S. GANESH, MUMBAI V. ADDL CIT RG 11(2), MUMBAI

ITA 3565/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8268 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 19-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: S GANESH
• Keywords: Unexplained investment; Earning of tax free income; Non-deduction of tax
• Section: 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI RAJENDRA (ACCOUNTANT MEMBER) ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 S. GANESH, 10, 2 ND FLOOR, FAIR FIELD, ROAD NO.4, CHURCHGATE, MUMBAI-20. PA NO.AAGPS 5047 M ADDL. CIT, RANGE 11(2), MUMBAI. (APPELLANT) VS (RESPONDENT) APPELLANT BY : SHRI S.GANESH RESPONDENT BY: SHRI GIRIJA DAYAL DATE OF HEARING: 22 .10.2012 DATE OF PRONOUNCEMENT: 16 . 11.2012 ORDER PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2007-08 AGAINST ORDER DATED 20.3.2012 OF LD CIT(A)-3 ON THE FOLLOWING GR OUNDS: 1). THE C.I.T (A) ERRED GROSSLY IN CONFIRMING THE ADDITION OF RS. 2,93,50,000/- IN RESPECT OF MUTUAL FUND INVESTMENTS . 2). THE C.I.T (A) ERRED IN CONFIRMING THE ADDITION IN RESPECT OF INVESTMENTS MADE BY THE APPELLANTS MOTHER, S. RAJA LAKSHMI , WHO IS A SEPARATE ASSESSEE, AND WHOSE DECLARED DIVIDEND AND OTHER INCOME IS FAR MORE THAN THE INVESTMENTS MADE IN HER NAME. 3). THE C.I.T (A) ERRED GROSSLY IS COMPLETELY DISRE GARDING THE ITAT ORDER IN FAVOUR OF THE APPELLANT ON THIS ISSUE IN THE EAR LIER ASST. YEAR. 4). THE C.LT (A) FAILED TO CONSIDER AND APPRECIATE THE DETAILED AND FULLY DOCUMENTED EXPLANATION GIVEN BY THE APPELLANT IN RE SPECT OF EACH M.F INVESTMENT AND INSTEAD RELIED BLINDLY ON THE REMAND REPORT OF THE ASSESSING OFFICER WHICH AGAIN DID NOT PROPERLY CONS IDER THE APPELLANTS EXPLANATION AND THE DOCUMENTS RELATING THERETO. ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 2 5). THE C.I.T (A) COMPLETELY FAILED TO APPRECIATE T HAT THERE WAS BOUND TO BE A SMALL TIME GAP BETWEEN THE DATE OF INVESTMENT AS PER THE AIR REPORT AND THE DATE OF DEBIT OF THE PAYMENT IN THE APPELLANTS BANK ACCOUNT, AND THIS WAS NO REASON AT ALL FOR TREATING THE INVESTMENT AS UNEXPLAINED AND ADDING IT TO THE APPELLANTS INCOME . 6). THE C.I.T(A) FAILED TO APPRECIATE THAT IT WAS N OT THE CASE OF THE I.T. DEPARTMENT THAT THE APPELLANT HAD ACQUIRED SOME OTH ER INVESTMENT OUT OF THE PAYMENT DEBITED IN THE APPELLANTS BANK ACCO UNT. 7). THE CIT(A) FAILED TO APPRECIATE THAT THE INVEST MENT OF RS.1,00,00,000/- IN HSBC MUTUAL FUND WAS FULLY EXPL AINED AND THE PAYMENT FOR THIS INVESTMENT WAS DEBITED TO THE APPE LLANTS BANK ACCOUNT ON 22.2.2007. 8) THE LD CIT(A) AND THE AO IN HIS REMAND REPORT ER RED GROSSLY IN STATING THAT THE SAID PAYMENT OF RS.1,00,00,000 RELATED TO FRANKLIN TEMPLETON F.M. AND NOT TO HSBC M.F. 9. THE LD CIT(A) AND THE AO ERRED GROSSLY IN COMPLE TELY DISREGARDING THE COMPLETE ACCOUNT STATEMENT OF THE APPELLANTS INVES TMENT IN FRANKLIN TEMPLETON M.F., WHICH WAS PRODUCED BEFORE THEM, AND WHICH CLEARLY ESTABLISHED THAT NO SUCH INVESTMENT OF RS 1 CRORE I N FRANKLIN TEMPLETON M.F WAS MADE BY THE APPELLANT BY THE SAID PAYMENT D ATED 22/2/07. 10). THE C.I.T(A) AND THE A.O ERRED IN REJECTING TH E APPELLANTS EXPLANATION IN RESPECT OF THE INVESTMENT OF RS 50 L AKHS MADE BY SRL, MERELY BECAUSE THERE WAS A SMALL TIME GAP BETWEEN T HE DATE OF PAYMENT IN THE BANK ACCOUNT ( 18/5/06) AND THE DATE OF INVE STMENT AS PER THE AIR INFO .(9/6/06) 11). THE CJ.T(A) AND THE A.O COMPLETELY FAILED TO A PPRECIATE THAT IT WAS NOT THE I.T. DEPTS CASE THAT ANY OTHER INVESTMENT HAD BEEN ACQUIRED BY S. RAJALAKSHMI OUT OF THE SAID PAYMENT MADE ON 18/5 /06. 12). THE C.I.T(A) AND THE A.O ERRED GROSSLY IN COMP LETELY DISREGARDING THE APPELLANTS EXPLANATION THAT THE PAYMENT FOR TH E FRANKLIN TEMPLETON M.F INVESTMENT MADE ON 30/3/07 WAS DEBITED IN THE A PPELLANTS BANK ACCOUNT IN THE SUBSEQUENT FINANCIAL YEARS, AND THAT THE APPELLANT HAD NOT ACQUIRED ANY OTHER INVESTMENT OUT OF THAT PAYMENT. 13). THE C.I.T(A) ERRED GROSSLY IN CONFIRMING THE A DDITION ON ACCOUNT OF NON-RECONCILIATION OF PROFESSIONAL FEES , IN COMPLE TE DISREGARD OF THE ITATS ORDER IN FAVOUR OF THE APPELLANT IN THE EARL IER ASST. YEAR. 14). THE C.I.T(A) ERRED GROSSLY IN COMPLETELY DISRE GARDING THE DETAILED REASONS GIVEN BY THE APPELLANT AS TO WHY IT WAS IMP OSSIBLE FOR THE ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 3 APPELLANT TO MAKE AN ITEM BY ITEM RECONCILIATION OF THE FEES , WHICH WAS ACCEPTED BY THE ITAT AND EVEN BY THE A.O HIMSELF, I N OTHER ASST. YEARS. 15). THE C.I.T(A) ERRED IN UPHOLDING THE DISALLOWAN CE OF RS 18,81,658/- MADE BY THE APPELLANT U/S 14A OF THE I.T. ACT. 16). THE C.I.T(A) FAILED TO APPRECIATE THAT THE I.T . DEPARTMENT WAS UNABLE TO IDENTIFY ANY SPECIFIC ITEM OF EXPENDITURE INCURRED BY THE APPELLANT WHICH HAD ANYTHING TO DO WITH THE TAX-FRE E DIVIDEND INCOME EARNED BY THE APPELLANT. 17). THE C.I.T(A) ERRED GROSSLY IN COMPLETELY DISRE GARDING THE I.T.A.T ORDER IN THE APPELLANTS OWN CASE WHICH LIMITED THE DISALLOWANCE U/S 14A TO RS 50,000/- ONLY. 18). THE IMPUGNED ORDER OF THE C.I.T(A) IS CONTRARY TO THE JUDGMENTS OF THE SUPREME COURT AND BOMBAY HIGH COURT AND PUNJAB & HARYANA HIGH COURT ON S.14A. 2. THE ASSESSEE IS A SENIOR ADVOCATE BY PROFESSION AND APPEARED IN PERSON TO PRESENT HIS CASE. 3. AT THE TIME OF HEARING, WHEN ATTENTION OF THE AS SESSEE WAS DRAWN THAT GROUNDS OF APPEAL TAKEN BY HIM ARE ARGUMENTATIVE IN NATURE AND WHETHER HE WOULD LIKE TO FILE CONCISE GROUNDS OF APPEAL, ASSESSEE SUBMITTED THAT ONLY THREE ISSUES ARE INVOLVED AND THE SAME BE CONSIDERED IN STEAD OF ADJOURNING THE M ATTER TO FILE CONCISE GROUNDS OF APPEAL AS HE HAS COME FROM OUTSIDE MUMBAI. 4. IN VIEW OF THIS, WE HAVE CONSIDERED THE EXISTING GROUNDS OF APPEAL AS IT IS AND HEARD THE ASSESSEE AS WELL AS LD D.R. AT LENGTH. 5. FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE IS A SR. ADVOCATE BY PROFESSION AND FILED HIS E-RETURN OF INCOME ON 31.10.2007 DECLARI NG TOTAL INCOME AT RS.5,68,04,094. THE ASSESSMENT WAS COMPLETED ON 31.12.2009 U/S.143( 3) OF THE ACT ASSESSING TOTAL INCOME AT RS.30,45,15,670. ASSESSEE FILED APPEAL B EFORE LD CIT(A) WHICH WAS ALLOWED IN PART. HENCE, THIS APPEAL BY THE ASSESSEE. ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 4 6. IN GROUND NOS.1 TO 12 OF APPEAL, THE ISSUE INVOL VED IS IN REGARD TO CONFIRMING THE ACTION OF AO TO MAKE THE ADDITION OF RS.2,93,50,000 - IN RESPECT OF MUTUAL FUNDS INVESTMENT. 7. THE ASSESSING OFFICER HAS STATED THAT AS PER AIR INFORMATION, ASSESSEE HAS MADE TOTAL INVESTMENTS AMOUNTING TO RS.23,83,43,112/-. ASSESSEE WAS ASKED TO RECONCILE THE INVESTMENT MADE BY HIM. ASSESSEE VIDE HIS LETTER D ATED 14.12.2009 GAVE THE BIFURCATION OF THE INVESTMENTS MADE FROM THE JOINT ACCOUNT HELD BY THE FOLLOWING FOUR ENTITIES/PERSONS IN HDFC A/C AS UNDER: S. GANESH (INDIVIDUAL) : 11,29,50,000 S.GANESH (HUF) : 7,80,50,000 K.R.SRINIVASAN : 3,76,43,112 S.RAJLAXMI : 1,69,00,000 7.1 AO HAS STATED THAT ASSESSEE FAILED TO SUBMIT TH E MUTUAL FUNDS STATEMENTS TO SUBSTANTIATE THE NAME OF THE HOLDERS OF THESE INVES TMENTS. ASSESSEE VIDE LETTER DATED 14.12.2009 STATED THAT THE ASSESSEE MAINTAINS A COM MON BANK ACCOUNT BETWEEN HIMSELF, HIS OWN HUF, MR. K.R. SRINIVASAN, FATHER & MRS. S. RAJALAXMI, MOTHER. AO STATED THAT ASSESSEE WAS ASKED VIDE SHOW CAUSE DATE D 04.12.2009 AS TO WHY THE AMOUNTS STATED IN THE AIR AS REGARDS THE INVESTMEN TS SHOULD NOT BE ADDED. ASSESSEE HAS NEITHER FILED THE MUTUAL FUND PURCHASE STATEMEN TS, NEITHER HAS GIVEN THE DETAILS REGARDING THE BALANCE SHEET AND THE OTHER DETAILS O F THE INVESTMENTS OF THE INDIVIDUALS AS STATED TO BE OWNING THE INVESTMENTS AS CLAIMED B Y THE ASSESSEE. THAT ASSESSEE STATED THAT INVESTMENTS HAVE BEEN MADE BY HIM SINGL Y OR JOINTLY BY HIS PARENTS OR BY THE HUF. HOWEVER, DEMARCATION OF FUNDS AND SOURCES AND WITH EXPLAINABLE SOURCES HAS NOT BEEN GIVEN INDIVIDUALLY FOR THE FOUR ACCOUNT HOLDER S. 7.2 AO HAS FURTHER STATED THAT ON VERIFICATION OF B ALANCE SHEET SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS SHOW N INCREASE OF INVESTMENT OF RS. 10,83,99,143/- AS COMPARED TO LAST YEAR. FURTHER, F ROM THE STATEMENT MADE BY ASSESSEE ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 5 VIDE LETTER DATED 24/12/2009, ASSESSEE HAS MADE THE INVESTMENTS OF RS. 11,29,50,000/-. ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE OF RS. 45 ,50,857/- ON THIS ACCOUNT. 7.3 IN VIEW OF ABOVE, AO MADE THE SAID ADDITION OF RS.23,83,43,112/- TO THE TOTAL INCOME OF ASSESSEE. BEING AGGRIEVED, ASSESSEE FILE D APPEAL BEFORE LD CIT(A). 8. ON BEHALF OF ASSESSEE, BESIDES MAKING SUBMISSION S MADE IN THE LINE OF SUBMISSIONS BEFORE THE AO, SUBMITTED THAT ASSESSEE FILED AT THE TIME OF ASSESSMENT PROCEEDINGS IN RESPECT OF INVESTMENT IN VARIOUS MUT UAL FUNDS ALL THE REQUISITE INFORMATION. FURTHER ASSESSEE SUBMITTED BEFORE LD C IT(A) THE DETAILS IN RESPECT OF INVESTMENTS IN BIRLA MUTUAL FUND OF RS.29,50,000 WR ONGLY MENTIONED IN PARA 1.2.2 (RS.2,95,00,000/-), INVESTMENT IN STANDARD CHARTERE D MUTUAL FUND OF RS.64,00,000/-, INVESTMENT IN STANDARD CHARTERED MUTUAL FUND OF RS. 50,00,000/-. IT WAS SUBMITTED THAT EXCEPT ABOVE THREE INVESTMENTS, ALL THE INVESTMENTS WERE MADE OUT OF BANK ACCOUNT WITH HDFC BANK. IT WAS FURTHER CONTENDED THAT HIS MOTHER SMT. S. RAJALAXMI IS A SEPARATE AND INDEPENDENT ASSESSEE AND NAME OF THE A SSESSEE IN THE SAID INVESTMENTS WERE APPEARING AS SECOND HOLDER. LD CIT(A) SOUGHT REMAND REPORT FROM THE AO. AO SUBMITTED HIS REMAND REPORT DATED 20.2.2012, COPY O F WHICH IS PLACED AT PAGES 2-4 OF PB. LD CIT(A) HAS DISCUSSED THE SAID REMAND REPORT OF THE AO IN PARA 1.2.4 AS UNDER: 1.2.4 THE AO VIDE REMAND REPORT DATED 20.2.2012 HA S STATED THAT ASSESSEE HAS TO EXPLAIN THE INVESTMENT BY POINTING OUT VARIOUS D EBIT SINCE BANK ACCOUNT. HOWEVER, THIS CANNOT BE TAKEN AS COMPLETE EVIDENCE AS THE CHEQUE ISSUED BY THE OF A PARTICULAR AMOUNT ON A PARTICULAR DAY MAYBE FO R SOME OTHER INVESTMENT FOR EXAMPLE, FOR EXAMPLE AN ENTRY NUMBER 9 DATED 21/3/0 7 IS SHOWING INVESTMENT OF RS. 1,00,00,000/- IN HSBC MF AND ASSESSEE HAS SHOWN A BANK ENTRY FOR ITS EXPLANATION, BUT THAT ENTRY OF RS. 1,00,00,000/- IS FOUND TO BE INVESTED IN FRANKLIN TEMPLETON, AND NOT IN HSBC. THE LEDGER PRI NTOUT CONTAINS SHARES IN MUTUAL FUNDS ACCOUNT APART FROM ACCOUNTS OF THE PE RSONS MENTIONED ABOVE. SINCE THE ASSESSEE HAS CLAIMED THAT ALL THE INVESTO RS BELONGING TO THE ASSESSEE HIMSELF AND THE PERSON MENTIONED ABOVE WERE MADE FR OM THE ABOVE-MENTIONED JOINT A/C. IN HDFC BANK, THEREFORE THESE INVESTMENT SHOULD APPEAR IN EITHER OF THE ABOVE MENTIONED LEDGER ACCOUNT. THE INVESTMENTS SHOWN IN AIR WERE VERIFIED WITH REFERENCE TO THE LEDGER ACCOUNTS TAKI NG ABOVE FACTS IN VIEW, IN RESPECT OF AIR ENTRY RELATED TO INVESTMENT IN MUTUA L FUNDS THE FOLLOWING INVESTMENT OF FOUND TO BE UNEXPLAINED AS NO ENTRIES SHOWING IN THESE FUNDS ARE FOUND IN THE LEDGER ACCOUNT. ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 6 SR.NO. AS THE AIR DATE NAME OF THE FUND AMOUNT(RS.) CLAIM BY THE ASSESSEE REASONS FOR REJECTING ASSESSEES EXPLANATION 7 10.10.06 BIRLA MUTUAL FUND 29,50,000 BELONGS TO SRL IS THIS ENTRY NOT FOUND IN THE SRL A/C 9 21.3.07 HSBC M.F. 1,00,00,000 ITS SOURCES THE BANK ENTRY DT.22.2.07 IT IS FOUND THAT THIS ENTRY BELONGS TO FRANKLIN TEMPLETON NOT TO HSBC MUTUAL FUND 16 9.6.06 STANDARD CHARTERED MF 64,00,000 IT BELONGS TO SRL THIS ENTRY NOT FOUND IN THE SRL A/C 17 9.6.06 STANDARD CHARTERED MF 50,00,000 IT BELONGS TO SRL ASSESSEE CLAIMED THAT THE ENTRY DATED 18.5.06 IN THE SRL A/C PERTAINS TO THIS BUT DUE TO DIFFERENCE, IT CANNOT BE TAKEN AS SAME ENTRY 27 30.3.07 FRANKLIN TEMPLETON 50,00,000 NOT A THING IN THE LEDGER A/C OF THIS YEAR TOTAL 2,93,50,000 8.1 LD CIT(A) CALLED FOR COMMENTS OF THE ASSESSEE. AFTER CONSIDERING THE MATERIAL ON RECORD AND THE RECONCILIATION STATEMENT SUBMITTE D BY THE ASSESSEE DURING THE COURSE OF REMAND PROCEEDINGS, HAS CONFIRMED THE ADDITION O F RS.2,93,50,000 OUT OF THE TOTAL ADDITION OF RS.23,83,41,112 MADE BY THE AO. THE SA ID PARA 1.3 OF THE ORDER OF LD CIT(A) READS AS UNDER: I HAVE CONSIDERED THE FACTS AND PERUSED THE MATERI AL ON RECORD. IT IS SEEN THAT THE AO HAS EXAMINED THE RECONCILIATION STATEMENT SU BMITTED BY THE APPELLANT DURING THE COURSE OF REMAND PROCEEDINGS. AS AGAINS T THE TOTAL ADDITION OF RS.23,83,41,112, THE AO STATED THAT THE ABOVE ENTRI ES AMOUNTING TO ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 7 RS.2,93,50,000 AS GIVEN IN THE ABOVE TABLE ARE NOT RECONCILED, HENCE ADDITION OF RS.2,93,50,000 IS SUSTAINED AND BALANCE IS DELETED. 9. HENCE, THIS APPEAL BY THE ASSESSEE. 10. DURING THE COURSE OF HEARING, ASSESSEE REITERAT ED THE FACTS AS STATED BEFORE THE AUTHORITIES BELOW. HE SUBMITTED THAT HIS MOTHER SM T. S.RAJALAXMI IS THE FIRST HOLDER IN RESPECT OF INVESTMENTS OF RS.29,50,000 MADE IN BIRL A MUTUAL FUND, RS.64,00,000 AND RS.50,00,000, RESPECTIVELY IN STANDARD CHARTERED MU TUAL FUND. HE FURTHER REFERRED LETTER DATED 26.11.2009 OF HDFC MUTUAL FUND, COPY P LACED AT PAGE 13 OF PB TO SUBSTANTIATE HIS SUBMISSION THAT HIS NAME APPEARS A S SECOND HOLDER FOR RS.50,00,000 AND RS.64,00,000 AND THE FIRST HOLDER IS HIS MOTHER SMT. S. RAJALAXMI. HE SUBMITTED THAT IF ANY ADDITION IS TO BE MADE, SAME SHOULD BE MADE IN THE HANDS OF HIS MOTHER AND NOT IN HIS HANDS. HE SUBMITTED THAT SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2006-07 IN I.T.A. NO.527/M/2010 VID E ORDER DATED 8.12.2010 AND FURNISHED A COPY OF THE SAID ORDER TO SUBSTANTIATE HIS SUBMISSION. 11. HE FURTHER REFERRED PAGES 9 & 10 OF PB AND SUBM ITTED THAT THE INVESTMENTS IN BIRLA MUTUAL FUND OF RS.29,50,000 HAS ALSO COME FRO M THE ACCOUNT OF HIS MOTHER AND HE IS THE SECOND HOLDER. HE SUBMITTED THAT MUTUAL FUN D HOLDING STATEMENT PLACED AT PAGE 10 OF PB ALSO CONTAINS THE ENTRY OF RS.29,50,000 AN D IN RESPECT THEREOF, HIS MOTHER IS THE FIRST HOLDER. 12. ASSESSEE FURTHER SUBMITTED THAT A SUM OF RS.1 C RORE INVESTED IN HSBC MUTUAL FUND HAS BEEN INVESTED OUT OF HIS BANK ACCOUNT AND REFERRED PAGE 16 OF PB, WHICH IS A COPY OF LETTER DATED 4.5.2012 FROM HSBC GLOBAL ASSE T MANAGEMENT CONFIRMING THAT THE DATE OF INVESTMENT IS DT.21 ST MARCH, 2007 AND THE AMOUNT HAD COME FROM HDFC BANK LTD. ASSESSEE SUBMITTED THAT AO DID NOT ACCEPT THE GENUINENESS OF THE SAID INVESTMENT ON THE GROUND THAT RELEVANT ENTRY RELATES TO INVEST MENT IN FRANKLIN TEMPLETON AND NOT TO HSBC MUTUAL FUND. DURING THE COURSE OF HEARING, A PROPOSAL WAS MADE AS TO WHETHER ASSESSEE COULD FILE THE BANK STATEMENT TO CORROBORA TE THAT THE SAID INVESTMENT OF RS.1 CRORE IN HSBC MUTUAL FUND HAS COME FROM DISCLOSED B ANK ACCOUNT OR THE BANK PARTICULARS THAT THE SAID ENTRY AS