S. GANESH, MUMBAI V. ACIT 11(2), MUMBAI

ITA 527/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3703 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S GANESH
• Keywords: Unexplained investment; Earning of tax free income; Corroborative evidences
• Section: 14A

Judgement Text

1 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH E EE E MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI D K AGARWAL, JM & D K AGARWAL, JM & D K AGARWAL, JM & D K AGARWAL, JM & SHRI SHRI SHRI SHRI R R R R K PANDA, AM K PANDA, AM K PANDA, AM K PANDA, AM IT ITIT ITA NO A NO A NO A NO. . . . 527/MUM/2010 527/MUM/2010 527/MUM/2010 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) SHRI S GANESH 10 FAIRFIELD 2 ND FLOOR J S MALANI ROAD, CHURCHGATE MUMBAI VS THE ASST COMMR OF INCOME TAX 11(2), MUMBAI (APPELLANT) (RESPONDENT) PAN PAN PAN PAN AAGPS5047M AAGPS5047M AAGPS5047M AAGPS5047M ASSESSEE BY: SHRI S GANESH REVENUE BY: SHRI D SANGATE O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THIS APPAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 23.11.2009 OF THE CIT(A)-3, MUMBAI RELATING T O ASSESSMENT YEAR 2006-07. 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E IS AN ADVOCATE BY PROFESSION AND FILED HIS RETURN OF INCOME ON 8. 12.2006 DECLARING TOTAL INCOME OF ` 4,96,57,940/-. THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN THE SOURC ES OF INVESTMENTS MADE IN VARIOUS MUTUAL FUNDS AND RECONCILE THE SAME WITH TH E AIR INFORMATION AS WELL AS CO-RELATE THE PAYMENTS WITH THE ASSESSEES BANK ACC OUNT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF INVESTMENT IN RESPECT OF THE FOLLOWING MUTUAL FUNDS TOTALLING TO ` 4.75 CRORES: 2 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) NAME OF THE MUTUAL FUND NAME OF THE MUTUAL FUND NAME OF THE MUTUAL FUND NAME OF THE MUTUAL FUND DATE DATE DATE DATE AMOUNT AMOUNT AMOUNT AMOUNT HSBC 9.5.2005 50,00,000 DSP 30.5.2005 50,00,000 SBI 14.2.26 25,0 0,000 HDFC 6.4.2005 1,00,00,000 TATA 5.4.2005 2,00,00,000 HDFC 6.4.25 50,00,000 TOTAL 4,75,00,000 2.1 IN ABSENCE OF ANY SATISFACTORY EXPLANATION BY T HE ASSESSEE WITH SUPPORTING EVIDENCES, THE ASSESSING OFFICER MADE THE ADDITION OF ` 4.75 CRORES AS UNEXPLAINED 2.2 THE ASSESSING OFFICER ASKED THE ASSESSEE TO FUR NISH PARTY-WISE DETAILS OF PROFESSIONAL FEES RECEIVED DURING THE YEAR UNDER CO NSIDERATION AND RECONCILE THE SAME WITH TDS CERTIFICATES. HE ALSO REQUESTED THE A SSESSEE TO RECONCILE THE PROFESSIONAL FEES RECEIVED BY THE ASSESSEE AS PER A IR INFORMATION. THE ASSESSEE, VIDE LETTER DATED 8.10.2008 SUBMITTED THAT ALL PROF ESSIONAL FEES ARE RECEIVED BY WAY OF CHEQUES AND ALL SUCH CHEQUES RECEIVED ARE DE POSITED IN HIS HDFC ACCOUNT. IT WAS FURTHER SUBMITTED THAT PROFESSIONA L RECEIPTS DISCLOSED BY THE ASSESSEE ARE MORE THAN THE RECEIPTS SHOWN IN AIR IN FORMATION AND ACCORDINGLY, THERE IS NO DISCREPANCY. THE ASSESSEE ALSO EXPRESS ED HIS INABILITY TO FURNISH PARTY-WISE DETAILS OF PROFESSIONAL FEES RECEIVED DU RING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER NOTED THAT 4 0 ITEMS AMOUNTING TO ` 47,37,000/- AS PER PAGE 3 & 4 OF THE ASSESSMENT O RDER HAS NOT BEEN DISCLOSED AS PROFESSIONAL FEES RECEIPTS IN RESPECT OF THE SAI D PARTIES. SINCE THE ASSESSEE COULD NOT FURNISH PARTY-WISE DETAILS OF PROFESSIONA L FEES RECEIVED DURING THE YEAR AND ALSO COULD NOT RECONCILE WITH THE AIR INFORMATI ON, EXCEPT BY GIVING VAGUE REPLY STATING THAT THE PROFESSIONAL RECEIPTS DISCLO SED BY HIM ARE MUCH MORE THAN THE PROFESSIONAL RECEIPTS SHOWN IN THE AIR INFORMAT ION AND IN THE ABSENCE OF ANY 3 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) SATISFACTORY EXPLANATION, THE ASSESSING OFFICER MAD E AN ADDITION OF ` 47,37,000/- BEING PROFESSIONAL FEE NOT DISCLOSED BY THE ASSESS EE AS PER AIR INFORMATION. 2.3 THE ASSESSING OFFICER FURTHER NOTED THAT THE AS SESSEE HAS DISCLOSED DIVIDEND INCOME OF ` 6.39 CRORES AS EXEMPT FROM TAX. THE ASSESSING OFFI CER ASKED THE ASSESSEE TO COMPUTE THE DISALLOWANCE U/S 14A AS PER RULE 8D. IT WAS SUBMITTED BY THE ASSESSEE THAT THE EXPENDITURE CLAI MED BY HIM AS DEDUCTION RELATES PURELY TO PROFESSIONAL ACTIVITIES AND NO PA RT OF THE EXPENDITURE RELATES TO HIS DIVIDEND INCOME WHICH IS NOT TAXABLE AND THEREF ORE, PROVISIONS OF SEC. 14A AND RULES 8D HAVE NO APPLICATION. HOWEVER, THE AS SESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATIONS GIVEN BY THE ASSES SEE. FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DISTRIBUTO RS BARODA PVT LTD REPORTED IN 155 ITR 120 AND THE DECISION OF THE TRIBUNAL IN THE CASE OF GHERZI EASTERN LTD IN ITA NO.6562/BOM/94 DATED23.9.2002, THE ASSESSING OF FICER DISALLOWED AN AMOUNT OF ` 50,000/- ON ESTIMATE BASIS U/S 14A OF THE I T ACT AS EXPENSE ATTRIBUTABLE TO EXEMPT INCOME. 3 BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE CO NFIRMATIONS/RELEVANT STATEMENTS ETC., WERE SUBSEQUENTLY OBTAINED FROM V ARIOUS MUTUAL FUNDS WHICH THE ASSESSEE INTENDED TO USE AS EVIDENCES IN APPEA L PROCEEDINGS. SINCE THIS EVIDENCE WAS NOT PRESENTED BEFORE ASSESSING OFFICER DUE TO LACK OF SUFFICIENT OPPORTUNITY , THE CIT(A) REMANDED THE MATTER TO THE FILE OF THE ASSESSING OFFICER UNDER RULE 46A ALONG WITH A SET OF DOCUMENTS SUBMIT TED BY THE ASSESSEE AND THE ASSESSING OFFICER WAS DIRECTED TO MAKE FURTHER ENQUIRES OR ASK FOR RECORDS AND EVIDENCES AS DEEMED NECESSARY. 4 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) 3.1 SO FAR AS THE ISSUE RELATING TO NON-RECONCILIAT ION OF PROFESSIONAL FEE WITH THE AIR INFORMATION, IT WAS SUBMITTED THAT THERE WA S SOME ERROR IN AIR INFORMATION AND THE ASSESSEE HAS ONLY ONE BANK ACCO UNT I.E. HDFC FOR MUTUAL FUND AND ORIENTAL BANK OF COMMERCE FOR PROFESSIONAL RECEIPTS FOR SUCH PARTIES. IT WAS SUBMITTED THAT THE ASSESSEE REQUESTED FOR MORE TIME AS THE TIME ALLOWED WAS FAR TOO SHORT FOR COMPLIANCE. THE ASSESSEE ALS O STATED THAT THE ADDITION WOULD LEAD TO MISMATCH IN TDS POSITION, IF ASSESSEE S INCOME IS INCREASED BY THE AMOUNT OF ADDITION AND THAT OTHER THAN THE MUTUAL F UND TRANSACTIONS, ALL PROFESSIONAL TRANSACTIONS WERE ONLY ROUTED THROUGH OBC. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE CIT(A) REMA NDED THIS ISSUE ALSO BACK TO THE FILE OF THE ASSESSING OFFICER UNDER RULE 46 A WITH THE DIRECTION TO EXAMINE THE SUBMISSIONS OF THE ASSESSEE AND MAKE FURTHER EN QUIRIES AS DEEMED FIT AND TO SEND THE REMAND REPORT. 3.2 AS REGARDS THE DISALLOWANCE OF ` . 50,000/- ON ACCOUNT OF EXPENSES ATTRIBUTABLE TO EARNING OF TAX FREE DIVIDEND INCOME , IT WAS SUBMITTED THAT NO DISALLOWANCE UNDER THE SAID HEAD WAS MADE BY THE AS SESSING OFFICER U/S14A IN THE PREVIOUS ASSESSMENT YEAR ALTHOUGH SIMILAR DIVID END INCOME WAS EARNED BY THE ASSESSEE AND SIMILAR EXPENDITURE WAS INCURRED B Y THE ASSESSEE. IT WAS SUBMITTED THAT ENTIRE EXPENDITURE CLAIMED WAS PUREL Y TOWARDS PROFESSIONAL RECEIPTS. 5 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) 3.3 AFTER OBTAINING THE REMAND REPORT FROM ASSESSING O FFICER, THE CIT(A) CONFRONTED THE SAME TO THE ASSESSEE. IN THE REMAND REPORT, AGAINST THE ADDITION OF ` 4.75 CRORES ON ACCOUNT OF UNEXPLAINED INVESTM ENTS IN MUTUAL FUNDS, THE ASSESSING OFFICER ACCEPTED `. 4 CRORES AS EXPLAIN ED AND SUBMITTED THAT THE FOLLOWING TWO AMOUNTS I.E. INVESTMENT IN DSP BLACK ROCK ON 30.5.2005 FOR RS. 50 LACS AND SBI MUTUAL FUND ON 14.2.2006 FOR RS. 25 LA CS REMAINED UNEXPLAINED. 3.4 AS REGARDS NON RECONCILIATION OF PROFESSIONAL F EE WITH ANNUAL INFORMATION REPORT (AIR), THE ASSESSING OFFICER, ON VERIFICATIO N OF TDS AND AIR INFORMATION OBSERVED THAT THE ASSESSEE HAS NOT DISCLOSED THE IN COME OF ` 47,37,000/-. SINCE THIS COULD NOT BE RECONCILED EVEN DURING THE REMAN D PROCEEDINGS, HE STATED IN THE REMAND REPORT THAT THE ADDITION NEEDS TO BE CO NFIRMED. 4 REJECTING THE VARIOUS ARGUMENTS ADVANCED BY THE A SSESSEE AND ON THE BASIS OF THE REMAND REPORT OF THE ASSESSING OFFICER , THE CIT(A) SUSTAINED THE ADDITION OF RS. 47,37,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON RECONCILIATION OF PROFESSIONAL FEE WITH AIR INFORMA TION AND RS. 50,000/- DISALLOWED U/S 14A. HE, HOWEVER, SUSTAINED THE ADD ITION OF RS. 75 LACS OUT OF ` 4,75,00,000 MADE BY THE ASSESSING OFFICER AS UND ISCLOSED INVESTMENT IN MUTUAL FUNDS. 5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE US. 6 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) 6 IN THE GROUNDS OF APPEAL NOS.1 TO 7, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 47, 37,000/- MADE BY THE AO ON ACCOUNT OF NON-RECONCILIATION OF PROFESSIONAL FEE R ECEIPTS WITH TDS CERTIFICATE. 7 THE ASSESSEE PERSONALLY APPEARED BEFORE THE TRIBU NAL. REFERRING TO THE LETTER DATED 8.10.2008 ADDRESSED TO THE ASSESSING O FFICE , WHICH IS PLACED AT PAGE 1 OF THE PAPER BOOK, HE SUBMITTED THAT THE EN TIRE FEES RECEIVED BY HIM ARE BY CHEQUES, WHICH MAY COME FROM THE CLIENTS OR FRO M INSTRUCTING ADVOCATES OR CHARTERED ACCOUNTANTS IN CASE THEY HAVE COLLECTED T HE AMOUNTS FROM THE CLIENTS; THEREFORE, IT IS NOT PRACTICALLY POSSIBLE FOR HIM TO GIVE A DETAILED PARTY WISE BREAKUP OF FEES RECEIVED. HE SUBMITTED THAT S IMILAR EXPLANATIONS WERE GIVEN IN EARLIER SCRUTINY ASSESSMENTS AND WAS ACCEP TED BY THE ASSESSING OFFICERS. MOREOVER, THE TOTAL FEES RECEIVED BY HI M DURING THE YEAR, LESS TDS, IF COMPARED WITH THE DETAILS AS PER TDS CERTIFICATE SU BMITTED BY HIM, THEY ALMOST TALLY EXCEPT IN A FEW SMALL CASES BECAUSE OF NON RE CEIPT OF TDS CERTIFICATE FROM THE CLIENTS. HE SUBMITTED THAT HIS TOTAL PROFESSIO NAL FEES FAR EXCEED THE FEES AS PER AIR INFORMATION. HE SUBMITTED THAT SINCE HE HAS DEPOSITED ALL HIS PROFESSIONAL FEE RECEIPTS IN ONE BANK ACCOUNT ONLY AND THERE IS NO INFORMATION WITH THE DEPARTMENT THAT HE HAS RECEIVED ANY OTHER AMOUNT WH ICH HAS NOT BEEN DISCLOSED AND/OR DEPOSITED IN SOME OTHER BANK ACCOUNT; THERE FORE, THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) I S UNCALLED FOR. 7 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) 7.1 THE LD DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE AUTHORITIES BELOW SUBMITTED THAT SINCE THE ASSESSEE FAILED TO R ECONCILE THE PROFESSIONAL FEES DECLARED ALONG WITH RECEIPTS APPEARING IN THE AIR I NFORMATION; THEREFORE, NOTWITHSTANDING THE FACT THAT THE ASSESSEES TOTAL RECEIPT IS MORE THAN THE FIGURE DISCLOSED IN THE AIR INFORMATION, THE ASSESSING OFF ICER WAS JUSTIFIED IN MAKING THE ADDITION AND CIT(A) WAS JUSTIFIED IN SUSTAINING THE SAME. 8 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER MADE AN ADDITION OF ` . 47,37,000/- ON ACCOUNT OF NON FURNISHING OF PARTY -WISE DETAILS OF PROFESSIONAL FEES RECEIPT DURING THE YEAR AND NON R ECONCILIATION OF PROFESSIONAL FEES RECEIPTS WITH THE AIR INFORMATION. WE FIND T HE CIT(A) SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER SINCE THE ASSESSEE F AILED TO RECONCILE EACH AND EVERY ENTRY OF THE ACCOUNTS WITH THE ASSESSEES RET URN AND RECORDS. ACCORDING TO THE CIT(A), IT IS IMMATERIAL THAT THE INCOME R ETURNED BY THE ASSESSEE IS HIGHER THAN THE FIGURE AS PER AIR INFORMATION. 8.1 IT IS THE SUBMISSION OF THE ASSESSEE THAT SINC E HE HAS DEPOSITED ALL HIS PROFESSIONAL RECEIPTS IN ONE BANK ACCOUNT ONLY AND SINCE ALL THE FEES ARE RECEIVED BY CHEQUES WHICH CAME FROM THE CLIENTS DIRECTLY OR FROM THE INSTRUCTING ADVOCATES OR CAS, IF THEY HAVE COLLECTED THE AMOUNT S FROM THE CLIENTS AND SINCE NO OTHER BANK ACCOUNT IS MAINTAINED BY HIM WHEREIN PROFESSIONAL FEES ARE 8 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) DEPOSITED AND SINCE THE AMOUNT RETURNED IN THE AUDI TED ACCOUNTS IS MORE THAN THE FEES AS PER THE AIR INFORMATION; THEREFORE, NO ADDITION IS CALLED FOR. 8.2 WE FIND SUFFICIENT FORCE IN THE ABOVE SUBMISSIO NS OF THE ASSESSEE. ADMITTEDLY, THE REVENUE HAS NOT CONTROVERTED THE SU BMISSIONS OF THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING THE ASSESSMEN T PROCEEDINGS AS WELL AS REMAND PROCEEDINGS THAT ALL PROFESSIONAL FEES RECEI VED ARE BY WAY OF CHEQUES AND ALL SUCH CHEQUES HAVE BEEN DEPOSITED IN HIS ORI ENTAL BANK OF COMMERCE ACCOUNT, SOUTH EXTENSION BRANCH, NEW DELHI (VIDE LE TTER ADDRESSED TO ASSESSING OFFICER ON 8.10.208). THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT BY THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS RECE IVED AMOUNT MORE THAN THE PROFESSIONAL FEES THAN WHAT HAS BEEN DECLARED BY HI M, NO ADDITION SHOULD HAVE BEEN MADE. IT IS ALSO A FACT THAT THE PROFESSIONAL INCOME DECLARED BY THE ASSESSEE FAR EXCEEDS THE PROFESSIONAL FEES AS PER A IR INFORMATION. THERE MAY BE SO MANY REASONS SUCH AS LOW DEDUCTION OF TAX, NON-D EDUCTION OF TAX, DEDUCTION ON ACCOUNT OF REIMBURSEMENT OF EXPENSES ETC., FOR W HICH THE FIGURE AS PER THE AIR MAY NOT TALLY WITH THE INCOME DECLARED BY THE A SSESSEE ON ACCOUNT OF PROFESSIONAL FEES FROM VARIOUS CLIENTS. FURTHER, IT HAS CATEGORICALLY BEEN EXPLAINED BY THE ASSESSEE THAT IT IS NOT PRACTICALL Y POSSIBLE TO GIVE DETAILED PARTY WISE BREAKUP OF FEES RECEIPTS SINCE THE ASSESSEE RECEIVED HIS FEES EITHER DIRECTLY FROM THE CLIENTS OR FROM THE INSTRUCTING A DVOCATES OR CAS, IF THEY HAVE COLLECTED THE AMOUNTS FROM THE CLIENTS. SIMILAR EXP LANATION HAVE BEEN ACCEPTED IN THE PAST IN SCRUTINY ASSESSMENT AND NO ADDITION HAS BEEN MADE, A FACT ALREADY BROUGHT ON RECORD. IN THIS VIEW OF THE MATTER, WE F IND SUFFICIENT FORCE IN THE SUBMISSIONS MADE BY THE ASSESSEE THAT NO ADDITION I S CALLED FOR ON THIS ACCOUNT. 9 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) A ND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. 9 THE GROUNDS OF APPEALS 8 TO 12 RELATE TO THE ORDE R OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 75 LACS ON ACCOUNT O F INVESTMENT FOR MUTUAL FUNDS. 10 THE ASSESSEE AT THE TIME OF HEARING BEFORE US, R EFERRED TO THE PAPER BOOK PAGE 28 AND SUBMITTED THAT THE INVESTMENT IN DSP BL ACK ROCK MUTUAL FUND WAS PURCHASED BY HIS FATHER MR K R SRINIVASAN AND HIS N AME WAS APPEARING AS JOINT HOLDER. REFERRING TO PAGE 29 OF THE PAPER BOOK, HE SUBMITTED THAT INVESTMENT OF RS. 25 LACS IN SBI BLUE CHIP MUTUAL FUND STANDS I N THE NAME OF SMT S RAJALAKSHMI, HIS MOTHER AND HE IS THE SECOND HOLD ER. REFERRING TO THE ORDER OF THE CIT(A), HE DREW THE ATTENTION OF THE BENCH TO P ARA 4.2.1 OF THE ORDER AND SUBMITTED THAT THE ASSESSING OFFICER VIDE LETTER D ATED 17.11.2009 HAS INFORMED THE ASSESSING OFFICER OF SHRI K R SRINIVASAN AND SM T S RAJALAKSHMI FOR NECESSARY ACTION AT THEIR END. THE ASSESSING OFFICE R IN THE SAID LETTER ALSO INFORMED THEM THAT THE ASSESSEE WAS ONLY A SECOND JOINT HOLDER 10.1 . REFERRING TO PARA 4.3.2 HE SUBMITTED THAT ALTHOUGH THE CIT(A) HAS SUSTAINED THE ADDITION, AT THE SAME TIME HE HAS MEN TIONED THAT THIS ADDITION IS SUBJECT TO THE DECISIONS TAKEN IN RESPECT OF THESE INVESTMENTS BY THE CONCERNED INCOME TAX AUTHORITIES IN THE CASE OF SHRI K R SRI NIVASAN AND SMT S RAJALAKSHMI. HE SUBMITTED THAT SINCE SHRI K R SRIN IVASAN AND SMT S RAJALAKSHMI ARE SEPARATELY ASSESSED TO INCOME TAX AND SINCE THE MONEY HAS GONE THROUGH 10 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) THEIR BANK ACCOUNT AND SINCE THE INVESTMENTS ARE M ADE BY THEM AND THEIR NAMES APPEARS AS 1 ST HOLDER AND HE IS ONLY THE 2 ND HOLDER, THEREFORE, NO ADDITION SHOULD HAVE BEEN MADE. 10.2 ON THE OTHER HAND, THE LD DR RELIED ON THE ORD ER OF THE CIT(A) AND SUBMITTED THAT SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THE INVESTMENTS, THEREFORE, THE ADDITION SUSTAINED BY T HE CIT(A) IS JUSTIFIED. 11 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE COPY OF THE CERTIFICATE OF D SP BLACK ROCK MUTUAL FUND, WE FIND AN AMOUNT OF RS. 50 LACS INVESTED ON 30.5 200 5 STANDS IN THE NAME OF SHRI K S SRINIVASAN AND THE ASSESSEES NAME APPEARS ON LY AS A JOINT HOLDER. FURTHER, MR SRINIVASAN IS ASSESSED TO INCOME TAX VIDE PAN N O.AALPS67541 AND ASSESSED TO TAX UNDER THE JURISDICTION OF THE ASSESSING OFFI CER WARD 12(3)(1). 11.1 SIMILARLY, FROM THE COPY OF THE CERTIFICATE IS SUED BY SBI MUTUAL FUND, WE FIND THE AMOUNT OF RS. 25 LACS INVESTED ON 12.2.200 6 STANDS IN THE NAME OF SMT S RAJALAKSHMI AND THE ASSESSEES NAME APPEARS AS 2 ND HOLDER. THERE IS ALSO NO DISPUTE TO THE FACT THAT MRS S RAJALAKSHMI IS ASSES SED TO INCOME TAX UNDER THE ITO WARD 12(2)(3) AS PER COPY OF THE REMAND REPORT INCORPORATED IN THE ORDER OF THE CIT(A) IN PARA 4.2.1. SINCE THE IDENTITY OF TH ESE PERSON ARE ESTABLISHED AND THEY ARE ASSESSED TO INCOME TAX; THEREFORE, ADDITIO N, IF ANY COULD HAVE BEEN MADE IN THEIR HANDS ONLY ON ACCOUNT OF UNEXPLAINED INVESTMENTS AND NOT IN THE 11 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) HANDS OF THE ASSESSEE. IT IS ALSO A FACT THAT THE ASSESSING OFFICER HAS ALREADY INFORMED THE ASSESSING OFFICER HAVING JURISDICTION OF THE ABOVE TWO PERSONS AS PER HIS LETTER DATED 17.11.2009 TO TAKE NECESSARY ACTION AT THEIR END. THEREFORE, IN OUR CONSIDERED OPINION, THE ADDITION IS UNCALLED FOR ON THIS ACCOUNT IN THE HANDS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` . 75 LACS. 12 IN THE GROUNDS OF APPEAL NOS 13 TO 16 THE ASSE SSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF ` 50,000/- MADE BY THE ASSESSING OFFICER U/S 14A. 13 AFTER HEARING BOTH THE PARTIES, WE FIND THAT AGA INST THE TAX FREE DIVIDEND INCOME OF RS. 6.39 CRORES, THE ASSESSEE HAS NOT DIS ALLOWED ANY AMOUNT ON ACCOUNT OF EXPENDITURE U/S 14A OF I T ACT R.W.R 8D. WE FIND, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 50,000/- ON ESTIMATE BA SIS U/S 14A BEING EXPENSES ATTRIBUTABLE TO EXEMPT INCOME, WHICH HAS BEEN SUSTA INED BY THE CIT(A). IT IS THE SUBMISSION OF THE ASSESSEE THAT THE ENTIRE EXPENDIT URE RELATES TO PROFESSIONAL INCOME AND NO PART OF EXPENDITURE RELATES TO EARNIN G OF TAX FREE DIVIDEND INCOME. HOWEVER, WE ARE UNABLE TO ACCEPT THE ABOVE CONTENTION OF THE ASSESSEE. THE TOTAL DIVIDEND INCOME RECEIVED BY THE ASSESSEE AND CLAIMED TO BE EXEMPT IS 6.39 CRORES. ALTHOUGH THE DIVIDEND INCOME MAY BE DIRECTLY CREDITED TO HIS BANK ACCOUNT STILL, SOME TIME IS DEVOTED BY THE ASSESSEE FOR MONITORING THE ACCOUNTS TRACKING THE INVESTMENT AS WELL AS REINVESTMENTS DU RING THE YEAR. THEREFORE, IT CANNOT BE SAID THAT NO PART OF THE EXPENDITURE IS A TTRIBUTABLE TO SUCH DIVIDEND 12 ITA NO. 527/MUM/2010 (ASSESSMENT YEAR 2006-07 ) INCOME. FURTHER, THE EXPENDITURE DISALLOWED BY THE ASSESSING OFFICER AT ` . 50,000/- APPEARS TO BE VERY REASONABLE CONSIDERIN G THE VOLUME OF DIVIDEND INCOME. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) SUSTAINING THE DISALLOWANCE OF ` . 50,000/- MADE BY THE ASSESSING OFFICER. THE GROUND RAISED BY THE ASSESSEE IS ACCO RDINGLY DISMISSED. 14 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 8 TH , DAY OF DEC 2010. SD/- SD/- ( (( ( D K AGARWAL D K AGARWAL D K AGARWAL D K AGARWAL ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 8 TH , DEC 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI