Shri Ashit Baran Maganlal Desai , Kolkata V. ITO, Ward - 34(2), Kolkata , Kolkata

ITA 567/KOL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6257 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 02-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PIJUSH MUKHERJEE
• Assessee Lawyers: ARIYAN KOCHAR
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 567/KOL/201 8 ASSESSMENT YEAR : 2013-1 4 SHRI ASHIT BARAN MAGANLAL DESAI -VS- ITO, WAR D-34(2), KOLKATA [PAN: ACSPD 8475 C ] (APPELLANT) (RESPOND ENT) FOR THE APPELLANT : SHRI ARIYAN KOCHAR, ADVOCATE FOR THE RESPONDENT : SHRI PIJUSH MUKHERJEE, ADDL. CIT DATE OF HEARING : 18.06.2018 DATE OF PRONOUNCEMENT : 04.07.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-10, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO. 254/CIT(A)- 10/W-34(2)/2013-14/2016-17/KOL DATED 02.02.2018 AGA INST THE ORDER PASSED BY THE ITO, WARD-34(2), KOLKATA [ IN SHORT THE LD AO] UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 22.01.201 6 FOR THE ASSESSMENT YEAR 2013- 14. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 14 A OF THE ACT IN THE SUM OF RS. 4,65,549/- WHICH IS IN EXCESS OF THE EXEMPT INCOME, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.567/KOL/2018 SHRI ASHIT BARAN MAGANLAL DESAI A.YR. 2013-14 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD. AO MADE AN ADDITION U/S 14A OF THE ACT BY APPLYING SECOND AND THIRD LIMB OF RULE 8D(2) OF THE RULES AND COMPUTING THE DISALLOWANCE OF RS. 4,65,549/- AND ADDED THE SAME T O THE TOTAL INCOME OF THE ASSESSEE. THIS ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT (A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE EXEMPT INCOME DERIVED BY THE ASSESSEE WAS LESS THAN THE DISALLOWANCE MADE BY THE LD. AO. WE HOLD THAT THE DISALLOWANCE U/S 14A OF THE ACT CANNOT EXCEED THE E XEMPT INCOME. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE DEL HI HIGH COURT IN THE CASE OF JOINT INVESTMENT PVT. LTD. VS. CIT REPORTED IN 372 ITR 6 94 (DEL) WHEREIN IT WAS HELD : 9. IN THE PRESENT CASE, THE AO HAS NOT FIRSTLY DISCLO SED WHY THE APPELLANT/ASSESSEE'S CLAIM FOR ATTRIBUTING RS. 2,97,440 AS A DISALLOWANC E UNDER S. 14A HAD TO BE REJECTED. TAIKISHA ENGG. INDIA LTD. (SUPRA) SAYS TH AT THE JURISDICTION TO PROCEED FURTHER AND DETERMINE AMOUNTS IS DERIVED AFTER EXAMINATION OF THE ACCOUNTS AND REJECTION IF ANY OF THE ASSESSEE'S CLAIM OR EXPLANATION. THE SECOND ASPECT IS THERE APPEARS TO HAVE BEEN NO SCRUTINY OF THE ACCOUNTS BY THE AO-AN ASPECT WHI CH IS COMPLETELY UNNOTICED BY THE CIT(A) AND THE TRIBUNAL. THE THIRD, AND IN THE OPIN ION OF THIS COURT, IMPORTANT ANOMALY WHICH WE CANNOT BE UNMINDFUL IS THAT WHEREAS THE EN TIRE TAX EXEMPT INCOME IS RS. 48,90,000, THE DISALLOWANCE ULTIMATELY DIRECTED WOR KS OUT TO NEARLY 110 PER CENT OF THAT SUM, I.E., RS. 52,56,197. BY NO STRETCH OF IMAGINAT ION CAN S. 14A OR R. 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALLOWANCE IS INDICATED IN S. 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE 'INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EX EMPT INCOME'. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWAL LOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE LD. AO TO RESTRICT THE DISALLOWANCE MADE U/S 14A OF THE ACT TO THE EXTENT OF EXEMPT INCOME. THE LD AO IS DIRECTED TO EXAMINE THE SAME AS PER LAW. THE ASSES SEE IS ALSO AT LIBERTY TO ADDUCE FRESH EVIDENCES AND MAKE FRESH ARGUMENTS IN SUPPORT OF HI S CONTENTIONS. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STAT ISTICAL PURPOSES. 3 ITA NO.567/KOL/2018 SHRI ASHIT BARAN MAGANLAL DESAI A.YR. 2013-14 3 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 04.07.2018 SD/- SD/- [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 04.07.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. SHRI ASHIT BARAN MAGANLAL DESAI, C/0, SHRI S.L. KOCHAR, ADVOCATE, 5, ASHUTOSH CHOWDHURY AVENUE, KOLKATA-19. 2. ITO, WARD-34(2), KOLKATA, AAYAKAR BHAWAN POORVA, KOLKATA-700107. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S