DR. ASHWIN BALCHAND MEHTA, MUMBAI V. JCIT RG 11(2), MUMBAI

ITA 5329/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2719 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Earning of tax free income; Revised return
• Section: 54F; 14A; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NOS.5329 & 6293/M/2012 ASSESSMENT YEARS: 2008-09 & 2009-10 DR. ASHWIN BALCHAND MEHTA, 2 ND FLOOR, MANI MAHAL, 11/21 MATHEW ROAD, OPERA HOUSE, MUMBAI - 400004 PAN: AACPM 8363J VS. JOINT COMMISSIONER OF INCOME TAX, RANGE 11(2), AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NITESH JOSHI, A.R. REVENUE BY : SHRI RAKESH RANJAN, D.R. DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT : 06.11.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST TWO DIFFERENT ORDERS DATED 10.07.2012 & 23.08.2012 OF T HE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS, HENCE, THEY ARE TAKEN TOGETHER AND ARE BEING DISPOSED OF WITH THIS COMMON ORDER. FOR THE SAKE O F CONVENIENCE, THE FACTS HAVE BEEN TAKEN FROM ITA NO.5329/M/2012 FOR A.Y. 20 08-09. ITA NO.5329/M/2012 FOR A.Y. 2008-09 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX [CIT(A)] HAS ERRED IN ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 2 CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN N OT ALLOWING ANY DEDUCTION U/S 54(1) OF THE ACT. ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE LEARNED CIT(A) OUGHT TO HAVE ACCEPTED THE APPELLANT'S CLAIM OF DEDUCTION U/S.54(1) AT RS.25,46,760/-. 2. LEARNED CIT(A) HAS ERRED IN NOT ENTERTAINING CLA IM OF THE APPELLANT THAT DEDUCTION U/S 54(1) OUGHT TO BE ALLOWED AT RS. 25,46,760 AS AGAINST RS.16,81,790/- CLAIMED IN THE RETURN OF INC OME ON THE GROUND THAT ANY CLAIM WHICH IS NOT MADE IN THE RETURN OF INCOME CANNOT BE SUBSTITUTED WITHOUT FILING OF REVISED RETURN OF INCOME. ON FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE APPELLANT'S CLAIM OF DEDUCTION U/S. 54(1) OF RS.25,46,760/-, BEING THE AMOUNT UTILISED BY THE APPELLANT FOR ACQUIRING THE RESIDENTIAL PROPERTY ON OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME, OUGHT TO BE ALLOWED. 3. LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISAL LOWANCE U/S.14A OF RS.7,69,490/UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. ON THE FACTS AND IN CIRCUMSTANCES OF T HE CASE, DISALLOWANCE MADE OUGHT TO BE DELETED OR IN THE ALTERNATIVE SUBS TANTIALLY REDUCED. 4. WHILE CONFIRMING THE DISALLOWANCE OF RS. 7,69,49 0 U/S 14A, LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE APPELLANT CANN OT TAKE UP THE ISSUE IN APPEAL ON THE GROUND THAT AO HAS OBSERVED IN THE AS SESSMENT ORDER THAT 'THE APPELLANT HAS NO OBJECTION TO THE DISALLOWANCE U/S 14A'. THE APPELLANT HAVING OBJECTED TO THE ABOVE OBSERVATION OF THE AO IN GROUND OF APPEAL RAISED BEFORE THE CIT(A) AND APPELLANT NOT HAVING MADE ANY SUCH STATEMENT BEFORE AO , THE SAID DISALLOWANCE OUGHT TO BE DELETED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR RESCIND ANY GROUNDS OF APPEAL DURING THE COURSE OF THE HEARING. GROUND NO.1 & 2 3. GROUND NO.1 & 2 RELATES TO DEDUCTION UNDER SECTI ON 54(1) OF THE ACT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD SOLD ONE FLAT ON 17.12.07 FOR A SALE CONSIDERATION OF RS.1.65 CRORES ON WHICH THE CAPITAL GAINS HAD BEEN COMPUTED AT RS.61,38,810/-. THE ASSESSEE CLAIMED DE DUCTION OF RS.16,81,790/- UNDER SECTION 54(1) AND DEDUCTION OF RS.35 LAKHS UN DER SECTION 54E OF THE ACT. AS REGARDS THE DEDUCTION UNDER SECTION 54(1), THE A SSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S. IDEAL HIGHTS PV T. LTD. FOR PURCHASE OF A ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 3 FLAT AT KOLAKATA. THE ASSESSEE ALSO FURNISHED A CO PY OF ALLOTMENT LETTER DATED 20.03.07. IT WAS CONTENDED THAT AN AMOUNT OF RS.16 ,81,790/- WAS PAID AS AN ADVANCE FOR THE PURCHASE OF THE SAID FLAT AND THE T OTAL AMOUNT OF SALE CONSIDERATION WAS SETTLED AT RS.43,35,850/-. THE A O NOTICED THAT THE ASSESSEE HAD NEITHER EXECUTED ANY AGREEMENT OF PURCHASE OF T HE FLAT NOR HAD FURNISHED ANY CERTIFICATION OF COMPLETION OR OCCUPATION OF TH E SAID FLAT. THE ASSESSEE HAD NOT TAKEN POSSESSION OF THE FLAT TILL DECEMBER 2010 . CONSIDERING THE ABOVE FACTS, HE REJECTED THE CLAIM OF DEDUCTION UNDER SEC TION 54(1) OF THE ACT. 4. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE SU BMITTED THAT ALTHOUGH, IN THE RETURN OF INCOME THE ASSESSEE HAD CLAIMED DEDUC TION OF RS.16,81,790/- ONLY. HOWEVER, THE ASSESSEE HAD MADE INVESTMENT OF RS.25,46,760/- TILL THE DUE DATE OF FILING OF RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE CLAIMED THAT WHAT WAS REQUIRED TO CLAIM DE DUCTION UNDER SECTION 54(1), WAS TO MAKE INVESTMENT IN RESIDENTIAL HOUSE FOR PURCHASE OF HOUSE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFT ER THE DATE OF TRANSFER OF ORIGINAL ASSET OR FOR CONSTRUCTION OF RESIDENTIAL H OUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. THE ASSESSEE CLAIMED THAT THE ASSESSEE HAD INVESTED AN AMOUNT OF RS.25,46,760/- T ILL THE DUE DATE OF FILING OF RETURN OF INCOME. THE ASSESSEE ALSO FURNISHED A CHA RT GIVING DETAILS OF PAYMENT BEGINNING FROM THE DATE OF 22.03.07 AND ENDING ON 1 5.03.12 AND SUBMITTED THAT THE PURCHASE DEED HAD BEEN COMPLETED ON 16.03.12. 5. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, HELD THAT THE ASSESSEE HAD NOT MADE THE CLAIM IN THE RET URN OF INCOME OF RS.25,46,760/-UNDER SECTION 54(1), RATHER THE CLAIM OF DEDUCTION OF RS.16,81,790/- ONLY WAS MADE. HE HELD THAT THE ASS ESSEE, SINCE, HAD NOT REVISED THE CLAIM BY WAY OF FILING A REVISED RETURN OF INCOME, HENCE THE CLAIM ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 4 OF THE ASSESSEE COULD NOT BE CONSIDERED IN THIS RES PECT. HE, FURTHER, OBSERVED THAT THE HOUSE IN QUESTION WAS NOT TRANSFERRED IN T HE NAME OF THE ASSESSEE WITHIN THREE YEARS FROM THE DATE OF SALE OF THE HOU SE BY THE ASSESSEE. HE HELD THAT THE ASSESSEE HAD NOT ACQUIRED INTEREST IN THE HOUSE WHICH WAS ALLEGEDLY PURCHASED ON A SUBSEQUENT DATE. HENCE, THE AO RIGH TLY DISALLOWED THE CLAIM OF THE DEDUCTION UNDER SECTION 54(1) OF THE ACT. B EING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE FI ND THAT IN A VERY RECENT DECISION, THE HONBLE KARNATAKA HIGH COURT IN THE C ASE OF CIT VS. B.S. SHANTAKUMARI IN ITA NO.165 OF 2014 VIDE ORDER DATE D 13.07.2015 HAS HELD THAT SECTION 54F OF THE ACT IS A BENEFICIAL PROVISI ON WHICH PERMITS FOR CONSTRUCTION OF RESIDENTIAL HOUSE. SUCH PROVISION HAS TO BE CONSTRUED LIBERALLY FOR ACHIEVING THE PURPOSE FOR WHICH IT IS INCORPORA TED IN THE STATUTE. THE INTENTION OF THE LEGISLATURE, AS COULD BE DISCERNED FROM THE READING OF THE PROVISION, WOULD CLEARLY INDICATE THAT IT WAS TO EN COURAGE INVESTMENTS IN THE ACQUISITION OF A RESIDENTIAL PLOT AND COMPLETION OF CONSTRUCTION OF A RESIDENTIAL HOUSE IN THE PLOT SO ACQUIRED. A BARE PERUSAL OF S AID PROVISION DOES NOT EVEN REMOTELY SUGGEST THAT IT INTENDS TO CONVEY THAT SUC H CONSTRUCTION SHOULD BE COMPLETED IN ALL RESPECTS IN THREE YEARS AND/OR MAK E IT HABITABLE. THE ESSENCE OF SAID PROVISION IS TO ENSURE THAT ASSESSEE WHO RE CEIVED CAPITAL GAINS WOULD INVEST SAME BY CONSTRUCTING A RESIDENTIAL HOUSE AND ONCE IT IS ESTABLISHED THAT CONSIDERATION SO RECEIVED ON TRANSFER OF HIS LONG T ERM CAPITAL ASSET HAS INVESTED IN CONSTRUCTING A RESIDENTIAL HOUSE, IT WO ULD SATISFY THE INGREDIENTS OF SECTION 54F. IF THE ASSESSEE IS ABLE TO ESTABLISH T HAT HE HAD INVESTED THE ENTIRE NET CONSIDERATION WITHIN THE STIPULATED PERIOD, IT WOULD MEET THE REQUIREMENT OF SECTION 54F AND AS SUCH, ASSESSEE WOULD BE ENTITLED TO GET THE BENEFIT OF SECTION 54F OF THE ACT. THOUGH SUCH CONSTRUCTION OF BUILDING MAY NOT BE ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 5 COMPLETE IN ALL RESPECT THAT BY ITSELF WOULD NOT DI SENTITLE THE ASSESSEE TO THE BENEFIT FLOWING FROM SECTION, 54F. 7. IN VIEW OF THE ABOVE DECISION OF THE HONBLE KAR NATAKA HIGH COURT (SUPRA), WE EXAMINE THE FACTS OF THE PRESENT CASE A ND FIND THAT THE ASSESSEE HAD BOOKED THE FLAT WITH THE BUILDER AND AN ALLOTMENT L ETTER WAS GIVEN TO THE ASSESSEE. THE HOUSE WAS UNDER CONSTRUCTION. UNDER SUCH CIRCUMSTANCES IT CAN BE SAFELY PRESUMED THAT THE ASSESSEE HAD INVESTED T HE MONEY FOR CONSTRUCTION OF THE HOUSE THROUGH THE BUILDER. SO THE MONEY INV ESTED BY THE ASSESSEE WITHIN THREE YEARS FROM THE DATE OF TRANSFER IS ALLOWABLE AS DEDUCTION UNDER SECTION 54 OF THE ACT. THE ASSESSEE HAS CLAIMED THAT UP TO T HE DUE DATE OF FILING OF THE RETURN FOR THE YEAR UNDER CONSIDERATION, HE HAD INV ESTED AN AMOUNT OF RS.25,46,760/-. THEREFORE, THE ASSESSEE IS ENTITLE D TO CLAIM THE SAID SUM AS DEDUCTION UNDER SECTION 54(1)/54F FOR THE YEAR UNDE R CONSIDERATION. 