MAYUR RAMNIKLAL SHAH, MUMBAI V. ASST CIT CEN CIR 38, MUMBAI

ITA 4936/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8474 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR LD
• Assessee Lawyers: K P KAPADIALD
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

ITA NO.4936/M/2014 MAYUR RAMNIKLAL SHAH ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 4936/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) MAYUR RAMNIKLAL SHAH KAILASH BUNGALOW LALA DEVIDAYAL CROSS ROAD MULUND (WEST) MUMBAI 400 080 / VS. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 38 AAYKAR BHAVAN M.K.ROAD MUMBAI 400 020 ./ ./PAN/GIR NO. AAJPS-2829-Q ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ASSESSEE BY : K.P.KAPADIA,LD.AR REVENUE BY : SUMAN KUMAR, LD. DR / DATE OF HEARING : 06/09/2017 / DATE OF PRONOUNCEMENT : 08/11 /2017 ITA NO.4936/M/2014 MAYUR RAMNIKLAL SHAH ASSESSMENT YEAR 2010-11 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 ASSAILS THE ORDER OF THE LD. COMMISSIONER O F INCOME-TAX (APPEALS)-41 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-41/ACCC-38/IT- 01/13-14 DATED 28/03/2014 QUA CONFIRMATION OF CERTAIN DISALLOWANCE U/S 14A FOR RS.44,90,440/-. THE ASSESSMENT WAS FRAMED B Y LD. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-38, MUMB AI [AO] ON 27/02/2013 U/S 143(3) OF THE INCOME TAX, 1961. 2. THE REGISTRY HAS NOTED THAT THE APPEAL HAS BEEN FILED WITH A DELAY OF 12 DAYS AND THE ASSESSEE, VIDE LETTER DATED 27/0 7/2014 DULY SUPPORTED BY AN AFFIDAVIT, HAS REQUESTED FOR THE CO NDONATION OF THE SAME. THE DELAY IS ATTRIBUTED TO THE POOR HEALTH BE ING SUFFERED BY THE CONSULTING CHARTERED ACCOUNTANT OF THE ASSESSEE. NO SERIOUS OBJECTIONS ARE RAISED AGAINST THE SAME BY THE LD. DEPARTMENTAL REPRESENTATIVE. THEREFORE, KEEPING IN VIEW THE QUANTUM OF DELAY AND IN THE INTEREST OF JUSTICE, WE CONDONE THE SAME AND PROCEED FURTHER ON THE MERITS OF THE CASE. 3.1 FACTS QUA THE ISSUE ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED AS BUILDER & DEVELOPER WAS ASSESSED FOR IMPUGNED AY ON 27/02/2013 U/S. 143(3) AT RS. 1,16,35,780/- AS AGAI NST RETURNED INCOME OF RS.69,43,542/- E-FILED BY THE ASSESSEE ON 30/07/2010. THE ASSESSEE, INTER-ALIA, HAS SUFFERED DISALLOWANCE OF RS.44,90,440/- U/S 14A AND THE SAME IS THE SOLE SUBJECT MATTER OF THIS APPEAL. ITA NO.4936/M/2014 MAYUR RAMNIKLAL SHAH ASSESSMENT YEAR 2010-11 3 3.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.30,55,576/- BUT DID NOT MAKE ANY DISALLOWANCE U/S 14A. THE ASSESSEE SUBMITTED THAT A LL INTEREST BEARING FUNDS PROCURED BY THE ASSESSEE BARRING A SUM OF RS. 156.50 LACS WERE UTILIZED IN GIVING INTEREST BEARING LOANS. FURTHER, THE ASSESSEE SUBMITTED DISALLOWANCE WORKING IN TERMS OF RULE 8D FOR RS.12, 38,406/- WHICH COMPRISED OF INTEREST DISALLOWANCE FOR RS.9,51,560/ - & EXPENSES DISALLOWANCE FOR RS.2,86,846/-. HOWEVER, LD. AO OPI NED THAT THE ASSESSEE COULD NOT ESTABLISH THE NEXUS OF INTEREST BEARING LOANS OBTAINED BY THE ASSESSEE VIS--VIS LOANS GRANTED BY THE ASSESSEE. FINALLY, APPLYING RULE 8D, LD. AO WORKED OUT THE SA ID DISALLOWANCE AS RS.44,90,440/- WHICH COMPRISED OF INTEREST DISALLOW ANCE U/R 8D(2)(II) FOR RS.41,14,920/- AND EXPENSE DISALLOWANCE U/S 8D(2)(I II) FOR RS.3,75,520/-. 4. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 28/03/2 014 WHERE THE ASSESSEE PLACING RELIANCE ON THE JUDGMENT OF HONBL E BOMBAY HIGH COURT IN RELIANCE UTILITIES & POWER LIMITED [178 TAXMAN 135] CONTENDED THAT OWN CAPITAL WAS SUFFICIENT TO COVER THE INVEST MENTS AND THEREFORE, A PRESUMPTION HAS TO BE DRAWN THAT INVESTMENTS WERE M ADE OUT OF OWN FUNDS. THE ASSESSEE ALSO CONTENDED THAT RULE 8D COU LD NOT BE APPLIED BY THE LD. AO WITHOUT VERIFYING THE CLAIM OF THE AS SESSEE AND POINTING OUT DEFECT IN THE SAME. THE ASSESSEE ALSO POINTED O UT THAT SOME INTEREST BEARING LOANS OBTAINED BY THE ASSESSEE WERE USED TO GRANT INTEREST BEARING LOANS AND THEREFORE, INTEREST PORTION, AT L EAST TO THAT EXTENT COULD NOT CONSIDERED WHILE COMPUTING INTEREST DISALLOWANC E. HOWEVER, NOT ITA NO.4936/M/2014 MAYUR RAMNIKLAL SHAH ASSESSMENT YEAR 2010-11 4 CONVINCED, LD. CIT(A) REJECTED THE VARIOUS CONTENTI ONS OF THE ASSESSEE AND UPHELD THE DISALLOWANCE WITH CERTAIN DIRECTIONS TO LD. AO TO MAKE CORRECTIONS IN THE FIGURES PICKED BY HIM FOR THE PU RPOSE OF CALCULATING THE SAID DISALLOWANCE. AGGRIEVED, THE ASSESSEE IS IN FU RTHER APPEAL BEFORE US. 5. THE LD. COUNSEL FOR ASSESSEE [AR] DREW OUR ATTEN TION TO THE FACT THAT THE IDENTICAL MATTER IN THE CASE OF BROTHER OF THE ASSESSEE NAMELY CHETAN R.SHAH IN ITA NO. 4935/M/2014 WAS HEARD BY ANOTHER BENCH O F THE TRIBUNAL WHERE THE MATTER HAS BEEN RESTORED BAC K TO THE FILE OF LD. AO FOR RECONSIDERATION OF THE MATTER IN TERMS OF VA RIOUS PLEAS OF THE ASSESSEE. THE LD. AR PLEADED FOR SIMILAR DIRECTIONS WHEREAS LD. DR CONTENDED THAT THE MATTER WAS ELABORATELY DISCUSSED BY LD. CIT(A) AND THEREFORE, NO FURTHER RELIEF COULD BE GRANTED TO TH E ASSESSEE. 6. WE HAVE APPRECIATED THE RIVAL CONTENTIONS. WE FI ND THAT THE MATTER TO BE FACTUAL ONE. THE CONTENTION OF THE ASSESSEE I S THAT INVESTMENT WERE MADE MOSTLY OUT OF OWN FUNDS AND ONLY SMALL PO RTION OF INTEREST BEARING LOANS HAVE BEEN USED TO MAKE THE INVESTMENT WHICH COULD EARN EXEMPT INCOME. WE ALSO NOTE THAT THE ASSESSEE HAS S UFFERED DISALLOWANCE OF RS.44,90,440/- AGAINST EXEMPT INCOM E OF RS.30,55,576/- WHICH WAS NOT JUSTIFIED SINCE IT IS NOW SETTLED LEG AL POSITION THAT THE DISALLOWANCE CANNOT SWALLOW THE ENTIRE EXEMPT INCOM E EARNED BY THE ASSESSEE. THE LD. CIT(A) HAS ALSO POINTED OUT ERROR S IN THE FIGURES PICKED UP BY LD. AO TO ARRIVE AT THE SAID DISALLOWA NCE. THEREFORE, ON THE TOTALITY OF FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER REQUIRES FRESH ADJUDICATION AT THE LEVEL OF LD. AO AFTER CON SIDERING VARIOUS ITA NO.4936/M/2014 MAYUR RAMNIKLAL SHAH ASSESSMENT YEAR 2010-11 5 CONTENTIONS OF THE ASSESSEE AS WELL AS APPRECIATING THE NEXUS OF OWN CAPITAL AND INTEREST BEARING LOANS VIS--VIS INVEST MENT MADE BY THE ASSESSEE. HENCE, THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSEE FOR RE-ADJUDICATION AFTER PROVIDING ADEQUATE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE, WHO, IN TURN, IS DIRECTED TO DEMONSTRATE THE APPROPRIATE DISALLOWANCE TO BE MADE AGAINST EXEMPT INCOME WITH COGENT MATERIAL. WE DIRECT SO. 7. RESULTANTLY, THE ASSESSEES APPEAL STANDS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH NOVEMBER, 2017. SD/- SD/- (MAHAVIR SINGH) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 08.11.2017 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. '%, , , , / DR, ITAT, MUMBAI 6. -. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI