SHRI PADMESH GUPTA, Nagpur V. ACITCENTRAL-CIRCLE-2(3), Nagpur

ITA 455/NAG/2013

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7583 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 24-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K BARAL
• Assessee Lawyers: RAJESH LOYHA
• Keywords: Business income; Earning of tax free income; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.455/NAG./2013 ( ASSESSMENT YEAR : 200506 ) SHRI PADMESH GUPTA 7 TH SHREERAM TOWERS KINGSWAY, SADAR NAGPUR 440 001 PAN AATPG8809Q APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE2(3), NAGPUR .... RESPONDENT ASSESSEE BY : SHRI RAJESH LOYHA REVENUE BY : SHRI R.K. BARAL DATE OF HEARING 08.05.2018 DATE OF ORDER 09.05 .2018 O R D E R PER SHAMIM YAHYA, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE IMPUGNED ORDER DATED 2 ND AUGUST 2013, PASSED BY THE LEARNED COMMISSIONER (A PPEALS)16, MUMBAI (CAMP AT NAGPUR), PERTAINING TO ASSESSMENT Y EAR 200506. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED B ELOW: 1. THAT THE ORDER OF THE ASSTT. COMMISSIONER OF INC OME TAX, CENTRAL CIRCLE 2(3), NAGPUR IS BAD IN LAW AND WRONG ON FACTS AND THE LEARNED C.I.T.(A) HAS ERRED IN CONFIRMING THE S AME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE ACTION OF BOTH THE AUTHORITIES IS UNJUSTIFIED. 2. THAT THE ASSESSING OFFICER ERRED IN LAW AND ON F ACTS IN INVOKING 2 SHRI PADMESH GUPTA THE PROVISIONS OF SECTION 14A AND MAKING DISALLOWAN CE OF EXPENSES OF RS.4,26,086/- IN NATURE OF INTEREST ON LOAN, DEPRECATION ON FIXED ASSETS, VEHICLE INSURANCE AND PROFESSIONAL EXPENSES INCURRED DURING THE COURSE OF CARRYING OUT BUSINESS OPERATIONS OF THE PARTNERSHIP CONCERNS OF THE ASSES SEE FOR EARNING TAXABLE BUSINESS INCOME AND THE LEARNED CIT(A) FURT HER ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. 3. THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE ASSESSEE, BEING A PARTNER OF THE PARTNERSHIP FIRMS WAS REQUIRED TO INVEST HIS BORROWED CAPITAL AND USE HIS PERSONAL AS SETS FOR CARRYING OUT BUSINESS ACTIVITIES OF THE FIRMS AND H ENCE IS ENTITLED TO CLAIM DEDUCTION OF SUCH EXPENDITURES AND THE LEA RNED CIT(A) FURTHER ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER. 2. THE LEARNED COUNSEL FOR ASSESSEE HAS ALSO FILED ADD ITIONAL GROUNDS OF APPEAL WHICH ARE REPRODUCED BELOW: (1) 'THAT THE AO WAS UNJUSTIFIED IN MAKING SEPARATE ADD ITION OF RS. 4,26,086/- WHILE COMPUTING THE INCOME, EVEN AFTER MAKING DISALLOWANCE OF THE LOSS OF RS. 4,26,086/- CLAIMED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS AND PROFESSION' AND THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MADE ERRO NEOUSLY BY THE AO. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ACTION OF THE AO HAS RESULTED INTO DOUBLE ADDITION IN HANDS OF TH E ASSESSEE.' (2) 'THAT THE AO WAS UNJUSTIFIED IN MAKING SEPARATE ADD ITION OF RS. 1,50,000/- WHILE COMPUTING THE INCOME, EVEN AFTER MAKING DISALLOWANCE OF THE LOSS OF RS. 1,50,000/- CLAIMED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MADE ERRONEOUSLY BY THE AO. O N THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ACTION OF THE AO HAS RESULTED INTO DOUBLE ADDITION IN HANDS OF THE ASSESSEE.' 3. AS REGARDS THE ADDITIONAL GROUND AS REFERRED TO ABO VE, IT TRANSPIRES THAT THE SAME RELATES TO DOUBLE DISALLOW ANCE MADE BY THE ASSESSING OFFICER WHICH THE LEARNED CIT(A) HAS FAIL ED TO ADDRESS. WE FIND THAT ON BOTH THE ISSUES, IT IS THE PLEA OF THE ASSESSEE THAT DOUBLE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER . THE SAME WAS 3 SHRI PADMESH GUPTA TO PUT BEFORE THE LEARNED DEPARTMENTAL REPRESENTATI VE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY AGREED WITH THE STATEMENTS OF THE ASSESSEE IN THE ADDITIONAL GROUND OF APPEAL AS ABOV E. ACCORDINGLY, THE ASSESSEE SUCCEEDS IN THESE ADDITIONAL GROUNDS INASM UCH AS THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DOUBLE DISALLOWANCE. 