DWIVEDI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 348 /MUM/2012 ASSESSMENT YEAR: 2008-09 RAJENDRAPRASAD JHUNJHUNWALA 21, KHATAU BLDG. 40/48 BANK STREET 2 ND FLOOR MUMBAI 400 001 PAN: AACPJ 1705 B VS. ITO 12(1) (2) EARNEST HOUSE 5 TH FLOOR NARIMAN POINT MUMBAI 400021 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI RAJARSHI DWIVEDI DATE OF HEARING : 09.05.2013 DATE OF PRONOUNCEMENT : 19.06.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER LD.CIT(A) -23, MUMBAI DATED 02.11.2011 FOR THE ASSESSMENT YEAR 200 8-09. THE ONLY ISSUE ARISING OUT OF THE GROUNDS OF APPEAL RELATES TO THE DISALLOWANCE/A DDITION MADE BY THE AO U/S 14A READ WITH RULE 8D OF RS.8,27,828/- AND THE SAME CONFIRME D BY THE LD.CIT(A). 2. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL ENGA GED IN THE BUSINESS OF DEALING IN SHARES DURING THE YEAR UNDER CONSIDERATION WHILE SH OWING A TAX FREE INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN, DIVIDEND, INTEREST OF PPF ETC HAD NOT SHOWN ANY EXPENDITURE INCURRED FOR EARNING THE SAID INCOME. HOWEVER, IN T HE ASSESSMENT FRAMED U/S 143(3), THE AO HAD WORKED OUT THE DISALLOWANCE AT RS.8,27,828/- BY INVOKING SECTION 14A R.W. RULE 8D AND ADDED THE SAME TO THE TOTAL INCOME OF THE AS SESSEE AS THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE OUT OF THE OTHER EXPENDIT URE BEING ADMINISTRATIVE EXPENSES DEBITED IN THE P & L ACCOUNT TO EARN THE EXEMPT INC OME BY NOTING THAT SIMILAR DISALLOWANCE U/S 14A WERE MADE IN THE EARLIER AYS. 2005-06, 2006-07, 2007-08. THE ITA NO. 348 /MUM/2012 RAJENDRAPRASAD JHUNJHUNWALA ASSESSMENT YEAR: 2008-09 2 LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD IT IS PERTINENT TO MENTION THAT THE AO CAN INVOKE RULE 8D ONLY WHEN HE RECORDS HIS DIS- SATISFACTION IN REGARD TO THE CORRECTNESS OF THE CL AIM OF THE ASSESSEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE CONDITION PRECEDENT F OR THE AO ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCU RRED IN RELATION TO EXEMPT INCOME IS THAT THE AO MUST RECORD THAT HE IS NOT SATISFIED WI TH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPEN DITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE AO WOULD HAVE TO IND ICATE 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 CORR ECTNESS OF THE CLAIM, ONLY HE CAN INVOKE RULE 8D. NO SUCH EXAMINATION HAS BEEN MADE OR DIS-S ATISFACTION RECORDED BY AO IN THIS CASE. IT IS NOTICED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AT ALL AND HE HAS STRAIGHTWAY EMBARKED UPON COMPUTI NG DISALLOWANCE UNDER RULE 8D ON THE PRESUMPTION THAT THE ASSESSEE MUST HAVE INCURRE D SOME EXPENDITURE OUT OF THE OTHER EXPENDITURE. IT IS ALSO FOUND THAT AO HAS NOT EXAMI NED ANY EXPENDITURE CLAIMED IN P&L ACCOUNT SO AS TO RELATE TO EXEMPT INCOME, NOR GIVEN A FINDING THAT ASSESSEES CLAIM IS NOT CORRECT FOR ANY REASON. RULE 8D CAN NOT BE INVOKED DIRECTLY WITHOUT SATISFYING ABOUT THE CLAIMS OR OTHERWISE. CONSEQUENTLY, WE DO NOT FIND T HE ORDER OF THE LD.CIT(A) CONFIRMING THE ACTION OF THE AO AS JUST AND FAIR. IN VIEW OF T HAT MATTER WE ARE OF THE VIEW THAT IT WOULD BE JUST AND PROPER TO SET ASIDE THE ISSUE TO THE FILE OF THE AO TO PASS A REASONED ORDER AS REQUIRED FOR INVOKING RULE 8D AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER AND DIRECT ACCORDIN GLY. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JUNE, 2013. SD/- SD/- (P.M.JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19.06.2013. *SRIVASTAVA ITA NO. 348 /MUM/2012 RAJENDRAPRASAD JHUNJHUNWALA ASSESSMENT YEAR: 2008-09 3 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.