Arun Kumar Mohata, Noida V. ITO, New Delhi

ITA 5376/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2951 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 22-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Assessee Lawyers: Y K AIYAR
• Keywords: Business income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.5376/DEL./2014 ASSESSMENT YEAR 2009-2010 SHRI ARUN KUMAR MOHATA, B-60, SECTOR-44, NOIDA PIN 201 301. PAN AEYPM2882C VS. THE INCOME TAX OFFICER, WARD-22(2), NEW DELHI. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI Y.K. AIYAR, C.A. FOR REVENUE : SHRI V.K. JIWANI, SR. D.R. DATE OF HEARING : 0 8 .03.2018 DATE OF PRONOUNCEMENT : 14 .03.2018 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-XXIII, NEW DELHI, DATED 30 TH JULY, 2014, FOR THE A.Y. 2009-2010 ON THE FOLLOWING GROUN DS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OR DER PASSED BY THE LD. C.I.T. (APPEALS) IS BAD BOTH IN TH E EYE OF LAW AND ON FACTS. 2 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. 2. THAT THE LD. CIT (APPEALS) IS WRONG IN LAW AS WELL A S IN FACTS IN PARTLY UPHOLDING THE ORDER OF ASSESSING OFF ICER. 3. THAT THE LD. CIT (APPEALS) ERRED ON FACTS AND IN LAW BY UPHOLDING THE ADDITION MADE BY THE LD. ASSESSING OFFI CER OF RS.25950/- ON ACCOUNT OF TRAVELLING EXPENSES, WHICH HAS NOT BEEN CLAIMED BY THE ASSESSEE IN HIS COMPUTATION OF I NCOME. MERELY SHOWING THE EXPENSES IN HIS PROFIT & LOSS AC COUNT SUBMITTED WITH LD. A.O. DOES NOT BECOME A PART OF EXP ENSES CLAIMED AGAINST INCOME EARNED. THE SAME WAS NOT CONSI DERED AS A ALLOWABLE EXPENSE IN THE RETURN OF INCOME FILE D. TH LD. CIT (APPEALS) ALSO DID NOT LOOK INTO THE FACT AND WITHOUT EXAMINING THE COMPUTATION OF INCOME, ADDITION MADE WAS UPHELD, WHICH IS TOTALLY ILLEGAL AND UNWARRANTED. THIS WAS A GROSS M ISTAKE APPARENT ON RECORD. THAT THE LD. CIT (APPEALS) ERRED ON FACTS AND IN LAW BY UPHOLDING THE DISALLOWANCES UNDER SECTION 14A R.W.RULE 8D(2)(I) MADE BY THE LD. ASSESSING OFFICER OF AMOUNTING RS.1,09,192/ -. WHEN THE ENTIRE EXPENSES CLAIMED IN THE RETURN AGAINST TAXABL E INCOME WAS DISALLOWED AND ADDITION MADE TO TAXABLE INCOME, THEN THERE 3 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. IS NO NEED TO INVOKE THE SECTION 14A OF INCOME TAX A CT, 1961. SECTION 14A R.W RULE 8D(2)(I) APPLIES IN CASE ASSESS EE INCURRED ANY EXPENSES TO EARN EXEMPTED INCOME DURING THE YEAR. FURTHER, IN CASE OF ACIT V PUNJAB STATE CO-OP & MKTG, HON. C HANDIGARH TRIBUNAL HELD THAT IN A.Y. 2007-08, THE ASSESSEE REC EIVED DIVIDEND OF IN RESPECT OF INVESTMENT IN SHARES MADE IN EARLIER YEARS. NO INVESTMENTS WERE MADE DURING THE YEAR. IT WAS CLAIMED THAT THE INVESTMENT IN THE EARLIER YEARS WA S MADE OUT OF RESERVES & SURPLUS AND THAT THERE WAS NO EXPENDITURE INCURRED DURING THE YEAR TO EARN THE DIVIDEND. THE ASSESSING OFFICER HELD THAT AS IN THE EARLIER YEARS, THE ASSESSEE HAD BORR OWED FUNDS, SECTION 14A APPLIED. IT WAS HELD THAT IF THERE IS NO NEXUS BETWEEN BORROWED FUNDS AND INVESTMENTS MADE IN PURCHASE OF SHA RES, DISALLOWANCE UNDER SECTION 14A IS NOT WARRANTED. (A .Y. 2007- 08). ACIT V. PUNJAB STATE CO-OP & MKTG. (2011) (CHANDIGA RH) (TRIB.) WHEN THE ALL EXPENSES CLAIMED IN RETURN OF INCOME WA S DISALLOWED, THERE IS NO NEED TO MADE FURTHER DISALL OWANCES UNDER SECTION 14A. 4 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. 2. I HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE MATERIAL ON RECORD. EARLIER APPEAL WAS DISMISSED IN DEFAULT WHICH IS RESTORED BY ALLOWING M.A. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT ASSESSE E FILED RETURN OF INCOME AT RS.3,36,890. SOURCE OF INCOME D ECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASS ESSEE HAS DECLARED DIVIDEND INCOME OF TOTALING TO RS.5,62,841 /-, WHICH THE ASSESSEE HAS CLAIMED EXEMPT. THE ASSESSEE WAS R EQUIRED TO FURNISH WORKING OF THE DISALLOWANCE UNDER SECTION 1 4A READ WITH RULE 8D OF I.T. RULES. THE ASSESSEES COUNSEL ATTENDED THE PROCEEDINGS BEFORE A.O. BUT, DID NOT FILE ANY REPLY ON THIS POINT. THE A.O. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT FOUND THAT ASSESSEES SOURCE OF INCOME ARE FROM DIVIDEND, OTHE R SOURCES AND SMALL AMOUNT OF SHORT TERM CAPITAL GAIN. AS SUC H, THE EXPENSES CLAIMED UNDER VARIOUS HEADS ARE FROM EARNI NG INCOME FROM THESE SOURCE AND THERE IS NO BUSINESS INCOME O F THE ASSESSEE. THE A.O, THEREFORE, CALCULATED THE DISALL OWANCE UNDER RULE 8D(2)(I) OF THE I.T. ACT AND TAKEN THE EXPENSE S CLAIMED IN 5 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. THE PROFIT AND LOSS ACCOUNT I.E., TELEPHONE EXPENSE S RS.17,166/- TRAVELLING EXPENSES RS.25,950/-, PROFESSIONAL CHARG ES RS.4494/-, INTEREST RS.1,41,076/-, D-MAT CHARGES RS .674/-, BANK CHARGES RS.6064/-, ACCOUNTING CHARGES RS.3000/ -, TOTALING TO RS.1,98,444/-. THE A.O. CALCULATED THE DISALLOWANCE UNDER 14A AT RS.1,09,192/- AND BY ADDING OF RS.1,98 ,444/-, DISALLOWED RS.3,07,636/- AND ADDED TO THE INCOME OF THE ASSESSEE. 3.1. THE ASSESSEE CHALLENGED THE ADDITIONS BEFO RE LD. CIT(A). THE SUBMISSIONS OF THE ASSESSEE ARE REPRODU CED IN THE APPELLATE ORDER. THE LD. CIT(A) WITH REGARD TO AMOU NT OF INTEREST OF RS.1,41,076/- FOUND THAT INTEREST WAS PAID ON BO RROWED FUNDS WHICH WERE NOT FORMED PART OF THE DISALLOWANC E UNDER SECTION 14A OF THE I.T. ACT. IT WAS DELETED. THIS G ROUND WAS ALLOWED IN FAVOUR OF THE ASSESSEE. 3.2. AS REGARDS ADDITION OF RS.25,950/- ON ACCOUNT OF TRAVELLING EXPENSES, THE ASSESSEE SUBMITTED THAT IT HAS NOT TAKEN IN COMPUTATION OF INCOME. HOWEVER, CLAIM OF A SSESSEE WAS 6 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. REJECTED BECAUSE IT WAS DEBITED IN P & L A/C. THIS ADDITION WAS CONFIRMED. IN EFFECT, THE A.O. WAS DIRECTED TO RE-C ALCULATE THE DISALLOWANCE UNDER SECTION 14A OF THE I.T. ACT BY R EDUCING THE AMOUNT OF INTEREST OF RS.1,41,076/-. 3.3. AS REGARDS DISALLOWANCE OF RS.1,09,192/-, THE CONTENTION OF ASSESSEE WAS FOUND LACKING AND ACCORD INGLY DISMISSED. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. GROUND NOS. 1 AND 2 ARE GEN ERAL AND NEED NO ADJUDICATION. 5. ON GROUND NO.3, ASSESSEE CLAIMED THAT ADDITION OF RS.25,950/- ON ACCOUNT OF TRAVELLING EXPENSES SHOUL D NOT BE MADE WHICH WERE NOT CLAIMED IN THE COMPUTATION OF I NCOME. ASSESSEES COUNSEL HAS FILED COPY OF THE P & L A/C IN WHICH TRAVELLING EXPENSES HAVE BEEN DEBITED OF RS.25,950/ -. BUT WHILE COMPUTING THE INCOME FOR THE PURPOSE OF FILING OF T HE RETURN OF INCOME, THIS AMOUNT HAVE BEEN EXCLUDED. WHATEVER FI GURES ARE GIVEN IN THE P & L A/C, PERTAINING TO DIVIDEND AND OTHER INCOME 7 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. WERE SEGREGATED AND ONLY INCOME FROM OTHER SOURCES HAVE BEEN TAKEN INTO CONSIDERATION WHILE COMPUTING THE TOTAL TAXABLE INCOME OF THE ASSESSEE. SINCE THE ASSESSEE DID NOT MAKE CLAIM OF DEDUCTION OF RS.25,950/- ON ACCOUNT OF TRAVELLIN G EXPENSES IN THE COMPUTATION OF INCOME, THEREFORE, THIS ADDIT ION SHOULD NOT BE MAINTAINED BY THE LD. CIT(A). I, ACCORDINGLY , SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDI TION OF RS.25,950/- ON ACCOUNT OF TRAVELLING EXPENSES. 5.1. THE ASSESSEE ON GROUND NO.3 FURTHER SUBMITTED THAT WHEN LD. CIT(A) CONFIRMED THE DISALLOWANCE UNDER SE CTION 14A OF RS.1,09,192/- AND ENTIRE EXPENSES HAVE ALSO BEEN DISALLOWED, NO FURTHER DISALLOWANCE SHOULD BE MADE. THE A.O. HA D DISALLOWED THE ENTIRE EXPENSES CLAIMED IN THE COMPU TATION OF INCOME OF RS.1,98,444/- OUT OF WHICH, LD. CIT(A) HA S ALREADY DELETED ADDITION OF RS.1,41,076/-. I HAVE ALREADY D ELETED ADDITION OF RS.25,950/- ON ACCOUNT OF TRAVELLING EX PENSES. REST OF THE EXPENSES HAVE ALREADY BEEN DISALLOWED BY THE A.O. APART FROM DISALLOWING RS.1,09,122/- UNDER SECTION 14A OF THE ACT. 8 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. THE ASSESSEES COUNSEL IS, THEREFORE, CORRECTLY SUB MITTED THAT WHEN ENTIRE EXPENSES HAVE BEEN DISALLOWED, THIS SUM SHOULD NOT BE CONSIDERED FOR THE PURPOSE OF MAKING FURTHER DISALLOWANCE UNDER SECTION 14A OF THE I.T. ACT. THE LD. CIT(A) HAS ALREADY DIRECTED THE A.O. TO RE-CALCULATE THE D ISALLOWANCE UNDER SECTION 14A, THEREFORE, A.O. IS FURTHER DIREC TED TO TAKE INTO CONSIDERATION THAT WHEN ENTIRE EXPENSES CLAIME D IN THE P & L A/C HAVE BEEN SEPARATELY DISALLOWED APART FROM WHAT IS DELETED BY THE LD. CIT(A) AND BY THE TRIBUNAL, THE SAME SHOULD NOT BE SUBJECT MATTER OF DISALLOWANCE UNDER SECTION 14A OF THE I.T. ACT. THIS GROUND OF ASSESSEE IS ACCORDINGLY AL LOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DELHI, DATED 14 TH MARCH, 2018 VBP/- 9 ITA.NO.5376/DEL./2014 SHRI ARUN KUMAR MOHATA, NOIDA. COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.