DINESH J. SHAH, KALYAN V. ITO 1(2)(2), KALYAN

ITA 3960/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6505 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 30-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.3960/M/2017 ASSESSMENT YEAR: 2012-13 SHRI DINESH J. SHAH, 401, A, VRUNDAVAN SOCIETY, MURBAD ROAD, KALYAN 421 301 PAN: ACKPS4828C VS. ITO-1(2)(2), 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN- 421301 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 14.02.2019 DATE OF PRONOUNCEMENT : 19.02.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 22.03.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE CASE WAS CALLED UP FOR HEARING. THEREFORE, AFTER HEARIN G THE LD. D.R. AND BASED ON THE RECORDS BEFORE US, WE ARE DISPOSIN G OFF THE APPEAL AS UNDER. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION OF RS.8,30,519/- BY LD. CI T(A) AS MADE BY THE AO UNDER SECTION 14A. ITA NO.3960/M/2017 SHRI DINESH J. SHAH 2 4. THE FACTS IN BRIEF ARE THAT IN THE ASSESSMENT PR OCEEDINGS THE AO OBSERVED THAT ASSESSEE HAS RECEIVED EXEMPT I NCOME BY WAY OF SHARE OF PROFIT FROM MAHAVIR ENTERPRISES. T HE AO ALSO NOTED THAT ASSESSEE HAS SHOWN INVESTMENT IN ASSOCIA TION OF PERSONS OF RS.2,83,02,193/- AND HAS ALSO SHOWN SHAR E OF PROFIT AT RS.3,69,768/-. THE AO THEREAFTER ISSUED SHOW CA USE NOTICE TO THE ASSESSEE AS TO WHY THE DISALLOWANCE UNDER SE CTION 14A READ WITH RULE 8D SHOULD NOT BE MADE WHICH WAS REPL IED BY THE ASSESSEE VIDE LETTER DATED 04.09.2014 STATING THAT PROVISIONS OF SECTION 14A OF THE ACT ARE NOT APPLICABLE TO THE AS SESSEE. THE ASSESSEE FURTHER SUBMITTED THAT ALL THE INVESTMENTS WERE OUT OF CAPITAL AND PERSONAL LOANS AND THEREFORE NO DISALLO WANCE UNDER SECTION 14A WAS CALLED FOR. THE REPLY OF THE ASSES SEE DID NOT FIND FAVOUR WITH THE AO AND THE AO CALCULATED THE D ISALLOWANCE AT RS.8,30,519/- COMPRISING RS.7,90,921/- UNDER RUL E 8D(2)(II) AND RS.39,598/- UNDER RULE 8D2(III) AND ADDED THE S AME TO THE INCOME OF THE ASSESSEE BY FRAMING ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 23.03.2015 BESID ES MAKING OTHER ADDITIONS. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) BY REFERRING TO CIRCULAR NO.5/2014 DATED 11.02.2014 AND AFTER CONSI DERING THE CONTENTIONS OF THE ASSESSEE CAME TO THE CONCLUSION THAT EVEN IF THERE IS NO INCOME, STILL DISALLOWANCE HAS TO BE WO RKED OUT AS PER THE RULE 8D2(II) & (III) THEREBY UPHOLDING THE ORDER OF AO ON THIS ISSUE. 6. WE FIND FROM THE PERUSAL OF RECORDS BEFORE US TH AT DURING THE YEAR ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOM E. WE FURTHER NOTE THAT THOUGH THE AO STATED THAT DURING THE YEAR ITA NO.3960/M/2017 SHRI DINESH J. SHAH 3 ASSESSEE HAS RECEIVED EXEMPT INCOME TO THE TUNE OF RS.3,69,768/- FROM MAHAVIR ENTERPRISES IN WHICH THE ASSESSEE IS A PARTNER AND ALSO NOTED THAT INVESTMENTS WERE RS.2,83,02,193/- WHICH WERE WRONG FINDINGS OF THE A O AS IS APPARENT FROM THE REMAND REPORT IN WHICH THE AO A DMITTED THAT THE FIGURE OF INVESTMENTS WERE WRONGLY TAKEN AS STATED ABOVE INSTEAD OF CORRECT INVESTMENTS OF RS.77,39, 496/-. SIMILARLY IN THE REMAND REPORT AO STATED THAT THER E WAS NO EXEMPT INCOME DURING THE YEAR TO THE ASSESSEE. THE LD. CIT(A) BY REFERRING TO THE CIRCULAR NO.5/2014 DATED 11.02. 2014 CAME TO THE CONCLUSION THAT EVEN IF THERE IS NO INCOME, DIS ALLOWANCE UNDER RULE 8D(2) HAS TO BE MADE. WE ARE NOT IN AGR EEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) AS THE ISSUE WHERE ASSESSEE RECEIVED NO INCOME, NO DISALLOWANCE TOWARD S EXPENSES IS TO BE MADE. THE CASE OF THE ASSESSEE IS SUPPORT ED BY THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR. CIT VS. BALLARPUR INDUSTRIES LTD. IN ITA NO.15 OF 2016 DATED 13.10.2016 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT NO DISALLOWANCE IS TO BE MADE UNDER SECTION 14A WHERE THERE IS NO EXEMPT INCOME. WE, THEREFORE, RESPECTFULLY FOLLOWI NG THE SAME SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE SAME. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19.02.2019. * KISHORE, SR. P.S. ITA NO.3960/M/2017 SHRI DINESH J. SHAH 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.