4. INSOFAR AS THE MERIT OF THE MAIN APPEAL IS CONCERNE D, WE FIND THAT THE SAME RELATES TO DISALLOWANCE UNDER SECTION 14A OF THE ACT WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. IT I S UNDISPUTED FACT THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. UNDER THESE CIRCUMSTANCES, THE LEARNED COUNSEL FOR ASSESSEE PLA CED RELIANCE UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN PCIT S BALLARPUR PAPER INDUSTRIES LTD., ITA NO.33 OF 2016, ORDER DAT ED 16 TH SEPTEMBER 2016. IN THE SAID CASE, THE HONBLE JURISDICTIONAL HIGH COURT HAS EXPOUNDED AS UNDER: BY THIS INCOME TAX APPEAL, THE APPELLANT - DEPARTM ENT CHALLENGES THE ORDERS OF THE COMMISSIONER OF INCOME TAX AND TH E INCOME TAX APPELLATE TRIBUNAL, NAGPUR. ON HEARING THE LEARNED COUNSEL FOR THE DEPARTMENT A ND ON A PERUSAL OF THE IMPUGNED ORDERS, IT APPEARS THAT BOT H THE AUTHORITIES HAVE RECORDED A CLEAR FINDING OF FACT T HAT THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE. WHILE HOLDING SO, THE AUTHORITIES RELIED ON THE JUDGMENT OF THE DELHI HIG H COURT IN INCOME TAX APPEAL NO. 749/2014, WHICH HOLDS THAT TH E EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES THAT THERE SH OULD BE AN ACTUAL RECEIPT OF THE INCOME, WHICH IS NOT INCLUDIB LE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE P URPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE 4 SHRI PADMESH GUPTA PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 19 61 WOULD NOT APPLY TO THE FACTS OF THIS CASE AS NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY ACTUAL INCOME WAS RECEIVED BY THE ASSESSEE AND THE SAME WAS INCLUDIBLE IN THE TOT AL INCOME. THE AUTHORITIES HAVE RIGHTLY HELD THAT SINCE THE ORDER OF THE ASSESSING OFFICER WAS BASED ON THE ORDER OF THE INCOME TAX AP PELLATE TRIBUNAL THAT WAS REVERSED BY THE DELHI HIGH COURT, THE ORDER OF THE ASSESSING OFFICER SHOULD FALL AS THE ORDER ON T HE BASIS OF WHICH IT WAS PASSED, WAS REVERSED. IN THE FACTS OF THE CA SE, THE AUTHORITIES HELD THAT SINCE THE INVESTMENTS MADE BY THE ASSESSEE IN THE SISTER CONCERNS WERE NOT THE ACTUAL INCOME R ECEIVED BY THE ASSESSEE, THEY-COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCOME. THE FINDINGS OF FACTS RECORDED BY BOTH THE AUTHORIT IES DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. SINCE NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS INCOME TAX APPEAL, THE INCOME TAX APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 5. LEARNED COUNSEL FOR ASSESSEE ALSO RELIED UPON THE D ECISION OF THE HONBLE DELHI HIGH COURT IN CHEMINVEST LTD. V/S CIT , [2015 TAXMANN.COM 118 (DEL.). 6. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. HAVING HEARD THE RIVAL CONTENTIONS AND ON A PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE BEFORE U S IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND RESPECTFULLY FOLLOWIN G THE SAME, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMM ISSIONER (APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASS ESSEE. 5 SHRI PADMESH GUPTA 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.05.2018 SD / - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER NAGPUR, DATED: 09.05.2018 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. P.S./P.S.) ITAT, NAGPUR