8. SO FAR AS THE CONTENTION THAT THE ASSESSEE IN TH E RETURN OF INCOME HAD NOT CLAIMED THE AMOUNT OF RS.25,46,760/- BUT OF RS.16,8 1,790/- IS CONCERNED, WE FIND THAT THE POWERS AND JURISDICTION OF THE LD. CI T(A) ARE COTERMINOUS WITH THAT OF AO. THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. (2012) 349 ITR 336 (BOM.) WHILE RELYING UPON THE VARIOUS DECISIONS OF THE HONBLE SUPREME C OURT AND OTHER HONBLE HIGH COURTS, HAS HELD THAT EVEN IF A CLAIM IS NOT M ADE BEFORE THE AO, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE JURISDI CTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM IS NOT BARRED . THE HONBLE BOMBAY HIGH COURT WHILE RELYING UPON THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LIMITED VS. CIT 1991 SUPP (2) SCC 744 = (1991) 187 ITR 688 HAS FURTHER OBSERVED THAT THE PO WER OF THE APPELLATE COMMISSIONER IS COTERMINOUS WITH THAT OF THE INCOME TAX OFFICER AND AN ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 6 APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST TH E ORDER OF THE SUBORDINATE AUTHORITY, HAS ALL THE POWERS WHICH THE ORIGINAL AU THORITY MAY HAVE IN DECIDING THE QUESTIONS BEFORE IT, SUBJECT TO THE RESTRICTION S OR LIMITATIONS, IF ANY, PRESCRIBED BY STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLEN ARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. AN A SSESSEE IS ENTITLED TO RAISE NOT MERELY ADDITIONAL LEGAL SUBMISSIONS BEFORE THE APPELLATE AUTHORITIES BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEFORE THE M. THE APPELLATE AUTHORITIES HAVE THE DISCRETION WHETHER OR NOT TO PERMIT SUCH A DDITIONAL CLAIMS TO BE RAISED. IT CANNOT, HOWEVER, BE SAID THAT THEY HAVE NO JURISDICTION TO CONSIDER THE SAME. THE APPELLATE AUTHORITIES HAVE JURISDICT ION TO DEAL NOT MERELY WITH ADDITIONAL GROUNDS WHICH BECOME AVAILABLE ON ACCOUN T OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS W HICH WERE AVAILABLE WHEN THE RETURN WAS FILED BUT COULD NOT HAVE BEEN RAISED AT THAT STAGE. THE WORDS COULD NOT HAVE BEEN RAISED MUST BE CONSTRUED LIBE RALLY AND NOT STRICTLY. IT IS OPEN TO THE ASSESSEE TO CLAIM A DEDUCTION BEFORE TH E APPELLATE AUTHORITY WHICH COULD NOT HAVE BEEN CLAIMED BEFORE THE AO. THE HON BLE BOMBAY HIGH COURT HAS FURTHER OBSERVED THAT THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF GOETZE (INDIA) LIMITED V. CIT (2006) 157 TAXMAN 1 , REGARDING THE RESTRICTION OF MAKING THE CLAIM THROUGH A REVISED RETURN WAS LI MITED TO THE POWERS OF THE ASSESSING AUTHORITY AND THE SAID JUDGMENT DOES NOT IMPINGE ON THE POWER OR NEGATE THE POWERS OF THE APPELLATE AUTHORITIES TO E NTERTAIN SUCH CLAIM BY WAY OF ADDITIONAL GROUND. 9. IN VIEW OF THE ABOVE, WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 54(1)/54F OF THE AC T IN RESPECT OF THE AMOUNT WHICH WAS INVESTED FOR THE PURCHASE/ALLOTMENT OF TH E NEW HOUSE UP TO THE DUE DATE OF FILING OF RETURN OF THE INCOME FOR THE YEAR UNDER CONSIDERATION. ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 7 GROUND NO.3 & 4 10. VIDE GROUND NO.3 & 4, THE ASSESSEE HAS RAISED T HE ISSUE OF DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES. DURING THE APPELLATE PROCEED INGS, THE AO NOTED THAT THE ASSESSEE HAD MADE INVESTMENTS FOR EARNING OF TA X EXEMPT INCOME. HE ACCORDINGLY COMPUTED THE DISALLOWANCE AS PER THE PR OVISIONS OF RULE 8D OF THE INCOME TAX RULES. 11. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE C ONTENDED THAT THE ASSESSEE IS A DOCTOR BY PROFESSION AND HAS EARNED E XEMPT INCOME OF RS.81,21,676/-. THE ASSESSEE HAD INCURRED DEMAT EX PENDITURE OF RS.19,381/-, ADVISORY SERVICES CHARGES OF RS.3,28,731/- AND SECU RITIES TRANSACTIONS TAX AND OTHER CHARGES OF RS.1,92,076/- AGGREGATINGRS.5,40,1 88/- WHICH AMOUNT WAS SUO-MOTO DISALLOWED BY THE ASSESSEE. HOWEVER, THE AO WITHOUT CONSIDERING THE COMPUTATION/WORKING PROVIDED BY THE ASSESSEE ST RAIGHTWAY APPLIED RULE 8D AND COMPUTED THE DISALLOWANCE ACCORDINGLY. THE ASSESSEE FURTHER SUBMITTED THAT DURING THE EARL IER ASSESSMENT YEAR 2007-08, THE DISALLOWANCE UNDER SECTION 14A WAS RES TRICTED TO BANK CHARGES AND ACCOUNTING CHARGES BY THE LD. CIT(A). THE LD. A.R. HAS FURTHER SUBMITTED THAT EXCEPT THE EXPENSES SUO-MOTO DISALLOWED BY THE ASSESSEE, NO OTHER EXPENDITURE WAS INCURRED FOR EARNING OF EXEMPT INCO ME. THE LD. CIT(A), HOWEVER, DID NOT AGREE WITH THE CONTENTIONS RAISED BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HAD DEBITED BANK CHARGES OF RS.5,426/-, MISCELLANEOUS EXPENSES OF RS.1,53,706/- WHICH INCLU DED ACCOUNTING EXPENSES OF RS.71,500/-, PRINTING AND STATIONARY EXPENSES OF RS.71,931/-, INSURANCE AND OFFICE EXPENSES ETC. IN THE P&L ACCOUNT. HE, THERE FORE, RELYING UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT [(2010) 328 ITR 81 (BOM)] HELD THAT RULE ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 8 8D WAS APPLICABLE FOR THE YEAR UNDER CONSIDERATION AND ACCORDINGLY UPHELD THE DISALLOWANCE MADE BY THE AO AS PER THE PROVISIONS O F RULE 8D OF THE I.T. RULES. BEING AGGRIEVED, THE ASSESSEE HAS COME IN A PPEAL BEFORE US. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. IT MAY BE OBSERVED THAT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA), THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D R.W.S. 14A(2) IS NOT ARBITRARY OR UNREASONA BLE AND ALSO NOT RETROSPECTIVE AND APPLIES FROM A.Y. 2008-09. IT HAS BEEN FURTHER HELD THAT UNDER SECTION 14A OF THE INCOME TAX ACT, RESORT CAN BE MADE TO RULE 8D OF THE INCOME TAX RULES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME, IF, THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE . THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARRIVED AT, HAVING REGA RD TO THE ACCOUNTS OF THE ASSESSEE. SUB SECTION (2) DOES NOT IPSO FACTO ENABL E THE ASSESSING OFFICER TO APPLY THE METHOD PRESCRIBED BY THE RULES STRAIGHTAW AY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT S UCH EXPENDITURE IS CORRECT. THE SATISFACTION OF THE ASSESSING OFFICER MUST BE A RRIVED AT ON AN OBJECTIVE BASIS. IN A SITUATION WHERE THE ACCOUNTS OF THE ASS ESSEE FURNISH AN OBJECTIVE BASIS FOR THE ASSESSING OFFICER TO ARRIVE AT A SATI SFACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, THERE WOU LD BE NO WARRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBED BY THE RULES. AN OBJECTIVE SATISFACTION CONTEMPLATES A NOTICE TO THE ASSESSEE, AN OPPORTUNI TY TO THE ASSESSEE TO PLACE ON RECORD ALL THE RELEVANT FACTS INCLUDING HIS ACCO UNTS AND RECORDING OF REASONS BY THE ASSESSING OFFICER IN THE EVENT THAT HE COMES TO THE CONCLUSION THAT HE IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 9 13. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER REVE ALS THAT THE AO HAS NOT FOLLOWED THE GUIDELINES OF OBJECTIVE SATISFACTION A S LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE (SU PRA) WHILE MAKING THE DISALLOWANCE . HE WITHOUT RECORDING ANY REASONING F OR HIS DISSATISFACTION WITH REGARD TO THE WORKING/CLAIM OF THE ASSESSEE, STRAIG HTWAY APPLIED RULE 8D AGAINST THE MANDATE OF THE PROVISIONS OF SECTION 14 A OF THE INCOME TAX ACT. THE LD. CIT(A) ALSO IGNORED THE MANDATE OF THE PROV ISIONS OF SECTION 14 A, WHILE CONFIRMING THE DISALLOWANCE. 14. COMING TO THE FACTS OF THE CASE IN HAND, WE FIN D THAT IN THIS CASE THE ASSESSEE SUO-MOTO HAS DISALLOWED EXPENDITURE OF RS. 5,40,188/- WHICH HE HAS CLAIMED TO HAVE INCURRED ON DEMAT CHARGES, ADVISORY SERVICES AND SECURITY TRANSACTIONS TAX. THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT NO EXPENDITURE WAS INCURRED IN RELATION TO EXEMPT INCO ME FOR THE YEAR UNDER CONSIDERATION. THE INVESTMENTS WERE MADE IN THE PA ST AND NO INVESTMENT WAS MADE DURING THE YEAR, HENCE NO DISALLOWANCE SHOULD BE MADE UNDER SECTION 14A READ WITH RULE 8D. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED THAT THE ASSESSEE HAD DEBITED CERTAIN EXPENSES LIKE BANK CHARGES, ACCOUNT ING CHARGES ETC. WHICH WERE RELATED TO THE INVESTMENT ACTIVITY OF THE ASSESSEE. 15. AS NOTED ABOVE, IN THE EARLIER ASSESSMENT YEAR 2007-08, THE LD. CIT(A) HAD RESTRICTED THE DISALLOWANCE TO THE EXTENT OF BA NK CHARGES AND ACCOUNTING CHARGES. CONSIDERING THE OVERALL FACTS AND CIRCUMS TANCES OF THE CASE, WE FIND THAT APART FROM THE SUO-MOTO DISALLOWANCE OF RS.5,4 0,188/-, THE FURTHER DISALLOWANCE WHICH CAN BE ADDED IS IN RELATION TO B ANK CHARGES OF RS.5,426/- AND ACCOUNTING EXPENSES OF RS.71,500/-. SO CONSIDE RING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE UNDER S ECTION 14A IS RESTRICTED TO THE SUO-MOTO DISALLOWANCE MADE BY THE ASSESSEE OF R S.5,40,188/- + RS.5,426/- ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 10 TOWARDS BANK CHARGES + RS.71,500/- INCURRED TOWARDS ACCOUNTING EXPENSES. THIS GROUND IS ACCORDINGLY PARTLY ALLOWED. NOW COMING TO THE APPEAL OF THE ASSESSEE FOR A.Y. 2 009-10. ITA NO.6293/M/2012 FOR A.Y. 2009-10 GROUND NO.1 16. GROUND NO.1 IS RELATING TO THE DISALLOWANCE OF RS.5,81,245/- UNDER SECTION 14A READ WITH RULE 8D OF THE I.T. RULES. D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED DIVIDEND/TAX FREE INTEREST INCOME AGGREGATING RS.56,54,905/-. THE ASSESSEE SUO-MOTO ALLOWED AN AMOUNT OF RS.1,32,619/- INCURRED TOWARDS DEMAT EXPENDITURE, A DVISORY SERVICES AND SECURITY TRANSACTION TAX. THE ASSESSEE IN THE P&L ACCOUNT HAS DEBITED BANK CHARGES OF RS.1,680/- AND ACCOUNTING EXPENSES. 17. IN VIEW OF OUR OBSERVATIONS MADE ABOVE WHILE DE CIDING THE APPEAL OF THE ASSESSEE FOR A.Y. 2008-09, WE RESTRICT THE DISALLOW ANCE UNDER SECTION 14A TO THE EXTENT OF SUO-MOTO DISALLOWANCE MADE BY THE ASS ESSEE + BANK CHARGES + ACCOUNTING CHARGES DEBITED IN THE P&L ACCOUNT. THI S ISSUE IS DECIDED ACCORDINGLY. GROUND NO.2 18. GROUND NO.2 IS RELATING TO THE DISALLOWANCE OF RS.31,685/- BEING 10% OF THE TELEPHONE EXPENSES DEBITED BY THE ASSESSEE IN T HE P&L ACCOUNT. THE AO DISALLOWED 20% OF THE SAID EXPENSES HOLDING THAT TH E PERSONAL USE OF THE TELEPHONE CANNOT BE RULED OUT. 19. IN APPEAL, THE LD. CIT(A) HAS RESTRICTED THE DI SALLOWANCE OF 10% OF THE TELEPHONE EXPENSE. ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 11 20. WE FIND THAT THE NATURE OF THE TELEPHONE EXPENS ES IS THAT SOME ELEMENT OF PERSONAL USE CANNOT BE RULED OUT. THE LD. CIT(A ) HAS VERY FAIRLY RESTRICTED THE DISALLOWANCE OF THE TELEPHONE EXPENSE TO 10%. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN THIS RE SPECT. THIS ISSUE IS ACCORDINGLY DECIDED AGAINST THE ASSESSEE. GROUND NO.3 21. GROUND NO.3 IS IN RELATION TO THE CONFIRMATION OF DISALLOWANCE OF 1/6 OF INTEREST ON MOTOR CAR LOAN AND MOTOR CAR INSURANCE. THE AO NOTED THAT THE ASSESSEE HAS DISALLOWED 1/6 OF THE CAR EXPENSES AND DEPRECIATION BUT NO DISALLOWANCE WAS OFFERED ON INTEREST ON CAR LOAN AN D INSURANCE ON CAR OF RS.1,98,491/- AND RS.83,023/- RESPECTIVELY. HE ACC ORDINGLY DISALLOWED THE 1/6 OF THE ABOVE EXPENSES. THE LD. CIT(A), AFTER CONSI DERING THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS OBSERVED THAT THE AS SESSEE HIMSELF HAS DISALLOWED 1/6 CAR EXPENSES BUT LEFT OUT TO DISALLO W THE EXPENSES RELATED TO INTEREST ON CAR LOAN AND INSURANCE ON CAR WHICH ARE VERY MUCH PART OF THE CAR EXPENSES. WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITIES IN MAKING THE ABOVE DISALLOWANCE. GROUND NO.3 IS THER EFORE DISMISSED. 22. IN VIEW OF OUR ABOVE OBSERVATIONS, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06.11.201 5. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 06.11.2015. * KISHORE, SR. P.S. ITA NOS.5329 & 6293/M/2012 DR. ASHWIN BALCHAND MEHTA 12 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.