KAMLESH KANUGO, MUMBAI V. ACIT 15(3), MUMBAI

ITA 368/MUM/2013

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9653 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MICHALE JERALD
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Notional interest
• Section: 14A; 40(a)(ia); 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI PAWAN SINGH (JM) I.T.A. NO. 368 /MUM/ 201 3 (ASSESSMENT YEAR 20 09 - 10 ) SHRI KAMLESH KANUNGO OFFICE NO. 18, 1 ST FLOOR 65/73, HABIB BUILDING C.P.TANK, MUMBAI - 400 004. PAN : ABBPK9675R V S . ACIT - 15(3) MUMBAI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI RAJKUMAR SINGH DEPARTMENT BY SHRI S. MICHALE JERALD DATE OF HEARING 18 . 09 . 201 9 DATE OF PRONOUNCEMENT 3 .12 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT (A) DATED 2.11.12 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10 . 2. I N THIS APPEAL ASSESSEE IS AGGRIEVED BY THE CONFIRMATION BY THE LEARNED CIT (A) OF THE FOLLOWING ADDITIONS : - SR. NO. PA RTICULARS AMOUNT ( RS ) A ADDITION ON ACCOUNT OF UN - RECONCILED INTEREST RECEIPT 83,765/ - B DISALLOWANCE OF NOTIONAL INTEREST ON BORROWED FUND 13,74,401/ - C DISALLOWANCE OF UNDER SECTION 14A 3,04,954/ - D DISALLOWANCE UNDER SECTION 40(A)(IA) 7,692/ - E A D - HOC DISALLOWANCE OF CONVEYANCE AND VEHICLE EXPENSES 11,911/ - F AD - HOC DISALLOWANCE OF DEPRECIATION ON VEHICLE 27,197/ - 3. T HIS APPEAL WAS EARLIER DISPOSED OF BY THE T RIBUNAL VIDE ORDER DATED 30/5/18 . SUBSEQUENTLY BY ORDER DATED 10.4.19 IN MISCELLANEO US A PPLICATION THIS ORDER WAS RECALLED FOR ADJUDICATING ISSUE RELATING TO DISALLOWANCE OF INTEREST AND DISALLOWANCE UNDER SECTION 14A WHICH HAD REMAINED TO BE ADJUDICATED . P URSUANT TO THE AFORESAID RECALL THIS APPEAL HAS BEEN HEARD BY US. WE HAVE HEARD BOT H THE COUNSEL AND PERUSED THE RECORDS. SHRI KAMLESH KANUNGO 2 4. AT THE OUTSET LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ON THE BOTH THE ISSUES OF DISALLOWANCE OF INTEREST AND DISALLOWANCE UNDER SECTION 14 A ASSESSEE HAD SUBMITTED BEFORE THE LEARNED CIT ( APPEALS ) THAT ASSESSE E HAS SUFFICIENT OWN/INTEREST FREE FUNDS. HENCE LEARNED COUNSEL SUBMITTED THAT IT WAS P LEADED BEFORE THE LEARNED CIT (A) THAT NO DISALLOWANCE FOR INTEREST FOR DIVERSION OF FUNDS OR EARNING OF EXEMPT INCOME CAN BE DONE. HOWEVER LEARNED CIT (A) HAS DISMISSED T HIS GROUND TAKEN BY THE ASSESSEE BY HOLDING THAT ASSESSEE'S FUNDS ARE INTERMINGLED AND THAT ASSESSEE WAS NOT IN A POSITION TO CORRELATE THE INTEREST FREE FUNDS AND THE INVESTMENT , INTEREST UPON WHICH ARE SUBJECT MATTER OF DISALLOWANCE. 5. IN THIS REGARD I T IS THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT THIS APPROACH OF LEARNED CIT (A) IS NOT IN CONSONANCE WITH THE HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF HDFC B ANK LTD. ( WP NO. 1753 OF 2016 DT. 25.2.2016) AND R ELIANCE UTILI TIES & POWER LTD. (178 TAXMAN 135), WHEREIN IT WAS HELD THAT IF INTEREST FREE FUNDS ARE SUFFICIENTLY AVAILABLE NO DISALLOWANCE FOR DIVERSION OR EARNING EXEMPT INCOME CAN BE DONE AND THAT ASSESSEE WAS NOT REQUIRED TO MAKE ONE - TO - ONE CORRELATION. 6. IN THIS VIEW OF THE MATTER UPON HEARING BOTH THE COUN S EL AND PERUS ING THE RECORDS , WE IN THE INTEREST OF JUSTICE REMIT BOTH THESE ISSUES TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL CONSIDER THIS ISSUE BY EXAMINING THE FACTUAL RECORDS. IF ASS ESSEE'S INTEREST FREE FUNDS ARE SUFFICIENT TO COVER THE IMPUGNED INVESTMENT NO DISALLOWANCE FOR INTEREST IN THIS REGARD IS REQUIRED. NEEDLESS TO ADD ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD . 7. I N THE RESULT APPEAL BY THE ASSESSEE ST ANDS PARTLY ALLOWED ORDER HAS BE EN PRONOUNCED IN THE COURT ON 3.12 . 201 9 . SD/ - SD/ - ( PAWAN SINGH ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 3/12 / 20 1 9 SHRI KAMLESH KANUNGO 3 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI