INDRA KUMAR, MUMBAI V. ACIT 11(1), MUMBAI

ITA 4754/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70858 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2008-2009
• Appeal Filed On: 17-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: ANIL THAKUR
• Keywords: Opportunity of being heard; Earning of tax free income; Commercial expediency
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, M UMBAI . . '# '# '# '# , $ $ $ $ % % % % BEFORE SHRI VIJAY PAL RAO, JM, AND SHRI N. K. BILLA IYA, AM /. I.T.A. NO.4754 /MUM/2012 ( & & & & '& '& '& '& / ASSESSMENT YEAR: 2008-09) MR. INDRA KUMAR 32, ROCK GARDEN, NEW LINK ROAD, ANDHERI (WEST), MUMBAI- 400 053 / VS. ACIT 11 (1), MUMBAI, ( $ /. ) /. PAN/GIR NO. : AAAP14859F ( (* / APPELLANT ) : ( +,(* / RESPONDENT ) (* - / APPELLANT BY : MR. ANIL THAKUR +,(* - / RESPONDENT BY : SHRI O.P. SINGH /$ / DATE OF HEARING : 26.08. 2013 12' /$ /DATE OF PRONOUNCEMENT : 26.08. 2013 3 3 3 3 / O R D E R PER : N.K. BILLAIYA (AM) THIS APPEAL BY THE ASSESSEE IS PREFERRED AGA INST THE ORDER OF THE CIT(A)-3, MUMBAI DATED 07.06.2012, PERTAINING TO AY 2008-09. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 3,57,736/- U/S 14A OF THE ACT R .W.R. 8D. 2 ITA 4754 M 2012 (AY-2008-09) MR. IND RA KUMAR V/S ACIT 11(1) 3. BRIEFLY STATED THAT THE FACTS OF THE CASE ARE T HAT FOR THE YEAR UNDER CONSIDERATION, ASSESSEE FILED RETURN OF INCOME DECLARING LOSS AT R S. 30,48,833/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY ST ATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. WHILE SCRUTINIZING` THE RETURN OF INCOME, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE A SSESSEE HAS NOT ALLOCATED ANY EXPENDITURE TOWARDS EARNING OF EXEMPT INCOME. THE A SSESSEE WAS ASKED TO EXPLAIN THE SAME, THE ASSESSEE SUBMITTED THAT NO EXPENSES HAVE BEEN INCURRED TO EARN EXEMPT INCOME. THE EXPLANATION OF THE ASSESSEE WAS REJECTE D BY THE AO, WHO WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS A NEGATIVE CAPITAL BAL ANCE AND HAS GIVEN LOANS AND ADVANCES TO CONCERN WITHOUT ANY COMMERCIAL EXPEDIENCY. ACCOR DING TO AO SECTION 14A R.W.R 8D IS SQUARELY APPLICABLE. THEREFORE APPLYING THE PRO VISIONS OF RULE 8D, THE AO WENT ON TO COMPUTE THE WORKING OF THE DISALLOWANCE U/S 14A AS EXHIBITED ON PAGE -2 OF THE ORDER AND WORKED OUT THE DISALLOWANCE AT RS. 3,57,7 36/- . THE ASSESSEE STRONGLY AGITATED THIS ISSUE BEFORE THE CIT(A) BUT WITHOUT ANY SUCCES S. 4. BEFORE US, THE COUNSEL FOR THE ASSESSEE FILED F ACT SHEET, IT IS THE SAY OF THE COUNSEL THAT THE CIT(A) HAS NOT CONSIDERED THE FACT THAT THE OPENING BALANCE IN CAPITAL ACCOUNT AS ON 01.04.2007 WAS POSITIVE AND REMAINED POSITIVE THROUGH OUT THE YEAR AND ONLY BECAUSE OF THE ALLOCATION OF SHARE OF LOSS FRO M PARTNERSHIP FIRM, THE CAPITAL BALANCE BECAME NEGATIVE AS ON 31.3.2008. IT IS FUR THER EXPLAINED THAT THE INVESTMENTS IN SHARES HAVE BEEN MADE OUT OF THE OWN CAPITAL. THE A SSESSEE HAS FURTHER OBJECTED TO THE MANNER IN WHICH THE DISALLOWANCE HAS BEEN COMPUTED UNDER RULE 8D. IT IS THE SAY OF THE COUNSEL THAT FOR THE PURPOSES OF CALCULATION OF AVERAGE INVESTMENT, THE INVESTMENT VALUE SHOULD INCLUDE THE INVESTMENTS WHICH DO NOT F IRM PART OF THE TOTAL INCOME, WHEREAS, AO HAS TAKEN ALL THE INVESTMENTS. 5. THE DR SUPPORTED THE FINDINGS OF THE LOWE R AUTHORITIES. 3 ITA 4754 M 2012 (AY-2008-09) MR. IND RA KUMAR V/S ACIT 11(1) 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT IN DISPUTE THAT PROVISIONS O F SECTION-14A R.W.R 8D ARE VERY MUCH APPLICABLE FOR THE YEAR UNDER CONSIDERATION. HOWEVE R, AT THE SAME TIME WHILE COMPUTING THE DISALLOWANCE, RULE 8D PROVIDES THAT T HE AVERAGE INVESTMENT TO BE CONSIDERED, INVESTMENT INCOME FROM WHICH DO NOT FOR M PART OF THE TOTAL INCOME. WE FIND THAT THE AO HAS TAKEN ALL THE INVESTMENTS MADE BY THE ASSESSEE FOR COMPUTING THE DISALLOWANCE. THIS ISSUE NEEDS TO BE RE-ADJUDICATED , THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH AFTER TAKING INTO CONSIDERATION ONLY THOSE I NVESTMENTS WHOSE INCOME DO NOT FORM PART OF THE TOTAL INCOME. THE AO IS FURTHER DI RECTED TO VERIFY THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE LIGHT OF HIS CLAIM THAT THE NEG ATIVE BALANCE IS ONLY BECAUSE OF THE ALLOCATION OF SHARE IN LOSS FROM THE PARTNERSHIP FI RM. THE AO IS EXPECTED TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. /5 &/ 6789:/ / ;' ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF AUGUST, 2013. 3 12' $ 5 26. 08. 2013 2 = . SD/- SD/- ( VIJAY PAL RAO ) ( N. K. BILLAIYA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI: DATED : 26.08.2013 . /. PRAMOD KUMAR, PS 3 3 3 3 +/ +/ +/ +/ >'/ >'/ >'/ >'/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT 4 ITA 4754 M 2012 (AY-2008-09) MR. IND RA KUMAR V/S ACIT 11(1) 3. ? ) ( / THE CIT(A); 4. ? / THE CIT CONCERNED; 5. @= +/ , , / DR, ITAT, MUMBAI; 6. =A& B / GUARD FILE 3 3 3 3 / BY ORDER, 7 77 7 / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI