Aruna Kundanani, Kolkata V. I.T.O Wd - 30(1),kolkata, Kolkata

ITA 589/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3404 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK NAG JCITSRDR
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Earning of tax free income; Cost of acquisition; Fair market value
• Section: 143(3); 50C; 14A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 589 / KOL / 2013 ASSESSMENT YEAR :2009-10 ARUNA KUNDANANI C/O D.J.SHAH & CO. KALYAN BHAVAN, 2 ELGIN ROAD, KOLKATA 700 020 [ PAN NO. AFLPK 4566 M ] V/S . INCOME TAX OFFICER WARD-30(1), AAYAKAR DAKSHIN, 2GARIAHAT ROAD, KOLKATA 68 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI MIRAJ D SHAH, FCA /BY RESPONDENT ALOK NAG, JCIT, SR-DR /DATE OF HEARING 09-12-2015 /DATE OF PRONOUNCEMENT 20 - 01-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-XIV, KOLKATA IN APPEAL NO.883/ CIT(A)-XIV/KOL.11-12 DATED 13.02.2013. ASSESSMENT WAS FRAMED BY ITO WARD -30(1), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 26.12.2011 FOR ASSESSMENT YEAR 2009 -10. ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THAT CAPITAL GAINS ON FLAT NO 501 IN OSHIWARA MATRUCHHAYA COOP H OUSING SOCIETY ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 2 LTD WAS CHARGEABLE IN AY 2009-10. THE CAPITAL GAINS ASSESSED BE DELETED. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE ENHANCEMENT OF CAPITAL GAINS U/S. 50C OF THE IT ACT 1961. 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE VALUE OF THE STAMP AUTHORITY WAS NOT DISPUTED. THIS FINDING IS PERVERSE AND BE REVERSED. 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE VALUATION OF THE CAPITAL ASSET. FOR THAT IN THE FACTS AND CIRCUM STANCES OF THE CASE THE VALUATION OF FLAT NO 501 IN OSHIWARA MATRUCHHAYA CO OP HOUSING SOCIETY LTD U/S 50C OF THE ACT BE REFERRED TO THE DISTRICT VALUATION OFFICER. 5. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IN UPHOLDI NG THE DISALLOWANCE OF RS.1,63,622 /S 14A OF THE ACT 1961. THE DISALLOWANCE BE REVERSED / DELETED. 2. FIRST ISSUE RAISED BY ASSESSEE IS THAT LD. CIT(A ) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY COMPUTING THE TAX LI ABILITY U/S 50C OF THE ACT ON ACCOUNT OF SALE OF THE FLAT. THE STAMP VALUATION OF THE PROPERTY IS RS. 63,39,879.00 AND ACTUAL SALE PRICE IS RS. 40 LACS O NLY. 2.1 FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIV IDUAL LADY AND HAS DECLARED INCOME FROM THE SOURCE OF HOUSE PROPERTY, SHARE TRADING, PROFESSIONAL INCOME AS AN ARTIST AND OTHER SOURCES. THE ASSESSEE WAS HAVING A PROPERTY BEING A FLAT NO. 501, 5 TH FLOOR, BUILDING NO.42, HIG, PLOT NO. 23, OSHIWARA MATRUCHHAYA CO-OPERATIVE HOUSING SOCIETY, IN MUMBAI WHICH WAS SOLD BY THE ASSESSEE DURING THE YEAR FOR AN AMOUNT OF RS.40 LAKH ONLY. THE SALE OF THE PROPERTY HAS GIVEN THE RISE TO SHORT TE RM CAPITAL GAIN BUT THE ASSESSEE DID NOT DECLARE THE SAME IN HER RETURN OF INCOME. THE COST OF ACQUISITION OF THE FLAT WAS AT RS.39,12,600/-. DURI NG THE ASSESSMENT PROCEEDINGS AO GATHERED THE INFORMATION FROM PROPER TY REGISTRY AUTHORITY IN PURSUANCE OF NOTICE ISSUED U/S. 133(6) OF THE ACT, MUMBAI AND FOUND THE ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 3 STAMP VALUATION OF THE PROPERTY FOR THE PURPOSE OF THE REGISTRATION FOR AN AMOUNT OF RS.63,39,879/-. THE AO CALLED UPON THE AS SESSEE FOR CLARIFICATION OF ABOVE STATED FACTS. THE REPLY OF ASSESSEE IS REPROD UCED BELOW FOR SAKE OF CLARITY :- THE SOUDA OF THE PROPERTY WAS DONE LONG BACK I.E. DURING THE MONTH OF SEPTEMBER 07 JANUARY 08, THE INITIAL PAY MENT OF RS.1,00,000 (RUPEES ONE LAKH) WAS GIVEN ON 22 ND JANUARY,2008 & THE NEXT INSTALLMENT WAS PAID ON 11 TH MARCH 2008 RS.4,00,000 (RUPEES FOUR LAKHS). AFTER THE 2 ND INSTALLMENT THE BUYER REFUSED TO HONUR THE COMMITMENT & SHOWING HIS INTENTION TO TAKE BACK HIS MONEY. SINCE ARUNA KUNDANANI STAYS IN KOLKATA, IT W AS NEVER EASY FOR HER TO FREQUENTLY VISIT MUMBAI FOR PROPERT Y DEAL & ALSO THE SOCIETY, WHERE THE FLAT, WAS NOT ALLOWING TO USE TH E FLAT AS GUEST HOUSE OR ANY OTHER PURPOSE. THERE WERE LOT OF RESTR ICTION FOR THE OWNERS IF THEY WANT TO LET OUT THEIR PROPERTY. SO U NDER DURESS MY CLIENT ARUNA KUNDANANI HAD TO PERSUADE THE PARTY TO TAKE PROPERTY AT THE LOWER AMOUNT. APART FROM THAT THERE WERE RECESSION IN PROPERTY PRICES IN MUMBAI WHICH MADE M Y CLIENT VERY NERVOUS. AFTER LOT OF PERSUASION THE PARTY AGREED T O PAY THE NEXT INSTALLMENT ON 17/06/2008 OF RS.35 LAKHS (RUPEES TH IRTY FIVE LAKHS) ON THE CONDITION THAT THE SALE DEED SHOULD B E SIGNED ON THIS PAYMENT AND ALSO PROMISE TO PAY SOME MORE MONE Y, IF POSSIBLE IN FUTURE WITH NO SPECIFIC DATE. BUT THE P ROMISE WAS NEVER COME THROUGH. AFTER SEVEN TO EIGHT MONTHS MY CLIENT TOLD ME UNHAPPILY THAT THE PROPERTY WAS SOLD FOR GOOD & NOTHING MORE COULD BE REALIZED FROM THE PARTY THAN WHAT SHE HAS ALREADY RECEIVED. THE AMOUNT WHICH MY CLIENT RECEIVED SHOWN IN THE LIABILITY SIDE OF THE BALANCE SHEET OF THE RESPECTI VE ACCOUNTING YEARS. SO THE AMOUNTS WHICH WERE RECEIVED IN ANTICIPATION AS INSTALLMENT MONEY WAS LATER CONSIDERED AS FINAL PAYMENT. WE REP EATEDLY TRIED TO PERSUADE THE PARTY OVER PHONE TO PAY LITTL E MORE BUT NOTHING CAME OUT. IN THE MEAN WHILE LOT OF MONTHS E LAPSED AND NEW ACCOUNTING YEAR STARTED. SO WE HAD TO BOOK THE SALE IN THE YEAR 2009-2010 WHICH WAS SHOWN IN THE BOOKS OF ACCO UNTS, GAIN IN PROFIT & LOSS, CAPITAL GAIN IN COMPUTATION & BAL ANCE SHEET OF 2009-2010, A XEROX COPIES OF EACH ENCLOSED. I HOPE THAT THE ABOVE EXPLANATION WILL CLEAR YOUR DOUBTS ABOUT THE BONAFIDE INTENTION OF MY CLIENT. 2) THERE ARE LOT OF INCIDENCE THAT THE CIRCLE RATE OF THE PARTICULAR AREA IS FOR MORE THAN WHAT THE PROPERTY USE TO FETC H. IN THE ABOVE PARA WE HAVE ALREADY EXPLAINED THAT MY CLIENT ARUNA KUNDANANI ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 4 IS SINGLE LADY. SHE CANT VISIT MUMBAI FREQUENTLY O NLY FOR PROPERTY TRANSACTION. APART FROM THAT SHE WAS ALSO PERTURBED WITH THE ATTITUDE OF THE SOCIETY IN WHICH NUMBER OF RESTRICT IONS PREVAILS. SHE ALSO HAD THE FEAR OF PRICE REDUCTION IN PROPERT Y RATE IN MUMBAI DURING THE PERIOD OF RECESSION. SHE WAS VERY UPSET WITH THE INVESTMENT SHE MADE ON THE PROPERTY OF THAT SOC IETY. SO IT QUITE PRACTICAL THAT UNDER DURESS THE PROPERTY COUL D BE SOLD AT ANY LOWER PRICE THAN IT SHOULD HAVE FETCHED. HOWEVER, AO DISREGARDED THE SUBMISSION OF ASSESSEE BY HOLDING THAT PROPERTY IN QUESTION HAS BEEN TRANSFERRED IN THE PR EVIOUS AY 2008-09 SO THE INCOME ARISING THEREON HAS TO BE OFFERED FOR TAXATI ON IN PRESENT AY 2009-10. BESIDES, THE AO ALSO OBSERVED THAT ASSESSEE HAS NOT DISPUTED THE VALUE OF PROPERTY ADOPTED BY STAMP VALUATION AUTHORITY FOR T HE PURPOSE OF REGISTRATION. THEREFORE THE VALUE ADOPTED FOR THE STAMP VALUATION PURPOSE HAS BEEN TREATED AS DEEMED SALE CONSIDERATION. ACCORDINGLY, AO WORKE D OUT THE STCG AND ADDED TO THE INCOME OF ASSESSEE. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO HAS UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND THE SUBMISSIONS OF THE APPELLANT. IT IS ADMITTED FACT T HAT THE ASSESSEE SOLD A PROPERTY, BEING FLAT NO. 501, 5 TH FLOOR IN BUILDING NO. 42, HIG, PLOT NO. 23, OSHIWARA MATRUCHHAYA CO-OP. HOUSING SOCIETY LTD ., ON 30/07/2008. IT IS SEEN FROM THE SALE DEED THAT THE SAID PROPERT Y WAS SOLD BY THE APPELLANT ON 30/07/2008. IT IS SEEN FROM THE SALE D EDUCTION THAT THE SAID PROPERTY WAS SOLD BY THE APPELLANT ON 30/07/2008. I T HAS ALSO BEEN CONFIRMED BY THE SUB-REGISTRAR (MSD), ANDHERI-2, MU MBAI, THAT THE DATE OF TRANSFER/REGISTRATION OF THE AFORESAID PROP ERTY BY THE APPELLANT WAS 30/07/2008. NOT ONLY THE SUB-REGISTRAR HAS CONF IRMED THE DATE OF SALE OF THE SAID PROPERTY AS 30/07/2008 BUT ALSO TH E SALE DEED PRODUCED BY THE LD. A/R OF THE APPELLANT, MR. PARESH GUPTA, DISPLAYS THAT THE DATE OF SALE/DATE OF REGISTRATION OF THE SAID PROPERTY I S 30/07/2008. THE PROPERTY WAS SOLD BY THE APPELLANT DURING THE PREVI OUS YEAR : 2008-09. THE OBJECTIONS RAISED BY THE APPELLANT ARE FRIVOLOU S AND THE ASSESSING OFFICER HAS DEALT WITH THESE OBJECTIONS IN THE ASSE SSMENT ORDER. I AGREE WITH THE VIEW OF THE ASSESSING OFFICER THAT THE CAP ITAL GAIN ON THE SAID PROPERTY WAS ASSESSABLE IN THE A.Y 2009-10 IN THE H ANDS OF THE APPELLANT. ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 5 IN THE LIGHT OF THESE EVIDENCES, I AM OF THE CONSID ERED VIEW THAT THE ASSESSING OFFICER HAS CORRECTLY TAXED THE CAPITAL G AIN IN THE HANDS OF THE APPELLANT IN THE AY 2009-10. I ALSO FIND THAT THE S UB-REGISTRAR (MSD), ANDHERI-2, MUMBAI, HAD CONFIRMED THAT THE STAMP VAL UATION AUTHORITY (SVA) HAS DETERMINED THE MARKET VALUE OF THE SAID P ROPERTY AT RS.63,39,879/-. SINCE THE VALUATION MADE BY THE STA MP VALUATION AUTHORITY (SVA) IS NOT DISPUTED, I AM OF THE CONSID ERED VIEW THAT THE ASSESSING OFFICE HAS RIGHTLY ADOPTED THE SALE CONSI DERATION OF THE PROPERTY AT RS.63,39,879/- FOR THE PURPOSE OF COMPU TATION OF SHORT-TERM CAPITAL GAIN BY INVOKING THE PROVISIONS OF SEC. 50C OF THE I.T. ACT, 1961. I DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE APPELLANT AS THE APPELLANT HAS SQUARELY FAILED TO PUT FORTH ANY CONV INCING ARGUMENT. THEREFORE, THE ACTION OF THE ASSESSING OFFICER OF T AXING THE SHORT-TERM CAPITAL GAIN BY ADOPTING THE SALE CONSIDERATION AT RS.63,39,879/- IN ACCORDANCE WITH THE PROVISIONS OF SEC. 50C OF THE I .T. ACT, 1961 IS UPHELD. THEREFORE, ALL THE GROUNDS OF THE APPEAL AN D THE ADDITIONAL GROUNDS OF THE APPEAL OF THE APPELLANT RELATING TO THE ADDITION OF THE SHORT-TERM CAPITAL GAIN ARE DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E IS IN SECOND APPEAL BEFORE US. SHRI MIRAJ D SHAH, LD. AUTHORIZED REPRESENTATIVE AP PEARING ON BEHALF OF ASSESSEE AND SHRI ALOK NAG, LD. DEPARTMENTAL REPRES ENTATIVE APPEARING ON BEHALF OF REVENUE. 4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. LD. AR SUBMITTED PAPER BOOK WHICH IS RUNNIN G PAGES 1 TO 19. THE LD. AR SUBMITTED THAT ASSESSEE HAS SOLD A PROPERTY FOR RS. 40 LACS ON DATED 30-7- 2008 BUT POSSESSION OF THE PROPERTY WAS DELIVERED I N THE ASSESSMENT YEAR 2010-11, HENCE IT SHOULD BE TAXED IN THE ASSESSMENT YEAR 2010-11. BESIDES THE LD. AR ALSO REQUESTED TO REFER THE MATTER TO DV O FOR THE PURPOSE OF VALUING THE PROPERTY AT FAIR MARKET VALUE. ON THE OTHER HAN D THE LD. DR VEHEMENTLY SUPPORTED THE VIEW OF THE LOWER AUTHORITIES. 4.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS SOLD THE PROPERTY BUT DID NOT DECLARE THE INCOME FROM THE SA LE OF THE PROPERTY. THE ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 6 ASSESSEE DECLARED THE INCOME IN THE SUBSEQUENT ASSE SSMENT YEAR 2010-11 ALTHOUGH THE REGISTRY WAS DONE IN THE ASSESSMENT YE AR 2009-10. FROM THE FACTS OF THE CASE IT IS CLEAR THAT THE TRANSFER OF THE PROPERTY HAS TAKEN PLACE IN THE ASSESSMENT YEAR 2009-10, SO THE TAXABILITY OF T HE INCOME ARISING FROM THE ABOVE TRANSACTION IS VERY MUCH TAXABLE IN THE RELEV ANT ASSESSMENT YEAR I.E. 2009-10 ONLY. HOWEVER, AS REGARDS THE REFERENCE TO THE DVO FOR THE PURPOSE OF DETERMINATION OF THE FAIR MARKET VALUE, WE OBSER VE THAT IT IS A LEGAL RIGHT OF THE ASSESSEE THEREFORE HE IS ENTITLED FOR THE SAME. WE ARE ALSO RELYING IN THE ORDER OF JURISDICTIONAL HIGH COURT OF CALCUTTA IN T HE CASE OF SUNIL KUMAR AGARWAL VS. CIT SILIGURI 372 ITR 83 WHEREIN IT WAS HELD THAT .. WE ARE OF THE OPINION THAT THE VALUATION BY THE DE PARTMENTAL VALUATION OFFICER, CONTEMPLATED UNDER SECTION 50C I S REQUIRED TO AVOID MISCARRIAGE OF JUSTICE. THE LEGISLATURE DID NOT INT END THAT THE CAPITAL GAIN SHOULD BE FIXED MERELY ON THE BASIS OF THE VALUATIO N TO BE MADE BY THE DISTRICT SUB REGISTRAR FOR THE PURPOSE OF STAMP DUT Y. THE LEGISLATURE HAS TAKEN CARE TO PROVIDE ADEQUATE MACHINERY TO GIVE A FAIR TREATMENT TO THE CITIZEN/TAXPAYER. THERE IS NO REASON WHY THE MACHIN ERY PROVIDED BY THE LEGISLATURE SHOULD NOT BE USED AND THE BENEFIT THER EOF SHOULD BE REFUSED. EVEN IN CASE WHERE NO SUCH PRAYER IS MADE BY THE LEARNED ADVOCATE REPRESENTING THE ASSESSEE, WHO MAY NOT HAV E BEEN PROPERLY INSTRUCTED IN LAW, THE ASSESSING OFFICER, DISCHARGI NG A QUASI JUDICIAL FUNCTION, HAS THE BOUNDEN DUTY TO ACT FAIRY AND TO GIVE A FAIR TREATMENT BY GIVING HIM AN OPTION TO FOLLOW THE CURSE PROVIDE D BY LAW. FOR THE AFORESAID REASONS, THE ORDER UNDER CHALLENG E IS SET ASIDE. THE IMPUGNED ORDER INCLUDING ORDERS PASSED BY THE C IT(A) AND THE ASSESSING OFFICER ARE ALL SET ASIDE. THE MATTER IS REMANDED TO THE ASSESSING OFFICER. HE SHALL REFER THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER IN ACCORDANCE WITH LAW. AFTER SUCH VALUATIO N IS MADE, THE ASSESSMENT SHALL BE MADE DE NOVO IN ACCORDANCE WITH LAW. NOW, IT IS CLEAR FROM THE AFORESAID SUBMISSION THAT THE ASSESSEE IS VERY MUCH ENTITLED TO REFER THE MATTER TO THE DVO FOR VALUING THE PROPERTY AT THE FAIR MARKET VALUE. IN VIEW OF ABOVE, WE RESTORE THE MATT ER TO AO FOR FRESH ADJUDICATION AS PER LAW AFTER REFERRING THE MATTER TO DVO FOR DETERMINING THE FAIR MARKET VALUE. HENCE THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 7 5. NEXT ISSUE RAISED BY ASSESSEE IS THAT LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.1,63,622/- IN PURSUANCE OF SEC. 14A OF THE ACT. DURING THE YEAR ASSESSEE HAS EARNED EXEMPTED INCOME FROM THE S OURCE OF DIVIDEND AND PPF INTEREST FOR AN AMOUNT OF RS.1,64,978/- AND RS. 52,822/- RESPECTIVELY BUT ASSESSEE DID NOT DISALLOW ANY EXPENSE BY VIRTUE OF THE PROVISIONS OF SEC. 14A OF THE ACT. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.1,63,6 22/- TOWARDS THE LEGAL CHARGES, BANK CHARGES, RENT CHARGES AND BANK INTERE ST. THE AO DISALLOWED THE ABOVE EXPENSES HOLDING THAT SUCH ABOVE EXPENSES HAVE NO NEXUS FROM THE INCOME SHOWN BY THE ASSESSEE. IN VIEW OF ABOVE AO HAS DISALLOWED THE EXPENSES AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- 6. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE EARNED DIVIDEND OF RS.1,64,978/- AND P.F. INTEREST TO THE TUNE OF RS.5 2,822/-. AS AGAINST THE AFORESAID EXEMPT INCOME, THE APPELLANT HAD CLAI MED EXPENSES OF RS.1,63,622/-. THE APPELLANT HAS NOT PRODUCED ANY S UPPORTING EVIDENCE TO SHOW ANY INFIRMITY IN THE ACTION OF THE ASSESSIN G OFFICER IN THIS REGARD. SINCE ON FACTS THE APPELLANT HAS NOT PRODUCED ANY S UPPORTING EVIDENCE, IT IS HELD THAT THE FACT OF THE INSTANT CASE ARE DI STINGUISHABLE COMPARED TO THE FACTS OF THE CASE RELIED UPON BY THE APPELLA NT. THEREFORE, THE ACTION OF THE ASSESSING OF MAKING DISALLOWANCE U/S 14A OF THE I.T. ACT, 1961, IS CONFIRMED. HENCE ALL THE GROUNDS AS WELL A S THE ADDITIONAL GROUNDS OF THE APPEAL RELATING TO THIS ADDITION, AR E DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E PREFERRED SECOND APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US THE LD. AR SUBMITTED THAT THE DIS ALLOWANCE UNDER SECTION SHOULD BE MADE IN TERMS OF THE PROVISIONS OF SECTIO N OF 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES 1962. THE LD. AR P RAYED TO RESTORE THE FILE TO THE AO FOR FRESH ADJUDICATION WITH THE DIRECTION TO ADJUDICATE THE MATTER AFRESH AS PER LAW AFTER CONSIDERING THE INVESTMENT WHICH H AS GIVEN RISE TO THE ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 8 DIVIDEND INCOME DURING THE YEAR. ON THE OTHER HAND THE LD. DR RELIED ON THE AUTHORITIES BELOW. 7.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS EARNED EXEMPT INCOME DURING THE YEAR BUT MADE NO ALLOWANCE OF THE EXPENSES IN TERMS OF SECTION 14A OF THE ACT. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS DECLARED CE RTAIN EXPENSES IN ITS PROFIT & LOSS ACCOUNT WHICH HAS NO NEXUS WITH THE I NCOME OF OTHER SOURCES SHOWN BY THE ASSESSEE. ACCORDINGLY THE AO HAS DISAL LOWED SUCH EXPENSES I.E. BANK CHARGES, BANK INTEREST, LEGAL CHARGES ETC FOR AN AMOUNT OF RS. 1,63,623.00. WE FIND FROM THE ORDER OF THE AO THAT NO SPECIFIC DISALLOWANCE HAS BEEN MADE AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES 1962. THE AO HAS DISALLOWED ALL TH E EXPENSES BY STATING THAT THE EXPENSES CLAIMED HAS NO NEXUS WITH THE INC OME OF THE ASSESSEE. WE OBSERVED THAT THE AO HAS NOT CLEARLY APPLIED THE PR OVISIONS OF RULE 8D WHILE WORKING THE DISALLOWANCE. THERE IS A PRESCRIBED PRO CEDURE FOR MAKING THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES 1962. THE LOWER AUTHORITIES CAN NOT DEVIATE FROM THE SAID PROCEDURE FOR MAKING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. IN VIEW OF ABOVE WE ARE INCLINED TO RESTORE THIS FILE TO THE AO WITH THE DIRECTION TO A DJUDICATE THE MATTER AFRESH AS PER LAW AFTER TAKING INTO ACCOUNT THOSE INVESTMENTS WHICH HAS GIVEN RISE TO THE DIVIDEND INCOME DURING THE YEAR. IT IS THE DIRECTIO N TO THE AO TO TAKE INTO ACCOUNT ONLY THOSE INVESTMENTS WHICH HAVE GIVEN RIS E TO THE DIVIDEND INCOME DURING THE YEAR, WE ARE RELYING TO THE ORDER OF HON BLE KOLKATA TRIBUNAL A BENCH IN THE CASE OF REI AGRO LTD. ITA NO. 1331/KOL /2011 WHEREIN IT WAS HELD THAT : 8. IN RESPECT OF PROVISIONS OF RULE 8D((2)(III), WH ICH IS THE SUBJECT-MATTER OF THE APPEAL IN THE ASSESSEES HAND, A PERUSAL OF THE SAID PROVISION SHOWS THAT WHAT IS DISALLOWABLE UNDER RULE 8D(2)(II I) IS THE AMOUNT EQUAL TO PERCENTAGE OF THE AVERAGE VALUE OF INVESTMENT THE INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. THUS, UNDER SUB-CLAUSE (III), WHAT IS DISALLOWED IS PERCENTAG E OF THE NUMERATOR B IN RULE 8D(2)(II). AGAIN THIS IS TO BE CALCULATED I N THE SAME LINE AS MENTIONED EARLIER IN RESPECT OF NUMERATOR B IN RULE 8D(2)(II) OF THE ACT. ITA NO.589/KOL/2013 A.Y. 2009-10 ARUNA KUNDANANI V. ITO WD-30(1) KOL. PAGE 9 8.1 THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT-MA TTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SCT DION1 14A READ WITH RULE 8D. THE DISALLOWANCE UNDER SECTION 14A RE AD WITH RULE 8D IS TO BE IN RELATION TO THE INCOME WHICH DOES NOT FORM PA RT OF THE TOTAL INCOME AND THIS CAN BE DONE ONLY BY TAKING INTO CONSIDERAT ION THE INVESTMENT WHICH HAS GIVEN RISE TO THIS INCOME 3WHICH DOES NOT FORM PART OF THE TOTAL INCOME. UNDER THE CIRCUMSTANCES, THE COMPUTAT ION OF THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2) (III), WHICH IS ISSUE IN THE ASSESSEES APPEAL, IS RESTORED TO THE FILE O F THE AO FOR RE COMPUTATION IN LINE WITH THE DIRECTION GIVEN ABOVE. NO DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(I) AND (II) CAN BE MADE IN THIS CASE. IN TERMS OF ABOVE, WE RESTORE THIS FILE TO AO FOR F RESH ADJUDICATION AS PER LAW. HENCE THIS GROUND OF ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT 20/ 01/2016 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 20 / 0 1/201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ARUNA KUNDANANI, C/O D.J.SHAH & CO. KALY AN BHAVAN, 2, ELGIN ROAD, KOLK ATA 700 020 2. /RESPONDENT- ITO, WARD-30(1) AAYAKAR DAKSHIN, 2 GAR IAHAT ROAD, KOLKATA-68 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,