ROHIT A. KAPADIA, MUMBAI V. ADDL CIT RG 11(3), MUMBAI

ITA 5828/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3303 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 17-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJARSHI DWIVEDI
• Assessee Lawyers: APURVA R SHAH
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, MUMBAI . , . ! , # $%& $ BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM $ ./I.T.A. NO.5828/M/2011 ( ' ( )( / ASSESSMENT YEAR : 2008-2009 ) ROHIT A KAPADIA, 12-B, PARADISE APARTMENTS, NEPEAN SEA ROAD, MUMBAI 400 011. / VS. ADDL. CIT, RANGE-11(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. &* # $ ./PAN : AABPK 0215 A ( *+ /APPELLANT) .. ( ,-*+ / RESPONDENT) *+ . / $ / APPELLANT BY : SHRI APURVA R. SHAH ,-*+ . / $ / RESPONDENT BY : SHRI RAJARSHI DWIVEDI, DR $ . 0# /DATE OF HEARING : 11.6.2013 1) . 0# /DATE OF PRONOUNCEMENT : 3.7.2013 %2 %2 %2 %2 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 17.8.2011 IS A GAINST THE ORDER OF CIT (A)- 2, MUMBAI DATED 30.6.2011 FOR THE ASSESSMENT YEAR 2 008-2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A BY MECHANICALLY APPLYING RULE-8D WITHOUT SHOWING ADEQUATE REASONS W HY HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CALCULATION OF THE APPELLANT . 2. IN MAKING A DISALLOWANCE U/S 14A, WHICH WAS VERY HUGE WITHOUT CONSIDERING THE CIRCUMSTANCES OF THE APPELLANTS ACTIVITIES AND WHICH THEREFORE NEEDS TO BE DELETED OR SUBSTANTIALLY REDUCED. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS AN INDIVIDUAL AND EARNED INCOME FROM PROFESSION AS AN ADVOCATE. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 5,08,73,77 3/-. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME OF TH E ASSESSEE WAS DETERMINED AT RS. 5,19,70,457/-. DURING THE ASSESSMENT PROCEEDIN GS, AO NOTICED THAT THE 2 ASSESSEE HAS DEBITED EXPENDITURE OF RS. 25,46,665/- AND REPORTED THE DIVIDEND INCOME EXCEEDING MORE THAN RS. 1 CR ON ACCOUNT OF D IVIDEND, MUTUAL FUNDS, RBI TAX FREE BOND INTEREST ON PPF. AO INVOKED THE PROVISIO NS OF SECTION 14A WITHOUT ANY DISCUSSION ABOUT THE SATISFACTION REFERRED TO IN SU B-SECTION (2) TO SECTION 14A OF THE ACT. ASSESSEE SUBMITTED THAT AN AMOUNT OF RS.1,887 /- WAS DISALLOWED AS RELATABLE TO THE EARNING OF THE SAID EXEMPT INCOME. SUBSEQUEN TLY, ASSESSEE SUBMITTED A FRESH WORKING FOR DISALLOWANCE U/S 14A AMOUNTING TO RS. 1 ,74,000/- IE @ 10% OF THE TAX FREE INCOME. THE SAID ESTIMATIONS ARE NOT IN ACCOR DANCE WITH RULE-8D READ WITH SECTION 14A OF THE ACT. THE AY UNDER CONSIDERATION IS 2008-09 AND THE AO CRYPTICALLY CONVEYED HIS DISSATISFACTION AND INVOKE D THE SAID PROVISIONS BEFORE QUANTIFYING THE DISALLOWANCE AT RS. 10,73,270/- @ 0 .5% OF THE AVERAGE INVESTMENT. AO MADE ADDITION ACCORDINGLY. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE MADE VARIOUS SUBMISSIONS AND QUESTIONED THE MECHANICAL AND AUTOMATIC WAY OF APPLICATION OF THE SAID RULE-8D BY THE AO WITHOUT CONVEYING DISSATISFACTIONS ABOUT THE METHOD ADOPTED BY THE ASSESSEE REGARDING THE REASONS IN WRITING. ON HEAR ING THE ASSESSEE, CIT (A) RELIED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD VS. CIT AND CONFIRMED THE ADDITION MADE BY THE AO AMOUNTING TO RS. 10,71,383/-. AGGRIEVED WITH THE SAME, ASSESSEE FIL ED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, SHRI APUUVA R. SHAH, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT MAKING DISALLOWANCE MECHANI CALLY UNDER THE SAID PROVISIONS OF THE ACT WITHOUT SHOWING ADEQUATE REAS ONS THAT WHY HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CALCULATION O F THE ASSESSEE, IS NOT CORRECT. FURTHER, HE PRAYED FOR SETTING ASIDE THE ISSUE TO T HE FILES OF THE AO FOR WANT OF WRITTEN REASONS FOR REJECTION OF THE CORRECTNESS OF THE ASSESSEES CLAIM. IN THIS REGARD, HE RELIED ON THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF GODREJ & BOYCE (SUPRA). 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 3 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES. IN THIS CASE, ASSESSEE CLAIMED THAT TH E AMOUNT OF EXPENDITURE INCURRED RELATABLE TO THE EXEMPT INCOME IS ONLY RS. 1,887/-. THE EXEMPT INCOME IS MORE THAN RS. 1 CR ON ACCOUNTS OF DIVIDEND INCOME, MUTUA L FUNDS, RBI TAX FREE BONDS, INTEREST ON PPF ETC. THE ASSESSMENT ORDER DOES NOT PROVIDE DISCUSSION AS TO HOW THE ASSESSEES CLAIM OF RS. 1,887/- IS INCORRECT. CONSIDERING THE LEGAL POSITION ON THIS ISSUE OF SATISFACTION, WE ARE OF THE OPINION T HAT AO IS BOUND TO RECORD REASONS IN WRITING CONVEYING HIS DISSATISFACTION ABOUT THE COR RECTNESS OF THE SAID CLAIMS. THEREFORE, IN OUR OPINION, ARGUMENTS RAISED BY THE LD COUNSEL HAVE MERIT. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE SET ASIDE . AO IS DIRECTED TO PROVIDE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3.7.2013 . SD/- SD/- (D. MANMOHAN ) (D. KARUNAKARA RAO ) / VICE PRESIDENT # $%& / ACCOUNTANT MEMBER MUMBAI; 3% 3.7.2013 . ' . $ ./ OKK , SR. PS %2 %2 %2 %2 . .. . ,'045 ,'045 ,'045 ,'045 65)0 65)0 65)0 65)0 / COPY OF THE ORDER FORWARDED TO : 1. *+ / THE APPELLANT 2. ,-*+ / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 5 89 ,'0' , , / DR, ITAT, MUMBAI 6. 9( : / GUARD FILE. $-50 ,'0 //TRUE COPY// %2 $ %2 $ %2 $ %2 $ / BY ORDER, / $ $ $ $ ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI