Shanti Bhushan, New Delhi V. ACIT, New Delhi

ITA 5400/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4555 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Assessee Lawyers: RAVISH AGGARWAL
• Keywords: Depreciation; Salary income; Earning of tax free income; Condonation of delay
• Section: 143(3); 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 5400/DEL/2015 A.Y. : 2011-12 SHANTI BHUSHAN, (SENIOR ADVOCATE), 1, JAIPUR ESTATE, NIZAMUDDIN EAST, NEW DELHI 110013 (PAN: AACPB3899E) VS. ACIT, CIRCLE 63(1), 21 ST FLOOR, E-2 BLOCK, DR. S.P.M. CIVIC CENTRE, J.L.N. MARG, NEW DELHI 110 002 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAVISH AGGARWAL, CA DEPARTMENT BY : SH. SHRAVAN GOTRU, SR. DR ORDER PER H.S. SIDHU : JM ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNE D ORDER DATED 01.7.2015 PASSED BY THE LD. CIT(A)-20, NEW DELHI RE LEVANT TO ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S . 14A OF RS.5,72,868/- AS AGAINST RS. 1,25,963/- COMPUTED BY THE ASSESSEE TOWARDS EXPENSES RELATED TO EARNING OF INC OME ON WHICH TAX IS NOT PAYABLE. 2. THAT THE LD. CIT(A) ERRED IN NOT HOLDING THAT THE O RDER OF THE AO IS CONTRARY TO THE ORDER OF ITAT DELHI BENCH ES IN 2 DCIT VS. JINDAL PHOTO LTD. (ITA NO. 4539/DEL/2010), WHEREIN THE HONBLE MEMBERS HELD THAT RECORDING OF SATISFACTION IS A PER-REQUISITE BEFORE INVOKING PRO VISIONS OF RULE 8D OF THE INCOME TAX RULES, AND THEREFORE, CA NNOT BE SUSTAINED. 3. ASSUMING AND WITHOUT PREJUDICE TO THE AFORESAID GRO UNDS OF APPEAL THAT THE AO WAS JUSTIFIED IN MAKING SUCH DISALLOWANCE, THE AUTHORITIES BELOW ERRED IN NOT AL LOWING BENEFIT IN RESPECT OF RS. 12596/- ALREADY ADDED IN THE COMPUTATION OF INCOME AS DISALLOWABLE EXPENSES U/S. 14A OF THE ACT AND FURTHER ERRED IN HOLDING THAT THE EX PENDITURE WAS A PERSONAL EXPENSES OF THE ASSESSEE. 4. THAT THE ORDERS OF THE LD. AUTHORITIES BELOW BEING CONTRARY THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW T HE APPEAL BE ALLOWED. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA D FILED THE RETURN DECLARING INCOME OF RS. 15,84,70,570/- ON 30.9.2011 . THE CASE WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED AS THE ACT). THE CASE OF THE ASSESSE WAS SELECTED F OR SCRUTINY THROUGH CASS. THE ASSESSING OFFICER ISSUED THE NOTICE U/S. 143(2) OF THE ACT DATED 11.9.2012 TO THE ASSESSEE WHICH WAS SERVED ON THE ASSESSEE. NOTICE U/S. 142(1) OF THE ACT ALONGWITH QUESTIONNAI RE WAS ISSUED TO THE ASSESSEE ON 22.7.2013. IN RESPONSE THERETO AUTHORI SED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED THE REQUISITE DETA ILS. THE ASSESSEE IS AN 3 ADVOCATE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DERIVED INCOME FROM SALARY (PENSION), HOUSE PROPERTY, PROF ESSION, AND CAPIGAL GAIN. THE REASON OF SCRUTINY SELECTION UNDER CASS W AS TO EXAMINE THE SOURCE OF CASH DEPOSITS IN SAVING BANK ACCOUNT AS P ER AIR INFORMATION AND SALE CONSIDERATION, COST CLAIMED WHILE COMPUTIN G LTCG BEFORE DEDUCTION U/S. 54B, C, D, G, GA. THE COUNSEL OF TH E ASSESSEE WAS ASKED TO EXPLAIN THE SAME AND HE VIDE SUBMISSION DATED 30 .1.2014 STATED THAT THE CASH DEPOSITS IN THE SAVING BANK ACCOUNT RELAT E TO THE PROFESSIONAL INCOME OF THE ASSESSEE AND ARE BANKED DIRECTLY UPO N THE RECEIPTS THEREOF. THE DETAILS OF THE CLIENTS ALONGWITH ADDRE SSES FROM WHOM THE CASH WAS RECEIVED HAS BEEN FILED AND PUT ON RECORD. THEREAFTER, THE AO OBSERVED THAT IN THE INSTANT CASE, IT IS INFERRED T HAT THE ASSESSEE CONTENDED THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME AND THAT NO DISALLOWANCE WAS WARRAN TED. HE OBSERVED THAT THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTAB LE IN VIEW OF THE FACT THAT THE INSERTION OF SECTION 14A WAS CURATIVE AND DECLARATORY. THE ASSESSEE HAS NOT PROVIDED ANY SEPARATE ACCOUNT FOR EARNING OF EXEMPT INCOME. AO FURTHER OBSERVED THAT THE ASSESSEE HAS MADE VERY HEAVY INVESTMENTS FOR EARNING EXEMPT INCOME THROUGHOUT TH E YEAR. ASSESSEE ALSO MANAGING SUCH A LARGE PORTFOLIO ENTAIL EXPENSE S RIGHT FROM DIVERSION OF MANPOWER / STAFF FOR INDULGING IN INVESTMENT AC TIVITIES TO VARIOUS ACTIVITIES LIKE VISITING BANKS, USE OF VEHICLE AND TELEPHONE, USE OF INTERNET IF PORTFOLIO MANAGEMENT IS WEB BASED, COST OF COMPU TER AND ITS DEPRECIATION, COMPUTER OPERATOR, CONSEQUENT ELECTRI CITY, USE OF OFFICE 4 PREMISES, FEE CHARGED BY MUTUAL FUND AGENTS/ BANKER S (ANNUAL FEE), PORTFOLIO RECORD MAINTENANCE AND ITS TRACKING TO EN SURE TIME SALE/PURCHASE OF MUTUAL FUND UNITS, ETC. ACCORDINGL Y, HE HELD THAT IN VIEW OF PROVISION OF SECTION 14A READ WITH RULE8D OF TH E INCOME TAX RULES, 1962, AN EXPENDITURE OF RS. 5,72,868/- WAS DETERMIN ED WHICH IS ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME AND AD DED BACK TO THE INCOME OF THE ASSESSEE AND ACCORDINGLY, ASSESSED TH E INCOME OF THE ASSESSEE AT RS. 15,90,43,440/- AND COMPLETED THE AS SESSMENT U/S. 143(3) OF THE I.T. ACT, 1961 DATED 12.3.2014. 3. AGGRIEVED WITH THE ASSESSMENT ORDER DATED 12.3.2 014, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 01.7.2015 HAS PARTLY ALLOWED THE APPEAL. 4. AGAINST THE IMPUGNED ORDER DATED 01.7.2015, AS SESSEE HAS FILED THE APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE STATED THAT AS REGARD THE CONFIRMATION OF DISALLOWANCE MADE U/S. 1 4A OF THE ACT OF RS. 5,72,868/- AS AGAINST RS. 1,25,963/- COMPUTED B Y THE ASSESSEE AS EXPENSES RELATED TO EARNING OF INCOME ON WHICH TAX IS NOT PAYABLE. HE FURTHER STATED THAT DISALLOWANCE OUT OF EXPENSES IN CURRED BY THE ASSESSEE IN THE COURSE OF HIS PRACTICE AS A SENIOR ADVOCATE IS NOT SUSTAINABLE AS AT NO STAGE HAVE SAID THE AUTHORITIES FOUND ANY DISSAT ISFACTION AS REGARDS THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE. HE REQUESTED THAT THE ADDITION IN DISPUTE MAY BE DELETED AND THE APPEAL O F THE ASSESSEE MAY 5 BE ALLOWED. HE FURTHER STATED THAT THE ITAT, G BENCH, NEW DELHI IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 HAS ALLOWED THE APPEAL OF THE ASSESSEE ON T HE SIMILAR ISSUE VIDE ITA NO. 949/DEL/2012 (AY 2008-09) DATED 14.12.2016, HENCE, THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE AFORESAID DECISION. FOR READY REFERENCE, HE FILED THE COPY OF THE AFORESAID DECISION OF THE TRIBUNAL AND REQUESTED THAT FOLLOWING THE SA ME RATIO, THE PRESENT APPEAL OF THE ASSESSEE MAY BE ALLOWED. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS AVAILABLE WITH ME ESPECIALLY THE ORDERS OF THE REVENUE AUTHOR ITIES. FIRSTLY, WE FIND THAT THERE IS DELAY OF ONE DAY IN FILING THE PRESEN T APPEAL BEFORE THE TRIBUNAL AND THEREFORE, THE DEFECT MEMO IN THIS BEH ALF WAS ISSUED AT THE TIME OF FILING OF THE APPEAL BY THE REGISTRY. WE AL SO FIND THAT ASSESSEES COUNSEL VIDE HIS APPLICATION DATED 02.9.2015 HAS RE QUESTED FOR CONDONATION OF DELAY OF ONE DAY STATING THEREIN THA T THE ORDER OF THE LD. CIT(A) IN THIS CASE WAS RECEIVED ON 03.7.2015 AND T HE LAST DATE OF FILING THE APPEAL WAS 01.9.2015. HOWEVER, THE ASSESSEE WAS OUT OF STATION AND RETURNED TO DELHI ONLY ON THE EVENING OF 1 ST SEPTEMBER, 2015 AND THEREFORE, HE COULD NOT SIGN THE APPEAL WITHIN TIME . ACCORDINGLY, LD. COUNSEL OF THE ASSESSEE HAS REQUESTED TO CONDONE TH E DELAY OF ONE DAY. AFTER PERUSAL OF THE LETTER DATED 02.9.2015 OF THE LD. COUNSEL OF THE 6 ASSESSEE, AS AFORESAID, WE FIND PLAUSIBLE REASONS FOR DELAY IN FILING THE APPEAL. HENCE, WE CONDONE THE DELAY OF 01 DAY IN F ILING THE APPEAL BEFORE THE TRIBUNAL AND PROCEED TO ADJUDICATE THE ISSUE IN DISPUTE. 7.1 WE FIND THAT DISALLOWANCE MADE U/S. 14A OF THE ACT OF RS. 5,72,868/- WAS AGAINST RS. 1,25,963/- COMPUTED BY THE ASSESSEE AS EXPENSES RELATED TO EARNING OF INCOME ON WHICH TAX IS NOT PA YABLE IN THE EYES OF LAW. WE FURTHER FIND THAT DISALLOWANCE OUT OF EXPE NSES INCURRED BY THE ASSESSEE IN THE COURSE OF HIS PRACTICE AS A SENIOR ADVOCATE IS NOT SUSTAINABLE AS AT NO STAGE IT HAS BEEN SAID THAT TH E AUTHORITIES FOUND ANY DISSATISFACTION AS REGARDS THE CORRECTNESS OF THE C LAIM MADE BY THE ASSESSEE. IN VIEW OF ABOVE, NO DISALLOWANCE UNDER SECTION 14A IS SUSTAINABLE IN THE EYES OF LAW. WE FURTHER FIND C ONSIDERABLE COGENCY IN THE ASSESSEES COUNSEL SUBMISSION THAT THE ISSUE I N DISPUTE IS SQUARELY COVERED BY THE ITAT, G BENCH, NEW DELHI DECISION PASSED IN ASSESSEES OWN CASE FOR THE AY 2008-09 PASSED IN ITA NO. 949/D EL/2012 (AY 2008- 09) DATED 14.12.2016 WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE WITH ME ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES. WE FIND THAT DISALLOWANCE MADE U/S. 14A OF THE ACT OF RS. 14,56,385/- WAS AGAINST RS. 50,400/- COMPUTED BY THE ASSESSEE AS EXPENSES RELATED TO EARNING OF INCOME ON WHICH TAX IS NOT PAYABLE IN THE EYES OF 7 LAW. WE FURTHER FIND THAT DISALLOWANCE OUT OF EXPENSES INCURRED BY THE ASSESSEE IN THE COURSE OF HIS PRACTICE AS A SENIOR ADVOCATE IS NOT SUSTAINABLE AS AT NO STAGE IT HAS BEEN SAID THAT THE AUTHORITIES FOUND ANY DISSATISFACTION AS REGARDS THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE. IN VIEW OF ABOVE, NO DISALLOWANCE UNDER SECTION 14A IS SUSTAINABLE IN THE EYES OF LAW. OUR VIEW IS FORTIFIED BY THE FOLLOWING DECISIONS:- CIT VS TAIKISHA ENGINEERING INDIA LTD. (DELHI HIGH COURT) ITA 115/2014 & 119/2014 DATED 25-11-2014 DISALLOWANCE OF EXPENSES ON EXEMPT INCOME ULS 14A R.W RULE 80 - INVESTMENTS IN SHARES AND MUTUAL FUNDS - HELD THAT:- IN MAXOPP INVESTMENT LTD. VS. COMMISSIONER OF INCOME TAX [2011 (11) TMI 267 - DELHI HIGH COURT] IT HAS BEEN HELD THAT IT IS ONLY WHEN THE AO IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE, THAT THE LEGISLATURE DIRECTS HIM TO FOLLOW THE METHOD THAT MAY BE PRESCRIBED - THE FINDINGS RECORDED BY THE CIT(A) AND THE TRIBUNAL ARE APPROPRIATE AND RELEVANT - THE ASSESSEE HAD SUFFICIENT FUNDS FOR MAKING INVESTMENTS IN SHARES AND MUTUAL FUNDS - 8 THE SELF OR VOLUNTARY DEDUCTIONS MADE BY THE ASSESSEE WERE NOT REJECTED AND HELD TO BE UNSATISFACTORY, ON EXAMINATION OF ACCOUNTS - THE RULE IN SUB RULE (2) SPECIFICALLY PRESCRIBES THE MODE AND METHOD FOR COMPUTING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT - UNDER CLAUSE (II) TO RULE 80(2) OF THE RULES, THE AO IS REQUIRED TO EXAMINE WHETHER THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST IN THE PREVIOUS YEAR AND SECONDLY WHETHER THE INTEREST PAID WAS DIRECTLY ATTRIBUTABLE TO PARTICULAR INCOME OR RECEIPT - THE AMOUNT TO BE DISALLOWED AS EXPENDITURE RELATABLE TO EXEMPT INCOME, UNDER SUB RULE (2) IS THE AGGREGATE OF THE AMOUNT UNDER CLAUSE (I), CLAUSE (II) AND CLAUSE (III) - CLAUSE (I) RELATES TO DIRECT EXPENDITURE RELATING TO INCOME FORMING PART OF THE TOTAL INCOME AND UNDER CLAUSE (III) AN AMOUNT EQUAL TO 0.5% OF THE AVERAGE AMOUNT OF VALUE OF INVESTMENT, APPEARING IN THE BALANCE SHEET ON THE FIRST DAY AND THE LAST DAY OF THE ASSESSEE HAS TO BE DISALLOWED - THUS, THE ORDER OF THE TRIBUNAL IS UPHELD - DECIDED AGAINST REVENUE. 7.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENT, AS AFORESAID, THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS 9 DELETED AND THE ISSUE IN DISPUTE RAISED BY THE ASSESSEE IS ALLOWED. 7.2 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE RESPECTFULLY FOLLOW THE PRECEDENT AS AFORESAID AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/09/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 06/09/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT ASSISTANT REGISTRAR, ITAT, DELHI BENCHES