ASHOK HARILAL TANNA, KALYAN V. A.C.I.T. CIRCLE -3, KALYAN

ITA 6106/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7705 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 04-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Earning of tax free income; Condonation of delay
• Section: 14A

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN , J M & HONBLE SH. G. MANJUNATHA , A M ./ I.T.A. NO . 6106 /MUM/201 7 ( / ASSESSMENT YEAR: 2012 - 13 ) ASHOK HARILAL TANNA, 202, ARCHIES CO - OP HSG, SOC. LTD., OAK BAUG, NEW STATION ROAD, KALYAN - 421301 / VS. ACIT CIRCLE 3 , 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN, PIN - ./ ./ PAN NO. AA A C T1340B ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI JAYANT BHATT & SANJIV BRAHME , A R / RESPONDENTBY : SHRI SATISHCHANDRA RAJORE , DR / DATE OF HEARING : 16 .01 .201 9 / DATE OF PRONOUNCEMENT : 16.01.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 3 , NASIK (CAMP OFFICE THANE) DATED 14.06 .17 F OR AY 20 12 - 13 . 2 I.T.A. NO. 6106 /MUM/201 7 ASHOK HARILAL TANNA, 2. AT THE VERY OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE DRAWN OUR ATTENTION TOWARDS AFFIDAVIT DATED 04.10.17 WHICH RELATES TO CONDONATION OF DELAY IN FILING APPEAL BEFORE HONBLE ITAT. LD. AR SUBMITTED THAT THE PRESENT APPEAL COULD NOT BE FILED WITH IN TIME BECAUSE OF THE REASONS MENTIONED IN AFFIDAVIT AND THUS THERE WAS A DELAY OF 25 DAYS IN FILING THE PRESENT APPEAL. 3. ON THE OTHER HAND, LD. DR REQUESTED FOR DISMISSAL OF THE SAID APPLICATION. 4. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WHILE TAKING INTO CONSIDERATION THE AFFIDAVIT FOR SEEKING CONDONATION OF DELAY, WHEREBY THE ASSESSEE HAS MENTIONED THE REASONS IN DETAIL FOR NOT FILING THE APPEAL WITHIN LIMITATION, THEREFORE KEEPING IN VIEW THE REASONS MENTIONED IN THE AFFIDAVIT AND FOLLO WING THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COURT IN CASE OF LAND ACQUISITION COLLECTOR VRS. MSTKITZI, AIR 1987 S.C. 1353 /(1987) 167 ITR 471 (SC), WE CONDONE THE DELAY OF 25 DAYS IN FILING THE APPEAL. RESULTANTLY, THIS APPLICATION IS ALLOWED AND APPE AL IS ADMITTED TO BE HEARD ON MERITS. 3 I.T.A. NO. 6106 /MUM/201 7 ASHOK HARILAL TANNA, 5 . THE SOLITARY GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT (A) IN CONFIRMING THE ORDER OF AO FOR ADDITION OF RS. 14,50,392/ - U/S 14A OF THE I.T. ACT. 6 . LD. AR APPEARING ON BEHALF OF THE ASSES SEE SUBMITTED BEFORE US THAT THIS GROUND IS COVERED BY THE ORDER OF HONBLE ITAT IN ITA NO. 2253/MUM/15 FOR AY 2011 - 12 IN ASSESSEES OWN CASE , WHEREIN THE IDENTICAL GROUND RA ISED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED ON MERITS. 7 . ON TH E OTHER HAND, LD. DR FAIRLY AGREED TO THE CONTENTION OF LD. AR THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE. 8 . WE HAVE HEARD BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF HONBLE ITAT IN ITA NO. 2253/MUM/15 FOR AY 2011 - 12 IN ASSESSEES OWN CASE . THE OPERATIVE PORTION OF THE ORDER OF HONBLE ITAT PASSED 4 I.T.A. NO. 6106 /MUM/201 7 ASHOK HARILAL TANNA, IN I T A NO. CONTAINED IN PARA NO. 3 TO 6 , WHICH IS REPRODUCED BELOW: - 3. THE SHORT FACTS OF THE CASE ARE AS UNDER: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAD SHOWN INVESTMENT IN SHARES AND CERTAIN OTHER ASSETS, WHEREFROM HE HAD EARNED DIVIDEND INCOME O F RS.8,98,542/ - . THE ASSESSEE HAS ALSO SHOWN INVESTMENT IN VARIOUS FIRMS AND EARNED INTEREST AND REMUNERATION INCOME. IN ADDITION TO ABOVE, THE ASSESSEE HAS SHOWN SHARE OF PROFIT AMOUNTING TO RS.1,19,42,886/ - FROM THESE FIRMS, WHICH IS EXEMPT U/S 10(2A) OF THE INCOME TAX ACT. IN THE BALANCE - SHEET, THE ASSESSEE HAS ALSO SHOWN UNSECURED LOAN AMOUNTING TO RS.2,73,24,307/ - AND SECURED LOAN OF RS.40,24,068/ - FROM ICICI AND BHARAT CO - OPERATIVE BANK. IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAD DEBITED AN INTERE ST OF RS.18,36,342/ - . SINCE THE ASSESSEE HAD NOT DISALLOWED ANY EXPENDITURE, AS PER PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, IN RESPECT OF TAX FREE DIVIDEND INCOME OF RS.8,98,542/ - , THEREFORE, THE ASSESSING OFFICER HAS DETERMINED THE DISALLOWABLE E XPENDITURE UNDER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1961, AS UNDER: - PARTICULARS AMOUNT (RS.) AMOUNT (RS.) I. DIRECT EXPENDITURE RELATING TO EXEMPT INCOME D - MART CHARGES NIL II. AMOUNT COMPUTED AS PER RULE 8D (2)(II) [A X B /C] 7,84,137 5 I.T.A. NO. 6106 /MUM/201 7 ASHOK HARILAL TANNA, A= INTEREST EXPENSES 18,36,342 B= AVERAGE INVESTMENT 4,25,25,168 C= AVERAGE TOTAL ASSET 9,95,88,185 III. 0.5% OF AVERAGE INVESTMENT (0.5% * RS.4,25,25,168/ - ) 2,12,626 TOTAL DISALLOWANCES AS PER RULE 8D (I+II+III) RS.9 ,96,763/ - MATTER CARRIED TO CIT(A) AND CIT(A) HAS UPHELD THE ACTION OF THE ASSESSEE. 4. DURING THE COURSE OF HEARING THE LD. AR FIRSTLY CONTENDED BEFORE US THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK 366 ITR 505 (BOM) WHEREIN IT IS HELD THAT WHEN THE HAS OWN FUND AND OTHER NON - INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN TAX FREE SECURITIES AND WHEN THE ASSESSEES CAPITAL PROFIT SURPLUS AND CURRENT DEPOSIT WERE HIGHER THAN INVE STMENT IN TAX FREE SECURITIES IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THERE WAS A QUERY FROM THE BENCH WHETHER THE ASSESSEE IS IN FINANCIAL BUSINESS OR NOT. THE LD. AR SUBMITTED THAT THE ASSESSEE IS NOT IN FINANCIAL BUSINESS BUT THIS JUDGMENT IS APPLICABLE. 5. IN RESPONSE TO THIS QUERY THE LD. DR SUBMITTED BEFORE US THAT HONBLE PUNJAB AND HARYANA HIGH COURT IN 53 TAXMANN.COM 297 (PUNJAB & HARYANA) HAS CONSIDERED THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITY AND AFTER 6 I.T.A. NO. 6106 /MUM/201 7 ASHOK HARILAL TANNA, CONSIDERING THE JUDGMENT HAS HELD THAT AFTER EXAMINING THE BALANCE SHEET OF THE ASSESSEE, IT SHALL BE PRESUMED THAT THE FUNDS AVAILABLE WITH THE ASSESSEE WERE SUFFICIE NT TO MEET THE INVESTMENTS OUT OF ITS OWN FUNDS AND THAT BORROWED FUNDS WERE NOT UTILIZED FOR INVESTMENT. THEREFORE, INTEREST, IF ANY, PAID ON BORROWED FUNDS CANNOT BE DISALLOWED IN TERMS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. DURING THE COURSE OF HEARING THE LD. AR SUBMITTED THAT LET THIS ISSUE GO BACK TO THE FILE OF A.O. AND THE ASSESSEE WILL BE ABLE TO PROVE THAT THE ASSESSEE HAS NOT PAID ANY INTEREST ON INVESTMENT MADE. THEREFORE, MATTER MAY BE RESTORED TO THE A.O. TO RE - CA LCULATE THE SAME. . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE HAD UTILIZED MIXED FUND ON WHICH THE INTEREST HAS BEEN PAID ON BORROWED FUND WAS RELATABLE TO INTEREST ON INV ESTMENT MADE IN TAX FREE FUNDS. THIS MATTER REQUIRES RE - EXAMINATION BY THE A.O. THEREFORE, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE A.O. TO RE - EXAMINE THE SAME KEEPING IN VIEW THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HDFC BANK (SUPRA) AND THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT (SUPRA). THE ASSESSING OFFICER IS DIRECTED TO 7 I.T.A. NO. 6106 /MUM/201 7 ASHOK HARILAL TANNA, DECIDE AS PER LAW KEEPING IN VIEW OF THE DECISION OF ABOVE HIGH COURTS AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. 9 . AFTER HAVING GON E THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND HONBLE ITAT AS MENTIONED ABOVE IN ASSESSEES OWN CASE , W E FIND THAT THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE HONBLE ITAT IN ITA NO. 225 3/MUM/15 FOR AY 2011 - 12 IN ASSESSEES OWN CASE . T HEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF HONBLE ITAT AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY , WE APPLY THE SAME FINDINGS IN THE PRESENT CASE WHICH ARE APPLICABLE MUTAT IS MUTANDIS IN THE PRESENT CASE. 10 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS A LLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JAN, 2019. SD/ - SD/ - ( G. MANJUNATHA ) ( SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 16 . 01 .201 9 SR.PS . DHANANJAY 8 I.T.A. NO. 6106 /MUM/201 7 ASHOK HARILAL TANNA, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ ASSTT.REGISTRAR) , / ITAT, MUMBAI