M/s. R. Wadiwala & Co., Surat V. The Income tax Officer,Ward-5(4), Surat

ITA 4044/AHD/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50791 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 05-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Opportunity of being heard; Corroborative evidences
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI D.K. TYAGI ,JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 4044/ AHD/2007 (ASSESSMENT YEAR 2004-05) M/S. R. WADIWALA & CO., 9.2003-4, LIMDA CHOWK, MAIN ROAD, SURAT VS. ITO, WARD 5(4), SURAT PAN/GIR NO. : AAEFR5962N (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI J. P. SHAH, AR RESPONDENT BY: SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 15.09.2011 DATE OF PRONOUNCEMENT: 21.10.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)- III, SURAT DATED 24.09.2007 FOR THE ASSESSM ENT YEAR 2004-05. 2. AN ADDITIONAL GROUND WAS RAISED BY THE ASSESSEE, WHICH IS AS UNDER: SECTION 143(2) NOTICE HAS BEEN SERVED AFTER THE EX PIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETUR N IS FURNISHED, AND THEREFORE, THE ENTIRE ASSESSMENT IS BAD IN LAW. 3. IT IS SUBMITTED BY THE LD. A.R. THAT THIS ADDITI ONAL GROUND IS NOT PRESSED AND ACCORDINGLY, THE SAME IS REJECTED AS NO T PRESSED. 4. THE MAIN GROUNDS OF ASSESSEES APPEAL ARE AS UND ER: 1. THAT THE LD. CIT(A) III, SURAT GROSSLY ERRED I N FACTS AND IN LAW IN CONFIRMING THE ADDITIONS, DISALLOWANCE AND I GNORING THE I.T.A.NO. 4044 /AHD/2007 2 LONG TERM CAPITAL LOSS, MADE BY THE LD. ITO WITHOUT PROPERLY APPRECIATING THE FACTS NOD CIRCUMSTANCES OF THE APP ELLANTS CASE. 2. THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERED AND APPRECIATE THE INTEREST PAYMENTS TO UNSECURED LOANS AND PAYME NTS. THE LD. CIT(A) ERRED IN DISALLOWING THE PART OF INTEREST PA YMENTS OF RS.6,22,906/- AND THE LD. CIT(A) ERRED IN CONFIRMIN G THE DISALLOWANCE OF INTEREST PAYMENTS. 3. THE LD. CIT(A) GROSSLY ERRED IN IGNORING THE LON G TERM CAPITAL LOSS OF RS.7.,38,501/- WHICH IS SUPPORTED B Y THE EVIDENCE. 4. THE RELIEF AS CLAIMED BY THE APPELLANT MAY KINDL Y BE ALLOWED IN TOTO. 5. IT IS SUBMITTED BY THE LD. A.R. THAT GROUND NO.1 IS GENERAL AND DOES NOT CALL FOR ANY SEPARATE ADJUDICATION. 6. REGARDING GERUND NO.2, THE FACTS ARE THAT IT IS NOTED BY THE A.O. IN PARA 3 OF THE ASSESSMENT ORDER THAT 40% OF THE TOTA L INCOME CREDITED TO P & L ACCOUNT REPRESENTS DIVIDEND INCOME. HE FURTHER NOTED THAT THE CAPITAL OF THE ASSESSEE WAS SHOWN AT RS.95,56,029/- AND UNSECURED LOAN WAS SHOWN AT RS.1,04,47,030/-. HE FURTHER NOTED TH AT THE ASSESSEE HAS INVESTED RS.31,23,090/- IN FIXED ASSETS WHILE INVES TMENT IS SHOWN AT RS.1,32,78,247/- IN SHARES AND MUTUAL FUNDS FROM WH ICH DIVIDEND INCOME IS SHOWN AT RS.84,09,800/- AND THE SAME IS CLAIMED AS EXEMPT U/S 10(34) OF THE INCOME TAX ACT, 1961. HE FURTHER NOTED THAT DURING THE YEAR ALSO, UNITS WERE PURCHASED AND SOLD BY THE ASSESSEE AND T HE INCOME GENERATED FROM THEM WAS CLAIMED TO BE EXEMPT. HE FURTHER NOT ED THAT THE ASSESSEE IS PAYING INTEREST ON UNSECURED LOANS OF RS.104.47 LACS @ 18% AND ON PARTNERS CAPITAL ALSO, THE ASSESSEE IS PAYING INTER EST @ 12%. HE INVOKED PROVISIONS OF SECTION 14A AND HELD THAT TO THE EXTE NT OF INTEREST BEARING FUNDS WERE INVESTED FOR EARNING EXEMPT DIVIDEND INC OME, DEDUCTION IS NOT ALLOWABLE ON ACCOUNT OF INTEREST. HE ISSUED SH OW CAUSE NOTICE TO THE ASSESSEE AS TO WHY INTEREST CLAIMED SHOULD NOT BE D ISALLOWED U/S 14A OF I.T.A.NO. 4044 /AHD/2007 3 THE INCOME TAX ACT, 1961. IN REPLY, IT WAS SUBMIT TED BY THE ASSESSEE BEFORE THE A.O. THAT DIVIDEND INCOME IS ONLY A SMAL L PART OF INCOME GENERATED FORM THE INVESTMENT AND BULK PROFIT IS GE NERATED BY WAY OF APPRECIATION OF SHARES VALUE AND AS AND WHEN THE SA ME ARE SOLD, THE SAME IS TREATED AS BUSINESS PROFIT AND FULLY TAXED AND, THEREFORE, THE PROVISIONS OF SECTION 14A IS NOT APPLICABLE. THE A.O. WAS NOT SATISFIED AND HE MADE DISALLOWANCE OF INTEREST EXPENDITURE U/S 14A TO THE EXTENT OF RS.6,22,906/-. BEING AGGRIEVED, THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. LD. A.R. OF THE ASSESSEE FAIRLY ACCEPTED THAT TH IS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPE CIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF DAGA CAPITAL AS RE PORTED IN 117 ITD 169 (S.B.). RESPECTFULLY FOLLOWING THIS DECISION OF SP ECIAL BENCH OF THE TRIBUNAL, THIS ISSUE IS DECIDED AGAINST THE ASSESSE E. HENCE, GROUND NO.2 OF THE ASSESSEE STANDS REJECTED. 8. REGARDING GROUND NO.3 OF THE APPEAL, THE FACTS A RE THAT IT IS NOTED BY THE A.O. IN PARA 7 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL LOSS OF RS.7,38,501/-. HE FURTHE R NOTED THAT IN THE WORKING, THE ASSESSEE HAD SHOWN SALE OF SHOP AT RS. 7,70,136/- WHICH WAS PURCHASED IN FINANCIAL YEAR 1998-99 FOR RS.13,09,35 2/-. THE A.O. CALLED DETAILS OF PURCHASE OF SHOP ALONG WITH COPY OF SALE DEED WITH A VIEW TO ASCERTAIN THE GENUINENESS OF SALE AND THE PRICE REA LIZED THEREFROM. HE FURTHER NOTED THAT PURCHASE WAS MADE FROM JJ LAND C ORPORATION, SURAT. IT IS ALSO NOTED THAT THE ASSESSEE HAS PRODUCED LETTE R DATED 20.12.2006 ON THE LETTER PAD OF JJ LAND CORPORATION AND THE LETTE R IS SIGNED BY SHANKARLAL LALJIBHAI FOR JJ LAND CORPORATION AND PA N IS ALSO GIVEN I.T.A.NO. 4044 /AHD/2007 4 WHICH IS THE PAN OF SHRI SHANKARBHAI IN INDIVIDUAL CAPACITY. THE A.O. ISSUED SHOW CAUSE NOTICE TO PRODUCE SALE DEED OF TH E SHOP FAILING WHICH, TO STATE AS TO WHY LONG TERM LOSS SHOULD NOT BE TAK EN AS NIL. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE A.O. THAT THE PURCHASE AND SALE OF THE SHOP WAS MADE ON THE BASIS OF KABJA RASID. IT WAS FURTHER SUBMITTED THAT PURCHASE DOCUMENT WAS WRITTEN BY JJ LAND CORPORATION AND COPY OF THE LETTER WAS PRODUCED BEFORE HE A.O. AND CONFIRMATION WAS ALSO SUBMITTED AS PER WHICH, JJ LAND CORPORATION HA S CONFIRMED THAT A CHEQUE WAS ISSUED TOWARD PURCHASE OF THE SHOP. IT WAS FURTHER SUBMITTED THAT PRICE AT WHICH THE SHOP WAS SOLD WAS AT JANTRI RATES. THE A.O. WAS NOT SATISFIED AND HE HELD THAT IT IS NOT CLEAR AS T O WHY SALE PRICE OF THE SHOP IS LESSER THAN PURCHASE PRICE PAID MANY YEARS AGO WHEREAS THERE SHOULD BE APPRECIATION IN THE SALE PRICE. HE HELD THAT IN THE ABSENCE OF SUPPORTING EVIDENCE, LONG TERM CAPITAL LOSS CLAIMED IN THE RETURN IS IGNORED AND TAKEN AS NIL. BEING AGGRIEVED, THE A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCC ESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 9. IT WAS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE THAT AS PER THE LETTER DATED 20.11.2006, COPY OF WHICH IS AVAILABLE ON PAGES 24-25 OF THE PAPER BOOK, SUPPORTING EVIDENCE OF LOSS ON SALE OF SHOP WAS ENCLOSED. HE DRAWN OUR ATTENTION TO LETTER DATED 20.12.2006 A DDRESSED TO THE A.O. WHICH IS AVAILABLE ON PAGES 26-28 OF THE PAPER BOOK AND POINTED OUT THAT ALONG WITH THIS LETTER, CONFIRMATION LETTER FROM JJ LAND CORPORATION REGARDING PURCHASE OF SHOP WAS ENCLOSED ALONG WITH COPY OF PAN CARD. HE ALSO SUBMITTED THAT COPY OF PAN IS AVAILABLE ON PAGE 27 OF THE PAPER BOOK AS PER WHICH THE PAN IS OF SHRI S L MODE. HE ALSO SUBMITTED A COPY OF THE WRITTEN SUBMISSION FIELD BEFORE LD. CIT (A) WHICH IS AVAILABLE I.T.A.NO. 4044 /AHD/2007 5 ON PAGES 105-124 OF THE PAPER BOOK AND IN PARTICULA R OUR ATTENTION WAS DRAWN TO PARA 7 OF THIS WRITTEN SUBMISSION WHICH I S AVAILABLE ON PAGES 115-124 OF THE PAPER BOOK. IT WAS SUBMITTED BY HIM THAT HIS ISSUE MAY BE RESTORED BACK TO THE FILE OF THE A.O. FOR A FRESH D ECISION AFTER EXAMINING VARIOUS DOCUMENTARY EVIDENCES SUCH AS PROOF REGARDI NG PAYMENT OF MUNICIPAL TAX OF THE CONCERNED SHOPS BY WAY OF CHEQ UE DRAWN ON SURAT PEOPLE COOPERATIVE BANK LTD. HE ALSO SUBMITTED TH AT SHOP WISE VALUE DETERMINED ALONG WITH SHOP NUMBER IS ALSO SUBMITTED BEFORE THE LD. CIT(A) AND ENTRY WAS PASSED IN THE BOOKS ON 27.03.1 999 AND THE SAME CAN ALSO BE VERIFIED. REGARDING PURCHASE PRICE, IT IS SUBMITTED THAT THE SAME IS AT JANTRI RATE AND THAT CAN ALSO BE VERIFIE D. 10. LD. D.R. OF THE REVENUE SUPPORTED THE ORDER OF LD. CIT(A). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT Y BELOW. WE FIND THAT THE CLAIM OF THE ASSESSEE REGARDING LONG TERM CAPIT AL LOSS HAS BEEN REJECTED BY THE AUTHORITIES BELOW MAINLY ON THIS BA SIS THAT HOW THE SALE PRICE CAN BE LOWER THAN PURCHASE PRICE AFTER SEVERA L YEARS WHEREAS THE SALE PRICE SHOULD HAVE BEEN HIGHER THAN THE PURCHAS E PRICE. BUT THERE IS NO COMMENT OF THE AUTHORITIES BELOW AS TO WHAT WAS THE JANTRI RATES OF THE CONCERNED SHOP AT THE TIME WHEN THE PURCHASE AND SA LE IS SAID TO BE EFFECTED AND NO EFFORTS WERE MADE TO FIND OUT MARKE T RATES IN THE ADJOINING AREAS DURING THE RELEVANT PERIOD. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE SHOP IN QUESTION WAS NOT PURCHASED OR NOT SOLD. WE, THEREFORE, FEEL THAT IN THE INTEREST OF JUSTICE, TH E MATTER SHOULD GO BACK TO THE FILE OF THE A.O. FOR FRESH DECISION. THE ASSES SEE SHOULD BRING EVIDENCE ON RECORD REGARDING JANTRI RATE OF THESE S HOPS ON THE DATE OF PURCHASE AND SALE OF THESE SHOPS. THE A.O. CAN AL SO FIND OUT THE I.T.A.NO. 4044 /AHD/2007 6 PREVAILING MARKET PRICE OF SIMILAR PROPERTY IN THE ADJOINING AREAS DURING THE RELEVANT PERIOD BY MAKING INQUIRY FROM THE MARK ET, IN THE AREA WHERE THE SHOPS WERE ACTUALLY PURCHASED AND SOLD BY THE A SSESSEE. IT WILL BE VERY MUCH RELEVANT TO EXAMINE THE CLAIM OF THE ASSE SSEE THAT MUNICIPAL TAXES WERE PAID BY THE ASSESSEE BY WAY OF A/C PAYEE CHEQUES. THE A.O. SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE WOULD LIKE TO MAKE IT CLEAR THAT IN ADDITION TO THE DIRECTION GIVEN BY US, THE A.O. IS AT LIBERTY TO MAKE FURTHER INQUIRY IF C ONSIDERED RELEVANT IN THE MATTER AND THE ASSESSEE CAN ALSO BRING ON RECORD OT HER EVIDENCES WHICH HE MAY LIKE TO BRING ON RECORD IN SUPPORT OF ITS CLAIM REGARDING CAPITAL LOSS. GROUND NO.3 OF THE ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCT., 2011. SD./- SD./- (D.K. TYAGI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 21 ST OCT., 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO. 4044 /AHD/2007 7 1. DATE OF DICTATION 18/10 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19/10 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.19/10 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/10 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/10 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/10/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..