Shri Harish M. Kukreja, Ahmedabad V. The Income Tax Officer, Ward-7(3), Ahmedabad

ITA 3508/AHD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5282 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMEET KUMAR VERMA
• Keywords: Earning of tax free income; Period of limitation; Proportionate interest; Time period of passing order
• Section: 143(3); 14A

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 3508/AHD/2016 ( ASSESSMENT YEAR : 2008-09) SHRI HARISH M. KUKREJA 22, SHANTINAGAR SOCIETY, USMANPURA, AHMEDABAD 380013 / VS. THE INCOME-TAX OFFICER WARD 7(3), NOW WARD 1(3)(2), PRATYAKSH KAR BHAVAN, NR. PANJARA POLE, AMBAWADI, AHMEDABAD ./ ./ PAN/GIR NO. : AFOPK6389P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI JAIMIN SHAH, A.R. / RESPONDENT BY : SHRI SUMEET KUMAR VERMA, SR.D.R. DATE OF HEARING 24/01/2019 !'# / DATE OF PRONOUNCEMENT 29/01/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-III, AHMED ABAD (CIT(A) IN SHORT), DATED 28.06.2013 ARISING IN THE ASSESSME NT ORDER DATED 03.12.2010 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 20 08-09. ITA NO. 3508/AHD/16 [SHRI HARISH M. KUKREJA VS. ITO] A.Y. 2008-09 - 2 - 2. THE SOLITARY ISSUE IN THE CAPTIONED APPEAL AG ITATED BY THE ASSESSEE IS TOWARDS DISALLOWANCE OF INTEREST AMOUNT ING TO RS.11,47,958/- COMPUTED IN TERMS OF RULE 8D(2)(II) UNDER THE UMBRELLA OF SECTION 14A OF THE ACT CONFIRMED IN AN EX PARTE ORDER PASSED BY THE CIT(A). 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEA RNED AR FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THERE IS A DELAY OF 1191 DAYS IN FILING THE APPEAL ON ACCOUNT OF VALID REASONS AS POINTED OUT IN THE SEPARATE PETITION FILED BY WAY OF AFFIDAVIT. THE L EARNED AR SUBMITTED THAT THE DELAY IS BROADLY ON ACCOUNT OF A PPLICATION FOR RECTIFICATION PENDING BEFORE THE CIT(A). THE LEARN ED AR THEREAFTER SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE AND ENDORSED BY THE HONBLE SUPREME COURT AND THEREFORE THERE WAS NO REASON FOR THE ASSESSEE NOT TO PREFER THE APPEAL BEFORE THE ITAT WITHIN THE STIPULATED LIMITATION PERIOD. LEARNED AR FOR THE ASSESSEE THUS SOUGHT CONDONATION OF THE DELAY O N THE STRENGTH OF PALPABLE BONAFIDES ON THE PART OF THE ASSESSEE. CON SIDERING THE CIRCUMSTANCES NARRATED BY THE AR, WE ARE SATISFIED TOWARDS THE EXISTENCE OF SUFFICIENT CAUSE FOR DELAY IN FILING A PPEAL BEFORE THE TRIBUNAL. WE ALSO OBSERVE THAT NO PREJUDICE WILL B E CAUSED TO THE REVENUE BY SUCH CONDONATION PER SE AS THE ISSUE INVOLVED IS PRIMA FACIE LEGAL IN NATURE AND CAN BE ADJUDICATED ON THE BASIS OF ASSERTIONS MADE IN THE ORDERS OF THE REVENUE AUTHOR ITIES ITSELF WITHOUT GOING INTO THE FACTUAL ASPECTS. THE DELAY IS THUS CONDONED. 4. ON MERITS, THE LEARNED AR ADVERTED OUR ATTENTION TO THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HA S EARNED DIVIDEND INCOME OF RS.17,819/- WHICH IS CLAIMED EXE MPT UNDER S.10(34) OF THE ACT. AS AGAINST THE AFORESAID EXEM PTED INCOME, THE ITA NO. 3508/AHD/16 [SHRI HARISH M. KUKREJA VS. ITO] A.Y. 2008-09 - 3 - AO HAS EMBARKED UPON DISALLOWANCE OF PROPORTIONATE INTEREST EXPENDITURE TO THE TUNE OF RS.11,47,958/- UNDER S. 14A OF THE ACT. THE LEARNED AR POINTED OUT THAT IT IS SETTLED POSIT ION OF LAW THAT DISALLOWANCE OF EXPENDITURE IN EXCESS OF EXEMPT INC OME IS NOT PERMISSIBLE UNDER S. 14A OF THE ACT. THE LEARNED A R REFERRED TO THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. STATE BANK OF PATIALA 393 ITR 476 (2017) (P&H) WHEREIN IT HAS BEEN CLEARLY HELD THAT DISALLOWANCE UNDER S. 14A OF THE ACT CANNOT EXCEED THE AMOUNT OF EXEMPT INCOME. THE LEA RNED AR THEREAFTER SUBMITTED THAT THE SPECIAL LEAVE PETITIO N FILED BY THE REVENUE AGAINST THE AFORESAID DECISION OF THE HONB LE GUJARAT HIGH COURT WAS DISMISSED ON MERITS BY THE HONBLE SUPREM E COURT IN SLP (CIVIL) DIARY NO(S). 24323/2018 DATED 08.10.201 8. THE LEARNED AR ACCORDINGLY SUBMITTED THAT ACTION OF THE LOWER A UTHORITIES FOR DISALLOWANCE OF INTEREST EXPENDITURE IN EXCESS OF E XEMPT INCOME IS WITHOUT AUTHORITY OF LAW. THE LEARNED AR ACCORDING LY SUBMITTED THAT THE DISALLOWANCE AT BEST IS REQUIRED TO BE RES TRICTED TO RS.17,819/- INSTEAD OF RS.11,47,958/-. 5. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SOLITARY ISSUE INVOLVED IN THE PRESENT APPEAL IS TO WARDS EXTENT OF DISALLOWANCE PERMISSIBLE UNDER S.14A OF THE ACT. W E FIND MERIT IN THE PLEA RAISED ON BEHALF OF THE ASSESSEE THAT THE DISALLOWANCE UNDER S.14A OF THE ACT CANNOT SURPASS THE QUANTUM OF EXEM PT INCOME IN VIEW OF THE LONG LINE OF JUDICIAL PRECEDENTS PREVAI LING IN THIS REGARD INCLUDING THE DECISION REFERRED AND RELIED UPON BY THE ASSESSEE IN STATE BANK OF PATIALA (SUPRA) AGAINST WHICH THE SLP OF THE REVENUE ITA NO. 3508/AHD/16 [SHRI HARISH M. KUKREJA VS. ITO] A.Y. 2008-09 - 4 - STANDS DISMISSED BY THE HONBLE SUPREME COURT OF IN DIA. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) I N THIS REGARD AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO THE E XTENT OF THE EXEMPT INCOME. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 29/01/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 29/01/20 19