SANDEEP B SHAH, MUMBAI V. ACIT 5(1), MUMBAI

ITA 4716/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101195 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 26-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND RAM L AL NEGI, JUDICIAL MEMBER / I .T.A. NO. 4716/MUM/2012 ( / ASSESSMENT YEAR : 2009 - 10 SHRI SANDEEP B. SHAH, 505, CEEJAY HOUSE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 400 018 / VS. THE ACIT(5) - 1, AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AAGPS 5405D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI MANDAR VAIDYA / RESPONDENT BY: SHRI AJAY MODI / DATE OF HEARING : 1 4 .0 9 .2015 / DATE OF PRONOUNCEMENT : 1 4 .0 9 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 9 , MUMBAI D ATED 3 .0 5 .2012 PERTAINING TO ASSESSMENT YEAR 200 9 - 1 0. 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 3,36,591/ - ON ACCOUNT OF DISALLOWANCE U/S. 14A OF THE ACT. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT HE IS NOT PRESSING GROUND NO. 2 , THE SAME IS DISMISSED AS NO T PRESSED. ITA. NO. 4716/M/2012 2 4. THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE DEVELOPER & OTHER RELATED SERVICES. THE RETURN FOR THE YEAR WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EARNED DIVIDEND AMOUNTING TO RS. 43,97,887/ - . THE ASSESSEE WAS ASKED TO GIVE THE DETAILS OF EXPENSES INCURRED FOR EARNING THIS DIVIDEND INCOME. THE ASSESSEE WAS FURTHER ASKED TO EXPLAIN WHY DISALLOWANCE SHOULD NOT BE MADE U/S. 14A R.W. RULE 8D OF THE ACT. 4.1. THE ASSESSEE CLAIMED THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING THE EXEMPT INCOME. THE CONTENTION OF THE ASSESSEE WAS DISMISSED BY THE AO WHO PROCEEDED BY COMPUTING THE DISALLOWANCE U/S. 14A AS PER THE METHOD PROVIDED IN RULE 8D. THE DISALLOWANCE WAS COMPUTED AT RS. 3,36,591/ - . 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE AO HAS COMPUTED THE DISALLOWANC E BASED O N INCORRECT APPRECIATION OF FACTS INASMUCH AS WHILE COMPUTING THE DISALLOWANCE, THE AO HAS ALSO CONSIDERED THE INVESTMENTS MADE IN JEWELLERY AND PAINTINGS AND ALSO IN THE INVESTMENTS WHICH DO NOT GIVE RISE TO ANY EXEMPT INCOME. THE LD. COUNSEL F URTHER POINTED OUT THAT THE AO HAS NOT TAKEN THE CORRECT AVERAGE VALUE OF INVESTMENT WHILE COMPUTING THE DISALLOWANCE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. ITA. NO. 4716/M/2012 3 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY THE LD. COUNSEL VIS - - VIS THE FACTS ON RECORD. AFTER PERUSING THE BALANCE SHEET, WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. THE AO HAS TAKEN THE INVESTMENTS IN PAINTINGS AND JEWELLERY WHILE COMPUTING THE DISALLOWANCE U/S. 14A. WE ALSO FIND THAT THE AO HAS TAKEN THE INCORRECT FIGURE FOR DETERMINING THE AVERAGE VALUE OF INVESTMENT. IN OUR CONSIDERED OPINION, THE DISALLOWANCE IS BASED ON FACTUAL ERRORS. WE, THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE AO. THE AO I S DIRECTED TO RECOMPUTE THE DISALLOWANCE TAKING INTO CONSIDERATION THE CORRECT AVERAGE VALUE OF INVESTMENT. THE AO IS FURTHER DIRECTED TO CONSIDER ONLY THOSE INVESTMENTS WHICH GIVE RISE TO THE EXEMPT INCOME. NEEDLESS TO MENTION, THE AO SHALL GIVE REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 1 4 TH SEPTEMBER , 2015 SD/ - SD/ - ( RAM L AL NEGI ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 1 4 TH SEPTEMBER , 2015 . . ./ RJ , SR. PS ITA. NO. 4716/M/2012 4 / 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// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI