RAVI MOHAN GEHI, MUMBAI V. ACIT- 24 (3), MUMBAI

ITA 5745/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6126 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI LAKSHMI NAYAKLD
• Assessee Lawyers: VIMAL PUNMIYA LD
• Keywords: Earning of tax free income; Rule 8D; Liquidation
• Section: 143(3); 14A

Judgement Text

ITA NO.5745/MUM/2018 MR. RAVI MOHAN GEHI ASSESSMENT YEAR :2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5745/MUM/2018 ( / ASSESSMENT YEAR: 2014-15) MR. RAVI MOHAN GEHI B/7, NAVKAR CHAMBERS ANDHERI KURLA ROAD ANDHERI (E), MUMBAI-400 059 / VS. A CIT - 24(3) MUMBAI. . ! ./ ./PAN/GIR NO. AEPPG-1674-M ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : SHRI VIMAL PUNMIYA- LD. AR REVENUE BY : MS. JYOTI LAKSHMI NAYAK-LD.DR / DATE OF HEARING : 11/02/2020 / DATE OF PRONOUNCEMENT : 11/02/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2014-15 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-36, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-36/IT-351/ACIT-24(3)/2016-17 DATED 31/05/2018 ON FOLLOWING GROUNDS: - ITA NO.5745/MUM/2018 MR. RAVI MOHAN GEHI ASSESSMENT YEAR :2014-15 2 1. LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE U/S 14A OF THE INCOME TAX ACT 1961, AMOUNTING TO RS.11,52,314/-MADE BY THE LD . AO. 2. THE LD. CIT(A) HAS FAILED TO TAKE INTO ACCOUNT T HE DOCUMENTARY EVIDENCES SUCH THE DETAILS OF DIVIDEND PLACED ON RECORD ALONG WITH THE STATEMENTS OF MUTUAL FUNDS WHICH SHOWS THAT APPELLANT HAD NOT GIVEN ANY EFFORT S OR TIME FOR THE SAID ACTIVITY SINCE THE INTENTION IS TO INVEST THE SPARE AMOUNT L YING IN THE BANK ACCOUNT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT WITHOUT PREJUDICE TO SECTI ON 14A R.W. RULE 8D THE APPELLANT HAD ON ITS OWN DISALLOWED RS. 40,000/- BY WAY OF DI SALLOWANCE U/S 14A OF THE INCOME TAX ACT 1961, BEING RS 2,000/- PER TRANSACTI ON OF INVESTMENTS OR LIQUIDATION OF INVESTMENTS FOR THE 20 TRANSACTIONS ENTERED BY T HE APPELLANT DURING THE YEAR. AS EVIDENT, THE SOLE SUBJECT MATTER OF APPEAL IS DI SALLOWANCE U/S. 14A. 2. WE HAVE CAREFULLY CONSIDERED ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES AND PERUSED RELEVANT MATERIAL ON RE CORD. WE HAVE ALSO DELIBERATED UPON VARIOUS JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. OUR ADJUDICATION TO THE SUBJECT MATTER OF DISPUTE W OULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 FACTS ON RECORD WOULD REVEAL THAT ASSESSEE BEI NG RESIDENT INDIVIDUAL STATED TO BE CARRYING OUT BROKERAGE BUSI NESS, WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S. 143(3) ON 26/12/2 016 WHEREIN INCOME OF THE ASSESSEE WAS DETERMINED AT RS.173.55 LACS AF TER SOLE DISALLOWANCE U/S. 14A FOR RS. 11.52 LACS AS AGAINST RETURNED INCOME OF RS.162.02 LACS E-FILED BY THE ASSESSEE ON 31/07/201 4. 3.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE HAD INVESTMENTS IN ITS BALANCE SHEET, WHICH CALLED FOR DISALLOWANCE U/S 14A. THE LD. AO, OBSERVING THAT THE ASSESSEE HAS NO T SHOWN TO HAVE INCURRED ANY EXPENDITURE SPECIFICALLY TO EARN EXEMP T INCOME, APPLIED RULE 8D AND COMPUTED INDIRECT EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.11.52 LACS, BEING 0.5% OF AVERAGE INVESTMENTS. ITA NO.5745/MUM/2018 MR. RAVI MOHAN GEHI ASSESSMENT YEAR :2014-15 3 4. BEFORE LD. CIT(A), THE ASSESSEE DREW ATTENTION T O THE FACT THAT IT HAD ALREADY OFFERED SUO-MOTO DISALLOWANCE OF RS.40, 000/- COMPUTED @RS.2000/- PER TRANSACTIONS WHILE COMPUTING ITS INC OME FOR THE YEAR. THE ATTENTION WAS ALSO DRAWN TO THE FACT THAT ENTIR E DIVIDEND RECEIVED BY THE ASSESSEE WERE BY WAY OF INVESTMENTS IN UNITS OF MUTUAL FUNDS. IT WAS ALSO SUBMITTED THAT NEGLIGIBLE EFFORTS WERE MADE BY THE ASSESSEE TO EARN THE EXEMPT INCOME. HOWEVER, LD. CIT(A), RELYING UPO N APPELLATE ORDER FOR AYS 2009-10 & 2010-11, CONFIRMED THE DISALLOWAN CE AS MADE BY LD. AO. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 5. UPON DUE CONSIDERATION OF FACTUAL MATRIX, IT IS OBSERVED THAT LD. AO HAS FAILED TO CONSIDER THE FACT THAT THE ASSESSEE H AD ALREADY OFFERED SUO- MOTO DISALLOWANCE OF RS.40,000/- WHILE COMPUTING IT S INCOME FOR THE YEAR. IT IS TRITE LAW THAT APPLICATION OF RULE 8D I S NOT AUTOMATIC AND IT WAS INCUMBENT ON LD. AO TO FIRST REJECT THE METHOD OF D ISALLOWANCE ADOPTED BY THE ASSESSEE, HAVING REGARDS TO THE ACCOUNTS OF THE ASSESSEE, BEFORE PROCEEDING TO APPLY RULE 8D. THE SAME IS A JURISDIC TIONAL REQUIREMENT AND THE FAILURE TO DO SO THE SAME WOULD OUST THE JU RISDICTION OF LD.AO TO APPLY RULE 8D. THE ASSESSEE HAD IDENTIFIED ESTIMATE D EXPENDITURE OF RS.2,000/- PER TRANSACTION AND COMPUTED DISALLOWANC E OF RS.0.40 LACS. UPON PERUSAL OF FINANCIAL STATEMENTS AS PLACED ON R ECORD, IT IS EVIDENT THAT MAJORITY OF THE EXPENSES WERE TOWARDS BUSINESS ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER C ONSIDERATION. THEREFORE, THE SUO-MOTO DISALLOWANCE AS COMPUTED BY THE ASSESSEE, IN OUR OPINION, WAS QUITE FAIR AND ADEQUATE. THEREFORE , THE FACTS OF THE CASE DO NOT INSPIRE US TO CONFIRM THE ADDITIONAL DISALLO WANCE OF RS.11.52 LACS AS MADE BY LD.AO. BY DELETING THE SAME, WE ALLOW TH E APPEAL. ITA NO.5745/MUM/2018 MR. RAVI MOHAN GEHI ASSESSMENT YEAR :2014-15 4 6. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEBRUARY, 2020. SD/- SD/- (AMARJIT SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 11/02/2020 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,-$. , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.