POINTED OUT BY T HE AO IN THE REMAND REPORT PERTAINS TO HSBC MUTUAL FUND ACCOUNT, ASSESSEE SUBMITTED THAT H E HAS NO DOCUMENTS TO ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 8 SUBSTANTIATE THE SAME. ASSESSEE ALSO SUBMITTED THA T THE MATTER ALSO SHOULD NOT BE RESTORED TO THE FILE OF AO FOR VERIFICATION AS ASSE SSEE DOES NOT HAVE ANY BANK STATEMENT THAT THE SAID INVESTMENTS IN HSBC MUTUAL FUND TO CO RROBORATE THAT IT WAS OUT OF HDFC BANK LTD. FURTHER, IN RESPECT OF INVESTMENT OF RS. 50 LAKHS IN FRANKLIN TEMPLETON FUND FOR WHICH DATE OF ALLOTMENT IS DT.30.3.2007 AS PER COPY OF LETTER DATED 4.5.2012, PLACED AT PAGE 18 OF PB, ASSESSEE AGAIN COULD NOT CONTROVE RT THE REMAND REPORT THAT SAID INVESTMENT WAS NOT APPEARING IN THE LEDGER ACCOUNT OF THE YEAR. MOREOVER, ON PERUSAL OF THE LEDGER ACCOUNT PLACED AT PAGE 20 OF PB, IT I S OBSERVED THAT SAID AMOUNTS WERE DEBITED IN HDFC BANK LTD SAVING BANK ACCOUNT ON ACC OUNT OF INVESTMENT OF RS.50 LAKHS TO FRANKLIN TEMPLETON ON 3.4.2007 AND WHEREAS DATE OF ALLOTMENT OF THE UNITS IS DATED 30.3.2007. IT IS A FACT THAT ALLOTMENT OF UNITS TO OK PLACE ONLY AFTER THE AMOUNT IS DEBITED TO ASSESSEES BANK AND NOT EARLIER THAN THAT. HENC E, IT CORROBORATES THE FINDINGS OF AO IN THE REMAND REPORT THAT THE SAID INVESTMENT OF RS .50 LAKHS IN FRANKLIN TEMPLETON UNIT ON 30.3.2007 IS NOT CORROBORATED BY ANY BANK STATEM ENT AND ASSESSEE ALSO COULD NOT EXPLAIN AS TO WHY SAID INVESTMENT WAS NOT APPEARING IN THE LEDGER ACCOUNT OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. 13. LD D.R. SUBMITTED THAT ASSESSEE COULD NOT DISCH ARGE THE ONUS THAT LAY UPON HIM TO EXPLAIN THE SOURCE OF INVESTMENT AND, THEREFORE, ADDITION SUSTAINED BY LD CIT(A) BE CONFIRMED. HOWEVER, LD D.R. COULD NOT CONTROVERT T HE FACTS ON RECORD THAT INVESTMENT OF RS.29,50,000 IN BIRLA MUTUAL FUND AND RS.64,00,000 AND RS.50,00,000, RESPECTIVELY IN STANDARD CHARTERED MUTUAL FUND, THE FIRST HOLDER IS SMT. S.RAJALAXMI, THE MOTHER OF ASSESSEE AND ASSESSEE IS ONLY A JOINT HOLDER. 14. CONSIDERING THE FACTS OF THE CASE AS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS FORCE IN THE SUBMISSI ON OF ASSESSEE THAT INVESTMENTS IN RESPECT OF WHICH ASSESSEE IS THE SECOND HOLDER AND HIS MOTHER IS THE FIRST HOLDER, THE ADDITION, IF ANY, SHOULD HAVE BEEN MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE HANDS OF HIS MOTHER SMT. S.RAJALAXMI FOR THE ABOVE AMOUNT AND NOT IN THE HANDS OF ASSESSEE. FURTHER, WE OBSERVE THAT SMT. S.RAJALAXM I IS ASSESSED TO INCOME TAX UNDER ITO 12(2)(3) AND THE IDENTITY OF ASSESSEES MOTHER IS ESTABLISHED. CONSIDERING THE SAID FACT, WE HOLD THAT THERE IS NO JUSTIFICATION FOR MA KING THE SAID ADDITION OF RS.29,50,000 OF BIRLA MUTUAL FUND AND RS.64,00,000 AND RS.50,00, 000/- EACH IN STANDARD CHARTERED ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 9 MUTUAL FUND IN THE HANDS OF ASSESSEE AS ASSESSEE IS THE SECOND HOLDER OF THE SAID UNITS ALONGWITH HIS MOTHER, WHO IS THE FIRST HOLDER. HEN CE, WE DELETE THE SAID ADDITION AGGREGATING TO RS.1,43,50,000 OUT OF RS.2,93,50,000 SUSTAINED BY LD CIT(A). HOWEVER, AS MENTIONED HEREINABOVE, THAT INVESTMENT OF RS.1 C RORE IN HSBC MUTUAL FUND AND OF INVESTMENT OF RS.50 LAKHS IN FRANKLIN TEMPLETON FUN D, ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE SOURCE OF INVESTMENT WITH ANY BANK DETA ILS OR EVIDENCE ON RECORD. THEREFORE, IN THE ABSENCE OF ANY MATERIAL ON RECORD , WE CONFIRM THE ACTION OF LD CIT(A) IN MAKING THE SAID ADDITION AGGREGATING TO RS.1,50, 00,000. ACCORDINGLY, GROUND NOS.1 TO 12 OF APPEAL TAKEN BY ASSESSEE ARE ALLOWED IN PA RT BY SUSTAINING THE ADDITION OF RS.1.50 CRORES OUT OF TOTAL ADDITION OF RS.2,93,50, 000 SUSTAINED BY LD CIT(A). 15. IN RESPECT OF GROUND NOS.13 & 14 OF APPEAL, AO HAS STATED THAT AS PER AIR INFORMATION, ASSESSEE HAS RECEIVED TOTAL FEES AMOUN TING TO RS.59,28,900. AO HAS MADE THE ADDITION OF RS.59,28,900 ON THE GROUND THAT ASS ESSEE HAS NEITHER FILED THE BREAK UP OF HIS PATY-WISE PROFESSIONAL FEES, NOR HAS GIVEN A STATEMENT AS TO RECONCILE THE PROFESSIONAL FEES ALONGWITH THE BANK STATEMENTS TO SHOW THAT ALL ENTRIES IN THE AIR HAVE BEEN OFFERED TO TAX. BEING AGGRIEVED, ASSESSEE FIL ED APPEAL BEFORE LD CIT(A). 16. LD CIT(A) HAS CONFIRMED PART ADDITION STATING THAT ASSESSEE COULD NOT RECONCILE ALL ENTRIES, DETAILS OF WHICH ARE GIVEN BY HIM AT P AGE 8 OF THE IMPUGNED ORDER AND HAS CONFIRMED THE ADDITION RELATING TO 8 ENTRIES. IT I S RELEVANT TO STATE THAT ON THE BASIS OF ENTRIES OF DETAILS STATED TO BE RECONCILED AGGREG ATE TO RS.36,81,000 OUT OF RS.59,28,900. THEREFORE, ADDITION CONFIRMED BY LD CIT(A) ON ACCOUNT OF NOT ABLE TO RECONCILE THE ENTRIES OF AIR INFORMATION AGGREGATES TO RS.22,47,900. 17. DURING THE COURSE OF HEARING, ASSESSEE SUBMITTE D THAT PROFESSIONAL FEES RETURNED BY ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION IS OF RS.5,64,91,441, WHICH IS FAR MORE THAN THE DETAILS REFLECTED IN THE AIR INFO RMATION OF RS.59,28,900. HE SUBMITTED THAT ALL HIS PROFESSIONAL RECEIPTS WERE DEPOSITED I N ONE BANK ACCOUNT AND ALL FEES ARE RECEIVED BY CHEQUES WHICH CAME FROM THE CLIENT DIRE CTLY OR FROM THE INSTRUCTING ADVOCATES, IN CASE THEY HAVE COLLECTED THE AMOUNTS FROM THE CLIENTS. HE SUBMITTED THAT IDENTICAL ISSUE OF NON-RECONCILIATION OF PROFESSION AL FEES WITH AIR INFORMATION HAS BEEN ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 10 DECIDED BY THE TRIBUNAL IN HIS OWN CASE FOR ASSESSM ENT YEAR 2006-07 IN I.T.A. NO.527/M/2010 VIDE ORDER DATED 8.12.2010 AND FURNIS HED A COPY OF THE SAID ORDER TO SUBSTANTIATE HIS SUBMISSION. HE SUBMITTED THAT THE BASIS ON WHICH THE SAID ENTRY HAS BEEN MADE IN THE ASSESSMENT YEAR UNDER CONSIDERATIO N IS IDENTICAL TO ASSESSMENT YEAR 2006-07. HE SUBMITTED THAT THE ADDITION MADE IN TH E FACTS AND CIRCUMSTANCES OF THE CASE IS NOT JUSTIFIED. 18. ON THE OTHER HAND, LD D.R. DID NOT DISPUTE ABOV E SUBMISSION OF THE ASSESSEE SAVE AND EXCEPT RELYING ON THE ORDER OF LD CIT(A). 19. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTA TIVES OF PARTIES AND PERUSED ORDERS OF AUTHORITIES BELOW AS ALSO THE COPY OF REM AND REPORT PLACED AT PAGES 6-8 OF PB. WE HAVE ALSO GONE THROUGH EARLIER ORDER OF THE TRIB UNAL DT.8.12.2010 (SUPRA). 20. WE OBSERVE THAT AO MADE THE ADDITION OF RS.59,2 8,900 ON THE GROUND THAT ASSESSEE COULD NOT FURNISH PARTY-WISE DETAILS OF PR OFESSIONAL FEES RECEIPTS AND NON- RECONCILIATION OF PROFESSIONAL FEES RECEIPTS WITH A IR INFORMATION. HOWEVER, LD CIT(A) SUSTAINED THE ADDITION IN PART ON THE GROUND THAT S OME OF THE ENTRIES OF AIR INFORMATION COULD NOT BE RECONCILED AS PER REMAND REPORT OF AO. HOWEVER, WE FIND SUFFICIENT FORCE IN THE SUBMISSION OF ASSESSEE THAT ASSESSEE RECEIVE D TOTAL PROFESSIONAL FEES OF RS.5,64,91,441 IN THE ASSESSMENT YEAR UNDER CONSIDE RATION, WHICH IS FAR MORE THAN THE DETAILS REFLECTED IN THE AIR INFORMATION AT RS.59,2 8,900. ASSESSEE ADMITTED BEFORE THE AUTHORITIES BELOW THAT RECONCILIATION OF PROFESSION AL RECEIPTS IS NOT POSSIBLE. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT AMOUNTS D EPOSITED IN THE BANK ACCOUNT ARE ACCOUNTED FOR IN THE ACCOUNTS OF THE ASSESSEE AS PR OFESSIONAL FEES AND BOOKS OF ACCOUNT OF ASSESSEE ARE DULY AUDITED. WE OBSERVE THAT SIMI LAR ISSUE CAME UP FOR CONSIDERATION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 AND THE TRIBUNAL ON SIMILAR FACTS AND CIRCUMSTANCES HAS DELETED THE ADDITION AS SUSTA INED BY LD CIT(A) VIDE PARA 8.2 OF THE SAID ORDER WHICH READS AS UNDER: 8.2, WE FIND SUFFICIENT FORCE IN THE ABOVE SUBMISS IONS OF THE ASSESSEE. ADMITTEDLY, THE REVENUE HAS NOT CONTROVERTED THE SU BMISSIONS OF THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING THE AS SESSMENT PROCEEDINGS AS WELL AS REMAND PROCEEDINGS THAT ALL PROFESSIONAL FEES RECEIVED ARE BY WAY OF CHEQUES AND ALL SUCH CHEQUES HAVE BEEN DEPOS ITED IN HIS ORIENTAL ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 11 BANK OF COMMERCE ACCOUNT, SOUTH EXTENSION BRANCH, N EW DELHI (VIDE LETTER ADDRESSED TO ASSESSING OFFICER ON 8.10.208). THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT BY THE REVENUE AUT HORITIES THAT THE ASSESSEE HAS RECEIVED AMOUNT MORE THAN THE PROFESSI ONAL FEES THAN WHAT HAS BEEN DECLARED BY HIM, NO ADDITION SHOULD HAVE B EEN MADE. IT IS ALSO A FACT THAT THE PROFESSIONAL INCOME DECLARED BY THE ASSESSEE FAR EXCEEDS THE PROFESSIONAL FEES AS PER AIR INFORMATION. THERE MAY BE SO MANY REASONS SUCH AS LOW DEDUCTION OF TAX, NON-DEDUCTION OF TAX, DEDUCTION ON ACCOUNT OF REIMBURSEMENT OF EXPENSES ETC., FOR WHIC H THE FIGURE AS PER THE AIR MAY NOT TALLY WITH THE INCOME DECLARED BY T HE ASSESSEE ON ACCOUNT OF PROFESSIONAL FEES FROM VARIOUS CLIENTS. FURTHER, IT HAS CATEGORICALLY BEEN EXPLAINED BY THE ASSESSEE THAT I T IS NOT PRACTICALLY POSSIBLE TO GIVE DETAILED PARTY USE BREAKUP OF FEES RECEIPTS SINCE THE ASSESSEE RECEIVED HIS FEES EITHER FROM THE CLIENTS OR FROM THE INSTRUCTING ADVOCATES OR CAS, IF THEY HAVE COLLECTED THE AMOUNT S FROM THE CLIENTS. SIMILAR EXPLANATION HAVE BEEN ACCEPTED THE PAST IN SCRUTINY ASSESSMENT AND NO ADDITION HAS BEEN MADE, A FACT ALREADY BROUG HT ON RECORD. IN THIS VIEW OF THE MATTER, WE FIND SUFFICIENT FORCE IN THE SUBMISSIONS MADE BY THE ASSESSEE THAT NO ADDITION IS CALLED FOR ON THIS ACCOUNT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. 21. SINCE FACTS AND THE BASIS FOR MAKING THE ADDITI ON IN ASSESSMENT YEAR UNDER CONSIDERATION ARE IDENTICAL TO ASSESSMENT YEAR 2006 -07, WE, FOLLOWING THE REASONING AS GIVEN BY THE TRIBUNAL IN PRECEDING ASSESSMENT YEAR IN THE CASE OF ASSESSEE VIZ 2006-07, HOLD THAT THE ADDITION SUSTAINED BY LD CIT(A) IS NO T JUSTIFIED AND SAME IS DELETED. HENCE, GROUND NOS.13 & 14 OF APPEAL TAKEN BY ASSESS EE ARE ALLOWED BY DELETING THE ADDITION AS SUSTAINED BY LD CIT(A). 22. IN RESPECT OF GROUND NOS.15 TO 18 OF APPEAL, AO HAS MADE THE DISALLOWANCE OF RS.18,81,658 BY FOLLOWING THE RATIO OF DECISION OF ITAT (SB) IN THE CASE OF DAGA CAPITAL MANAGEMENT SERVICES PVT LTD. 312 ITR 1(AT) AND ACCO RDINGLY, APPLIED THE PROVISIONS OF SECTION 14A R.W. 8D. WE OBSERVE THAT ASSESSEE CONT ENDED BEFORE THE AO THAT INVESTMENTS MADE BY THE ASSESSEE ARE LOOKED AFTER B Y HIS FATHER TO WHOM HE HAD NOT MADE ANY PAYMENT AT ANY TIME AND THE DIVIDENDS ARE MOSTLY TRANSFERRED DIRECTLY TO HIS BANK ACCOUNT WITHOUT INCURRING ANY EXPENDITURE. LD CIT(A) HAS CONFIRMED THE ACTION OF AO IN SUSTAINING THE DISALLOWANCE MADE BY HIM. 23. DURING THE COURSE OF HEARING BEFORE US, IT WAS CONTENDED BY THE ASSESSEE THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN HIS CASE IN ASSESSMENT ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 12 YEAR 2006-07(SUPRA) AND THE TRIBUNAL HAS CONFIRMED THE ADDITION OF RS.50,000/- VIDE PARA 13 OF THE SAID ORDER WHICH READS AS UNDER: 13 AFTER HEARING BOTH THE PARTIES, WE FIND THAT AG AINST THE TAX FREE DIVIDEND INCOME OF RS. 6.39 CRORES, THE ASSESSEE HAS NOT DIS ALLOWED ANY AMOUNT ON ACCOUNT OF EXPENDITURE U/S 14A OF I T ACT R.W.R 8D. WE FIND, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 50,000/- ON EST IMATE BASIS U/S 14A BEING EXPENSES ATTRIBUTABLE TO EXEMPT INCOME, WHICH HAS B EEN SUSTAINED BY THE CIT(A). IT IS THE SUBMISSION OF THE ASSESSEE THAT T HE ENTIRE EXPENDITURE RELATES TO PROFESSIONAL AND NO PART OF EXPENDITURE RELATES TO EARNING OF TAX FREE DIVIDEND INCOME. HOWEVER, WE ARE UNABLE TO ACCEPT THE ABOVE CONTENTION OF THE ASSESSEE. THE TOTAL DIVIDEND INCOME RECEIVED BY THE ASSESSEE AND CLAIMED TO BE EXEMPT IS 6.39 CRORES. ALTHOUGH THE DIVIDEND INCOME MAY BE DIRECTLY CREDITED TO HIS BANK ACCOUNT STILL, SOME TIME IS DEVOTED BY THE ASSESSEE FOR MONITORING THE ACCOUNTS TRACKING THE INVESTMENT AS WELL AS REINVES TMENTS DURING THE YEAR. THEREFORE, IT CANNOT BE SAID THAT NO PART OF THE EX PENDITURE IS ATTRIBUTABLE TO SUCH DIVIDEND INCOME. FURTHER, THE EXPENDITURE DISALLOWED BY THE ASSESSING OFFICER AT RS. 50,000/- APPEARS TO BE VERY REASONAB LE CONSIDERING THE VOLUME OF DIVIDEND INCOME. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) SUSTAINING THE DISALLOWANCE OF RS. 50,000/- MADE BY THE ASSESS OFFICER. THE GROUND RAISED BY THE ASSESSEE I S ACCORDINGLY DISMISSED. 24. ASSESSEE FURTHER SUBMITTED THAT RULE 8D IS NOT APPLICABLE TO ASSESSMENT YEAR UNDER CONSIDERATION IN VIEW OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (328 ITR 81). HE FURTHER SUBMITTED THAT IN ASSESSMENT YEAR 2009-2010, AO HIMSELF MADE THE ADDI TION OF RS.50,000 U/S.14A OF THE ACT ON SIMILAR FACTS AND CIRCUMSTANCES. HE SUBMITT ED THAT ADDITION SUSTAINED BY LD CIT(A) IS NOT JUSTIFIED. 25. ON THE OTHER HAND, LD D.R. RELIED ON ORDER OF L D CIT(A). 26. CONSIDERING THE SUBMISSIONS OF LD REPRESENTATIV ES OF PARTIES AND ORDERS OF AUTHORITIES BELOW, WE OBSERVE THAT THE AUTHORITIES BELOW HAVE MADE THE DISALLOWANCE ON ACCOUNT OF EXPENDITURE U/S.14A R.W. 8D OF I.T.RULES . IT IS A FACT THAT RULE 8D IS NOT APPLICABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATI ON IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD (SUPRA). FURTHER, WE OBSERVE THAT THE AUTHORITIES BELOW HAVE ALSO NOT BR OUGHT ON RECORD ANY FACTS THAT THE CLAIM OF ASSESSEE IN RESPECT OF EXPENDITURE IN RELA TION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT ARE NOT CORR ECT. THE AUTHORITIES BELOW HAVE ITA NO.3565/MUM/2012 ASSESSMENT YEAR: 2006-07 13 APPLIED THE PROVISIONS OF RULE 8D WITHOUT FULFILLME NT OF REQUIREMENT OF SUB-SECTION (2) & (3) OF SECTION 14A OF THE ACT. THE DEPARTMENT HAS NOT BROUGHT ANY FACTS THAT ASSESSEE HAS INCURRED DIRECTLY ANY EXPENDITURE IN EARNING TH E DIVIDEND INCOME WHICH IS EXEMPT FROM TAX UNDER THE PROVISIONS OF THE ACT. WE AGREE WITH THE ASSESSEE THAT THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION ARE IDENT ICAL TO THE FACTS FOR THE ASSESSMENT YEAR 2006-07. RESPECTFULLY FOLLOWING THE EARLIER O RDER OF THE TRIBUNAL DATED 8.12.2010(SUPRA), WE HOLD THAT THE DISALLOWANCE OF RS.50,000/- ON ACCOUNT OF SOME TIME DEVOTED BY ASSESSEE FOR MONITORING THE ACCOUNTS TRA CKING THE INVESTMENT AS WELL AS REINVESTMENTS DURING THE YEAR WILL BE SUFFICIENT AN D REASONABLE CONSIDERING THE VOLUME OF DIVIDEND INCOME AND INVESTMENT MADE BY THE ASSES SEE. HENCE, WE RESTRICT THE DISALLOWANCE TO RS.50,000 AS AGAINST RS.18,81,658 S USTAINED BY LD CIT(A). THEREFORE, GROUND NOS.15 TO 18 ARE ALLOWED IN PART. 27. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED IN PART. PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2012 SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 16 TH NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)3, MUMBAI 4. COMMISSIONER OF INCOME TAX,11, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI