KAMLESH KUMAR MAHESHWARI, MUMBAI V. ASST CIT 3(3), MUMBAI

ITA 4301/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3441 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M MURLIDR
• Assessee Lawyers: MANISH R RESHAMWALA
• Keywords: Business income; Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NOS.4301 & 4302/MUM/2013 ASSESSMENT YEARS-2008-09 & 2009-10 SHRI KMALESH KUMAR MAHESHWARI, C/O- R.C. RESHAMWALA & CO., CHARTERED ACCOUNTANTS 323, VARMA CHAMBERS, 11, HOMJI STREET, FORT, MUMBAI-400001 / VS. DCIT - 3(3) AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN NO. AEQUPM5521C ( / APPELLANT) ( / RESPONDENT) ! / ASSESSEE BY SHRI KIRIT SANGHVI & SHRI MANISH R. RESHAMWALA ' / REVENUE BY SHRI M.MURLI-DR '$ % !& / DATE OF HEARING : 17/03/2016 % !& / DATE OF ORDER: 17/03/2016 ITA NO.4301 & 4302/MUM/2013 SHRI KAMLESH KUMAR MAHESHWARI 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) BOTH THESE APPEALS ARE BY THE ASSESSEE FOR A.Y. 200 8- 09 AND 2009-10, AGGRIEVED BY THE IMPUGNED ORDERS BO TH DATED 15/01/2013 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. 2. SO FAR AS, A.Y. 2008-09 (ITA NO.4302/MUM/2013) IS CONCERNED, THE ASSESSEE HAS CHALLENGED THE ADDIT IONS AMOUNTING TO RS.1,00,00,000/- AS UNDISCLOSED INVEST MENT. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSEE, S HRI KIRIT SANGHAVI ALONG WITH SHRI MANISH R. RESHAMWALA, ASSE RTED THAT THE CHARTERED ACCOUNTANT, SHRI MANISH R. RESHA MWALA, DURING HEARING BEFORE THE LD. COMMISSIONER OF INCOM E TAX (APPEALS), PERSONALLY HANDED OVER A LETTER DATED 17 /11/2011 ALONG WITH ENCLOSURES, WHICH FORM PART OF THE PAPER BOOK FROM PAGE 1 TO 23 OF THE PAPER BOOK SUBMITTED ON 17 TH AUGUST, 2015, THEREFORE, THE AVERMENT MADE IN PARA -11 OF THE IMPUGNED ORDER DATED 15/01/2013 TO THE EFFECT T HAT THE ASSESSEE COULD NOT ADDUCE ANY EVIDENCE TO PROVE THE SOURCE OF IMPUGNED SUM, ADDED BY THE ASSESSING OFFICER, IS FACTUALLY INCORRECT. THE ASSESSEE ALSO FILED AN AFF IDAVIT DULY SWORN BY SHRI MANISH RESHAMWALA, THE CHARTERED ACCOUNTANT, WHO APPEARED BEFORE THE LD. COMMISSIONE R OF INCOME TAX (APPEALS). HOWEVER, THE LD. DR, SHRI M. MURLI, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. ITA NO.4301 & 4302/MUM/2013 SHRI KAMLESH KUMAR MAHESHWARI 3 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WITHOUT G OING INTO MUCH DELIBERATION AND SINCE, THE FINDING CONTAINED IN PARA- 11 OF THE IMPUGNED ORDER HAS BEEN CHALLENGED WITH T HE SUPPORT OF AN AFFIDAVIT, IN THE INTEREST OF JUSTICE , WE REMAND THIS FILE/ISSUE TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO EXAMINE THE FACTUAL MATRIX AND AFT ER PROVIDING DUE OPPORTUNITY OF BEING HEARD, DECIDE IN ACCORDANCE WITH LAW. THUS, THE APPEAL OF THE ASSES SEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 3. NOW, WE SHALL TAKE UP THE APPEAL FOR A.Y. 2009- 10 (ITA NO.4301/MUM/2013), WHEREIN, THE ASSESSEE HAS CHALLENGED APPLICATION OF SECTION 14A OF THE ACT RE AD WITH RULE-8D OF THE RULES, CHALLENGING DISALLOWANCE OF RS.2,90,290/-. 3.1. THE CRUX OF ARGUMENT, ADVANCED ON BEHALF OF T HE ASSESSEE, IS THAT THE EXEMPT INCOME WAS EARNED WHIC H IS INCIDENTAL TO THE BUSINESS OF SHARE TRADING, CARRIE D OUT BY THE ASSESSEE. IT WAS EXPLAINED THAT THE INCOME SHOW N IN THE BOOKS OF ACCOUNTS IS SEPARATE FROM BUSINESS INCOME CARRIED ON IN THE NAME OF UNIVERSAL INVESTMENT. THE CRUX OF THE ARGUMENT, IS THAT THE LD. DY. COMMISSIONER OF INCOM E TAX (APPEALS) WRONGLY COMBINED THE EXEMPT INCOME IN THE PERSONAL BOOKS OF THE ASSESSEE AND DIVIDEND INCOME EARNED TO THE TUNE OF RS.20,000, SHOWN AS PART OF BUSINESS INCOME OF UNIVERSAL INVESTMENTS. IT WAS ALSO EXPLAINED THA T NO ITA NO.4301 & 4302/MUM/2013 SHRI KAMLESH KUMAR MAHESHWARI 4 EXPENSES WERE CLAIMED AGAINST THE EXEMPT INCOME, TH US, DISALLOWANCE OF A SUM OF RS.2,90,290/- IS PATENTLY INCORRECT. IT WAS ALSO CONTENDED THAT NO SATISFACTION WAS RECO RDED BY THE ASSESSING OFFICER, WHILE MAKING THE DISALLOWANC E. ON THE OTHER HAND, LD. DR, DEFENDED THE DISALLOWANCE B Y PLACING RELIANCE UPON THE ASSESSMENT ORDER/IMPUGNED ORDER. 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FAC TS, IN BRIEF, ARE THAT THE ASSESSEE AN INDIVIDUAL, IS REGU LARLY ASSESS TO TAX HAVING INCOME FROM VARIOUS SOURCES, WHICH IS DIVIDED INTO TWO PARTS (A) BUSINESS INCOME FROM PROPRIETORY CONCERN OF M/S UNIVERSAL INVESTMENT, WHICH IS CARRYING ON T RADING IN SHARES, SECURITIES, DERIVATIVES AND COMMODITY EXCHA NGE (B) PERSONAL INVESTMENT IN PROPERTY, PUBLIC PROVIDENT F UND AND INTEREST INCOME/DIVIDEND INCOME. THE ASSESSEE PURC HASED SHARES AND SOLD THE SAME AFTER SOME TIME, RESULTING INTO DIVIDEND INCOME FROM SOME OF THE SHARES. THE ASSESS EE RECEIVED DIVIDEND TO THE TUNE OF RS.20,000/-. ALL T YPE OF INCOME, RECEIVED UNDER DIFFERENT HEADS WAS SEPARATE LY SHOWN IN THE BOOKS OF ACCOUNTS DIFFERENT FROM BUSIN ESS INCOME CARRIED ON IN THE NAME OF UNIVERSAL INVESTME NTS. THE LD. DCIT COMBINED THE EXEMPT INCOME IN PERSONAL BOO KS TO THE DIVIDEND INCOME SHOWN AS PART OF BUSINESS INCOM E, BY HOLDING THAT ALL THE EXEMPT INCOME HAS TO BE CONSID ERED WHILE APPLYING PROVISIONS OF SECTION 14A OF THE ACT . IN HIS PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS MENTIONED R S.20,525 ITA NO.4301 & 4302/MUM/2013 SHRI KAMLESH KUMAR MAHESHWARI 5 HAS DEBITED EXPENSES, WHICH ARE DIRECTLY ATTRIBUTAB LE TO EXEMPT INCOME (DEMAT CHARGES). HOWEVER, THE LD. AS SESSING OFFICER FOLLOWING THE DECISION IN GODREJ & BOYCE MF G. COMPANY LTD., (325 ITR 81) FROM HONBLE BOMBAY HIGH COURT CALCULATED THE DISALLOWANCE AT 0.5% OF THE AV ERAGE VALUE OF INVESTMENT ON THE OPENING AND CLOSING DAY OF THE PREVIOUS YEAR, WHICH COMES TO RS.2,90,290/-, THEREF ORE, HE MADE ADDITION OF THIS AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. THE BUSINESS LOSS OF RS.40,76,425/- WAS ADJUSTED IN OTHER INCOME I.E. RS.2,23,542/- AND THE REMAININ G LOSS OF RS.38,52,885/- WAS ALLOWED TO BE CARRIED FORWARD. T HE LD. COMMISSIONER OF INCOME TAX (APPEALS), ON APPEAL, AF FIRMED THE STAND OF THE ASSESSING OFFICER, AGAINST WHICH, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 3.3. CONSIDERING THE TOTALITY OF FACTS, THERE IS N O DISPUTE TO THE FACT THAT THE ASSESSEE HAS ONLY CLAI MED DE- MAT CHARGES OF RS.20,525/-, WHICH WERE DIRECTLY ATT RIBUTABLE TO EARN THE EXEMPT INCOME. NO BORROWED FUNDS WERE U TILIZED BY THE ASSESSEE WHILE MAKING THE INVESTMENT. TOTALI TY OF FACTS, CLEARLY INDICATES THAT SECTION 14A R.W.R -8D IS NOT UNIVERSAL APPLICATION AND FACTS OF EACH CASE HAS TO BE CONSIDERED. THOUGH THE INVESTMENT IS HUGE BUT A MAJ ORITY OF THE SHARES, THERE IS A LOSS AND THE DISALLOWANCE CA NNOT BE MADE MORE THAN THE EXEMPT INCOME. WE FIND THAT THE ONLY EXPENSES INCURRED BY THE ASSESSEE ARE DE-MAT CHARGE S AND NO OTHER EXPENSES HAS BEEN CLAIMED BY THE ASSESSEE. IN A ITA NO.4301 & 4302/MUM/2013 SHRI KAMLESH KUMAR MAHESHWARI 6 LATER DECISION, HONBLE DELHI HIGH COURT IN THE CAS E OF JOINT INVESTMENT PVT. LTD. VS CIT (ITA NO.117 OF 2015) OR DER DATED 25/02/2015, WHEREIN, THE ASSESSEE WAS ENGAGED IN DI VERSE INVESTMENT ACTIVITIES, REPORTED LOSS OF RS.52,56,19 7/- AND INTER-ALIA DECLARED TAX EXEMPT INCOME IN THE FORM O F DIVIDEND TO THE TUNE OF RS.48,90,000/-. THE ASSESSEE VOLUNTE ERED RS.2,97,440/- AS ATTRIBUTABLE U/S 14A FOR THE PURPO SES OF DISALLOWANCE. THE ASSESSING OFFICER IN HIS OWN UNDERSTANDING OF RULE-8D DISALLOWED A SUM OF RS.52,56,197/- U/S 14A R.W.R-8D. THE HONBLE HIGH COURT CONSIDERED THE FINDING OF THE TRIBUNAL AND AFTER CO NSIDERING THE DECISION IN CIT VS TAIKISHA ENGINEERING INDIA L TD. (ITA NO.115/2014) ORDER DATED 25/11/2014, WHEREIN, IT WA S FOUND THAT THERE WAS NO CLAIM OF EXPENDITURE INCURR ED FOR EARNING EXEMPT INCOME HELD THAT BY NO STRETCH OF IMAGINATION, FOR SECTION 14A OR RULE-8D, BE INTERPR ETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW OF DISALLOWANCE IS INDICATE D IN SECTION 14A IS ONLY TO THE EXTENT OF DISALLOWING EX PENDITURE INCURRED BY THE ASSESSEE IN RELATION TO TAX EXEMPT INCOME. THEREFORE, CONSIDERING THE TOTALITY OF FACTS, WE FI ND MERIT IN THE CONTENTION OF THE ASSESSEE AND SINCE, THE ASSES SEE HAS EARNED EXEMPT INCOME TO THE TUNE OF RS.20,000/- ONL Y, THEREFORE, THERE IS NO QUESTION OF MAKING DISALLOWA NCE OF RS.2,90,290/-. OUR VIEW FURTHER FIND SUPPORT FROM T HE RATIO LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN C IT VS INDIA ADVANTAGE SECURITIES LTD. (ITA NO.1131/2013) ORDER ITA NO.4301 & 4302/MUM/2013 SHRI KAMLESH KUMAR MAHESHWARI 7 DATED 17/03/2015, CHEMINVEST LTD. VS CIT (DEL.) (IT A NO.749/2014) ORDER DATED 02/09/2015, ETC. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IN ITA NO.4302/MUM/2013 IS ALLOWED FOR STATISTICAL PURPOSE S AND ITA NO.4301/MUM/2013 IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESEN CE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON 17/03/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ MUMBAI; ) DATED : 17/03/2016 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. / THE RESPONDENT. 3. + + ,! ( ) / THE CIT, MUMBAI. 4. + + ,! / CIT(A)- , MUMBAI, 5. /'01 !2 , + & 23 , $ / DR, ITAT, MUMBAI 6. 14 5$ / GUARD FILE. / BY ORDER, /! ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI