VIVEK MEHROTRA, MUMBAI V. JT CIT 21(2), MUMBAI

ITA 6383/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3840 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 12-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 16-10-2014
• Court: TRIBUNAL
• Assessee Lawyers: RAJIV MEHROTRA
• Keywords: Business income; Transactions in derivatives; Earning of tax free income; Question of law
• Section: 143(3); 14A

Judgement Text

, , F, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.6383/MUM/2014 ASSESSMENT YEAR: 2010-11 VI VEK MEHROTRA, 7 PLOT NO.231, SHRI NILAYAM BLDG., SION(E) MUMBAI-400022 / VS. JT CIT 21(2), C-10 BLDG, 5 TH FLOOR, PRATYAKSHAKAR BHAVAN, BKC, BANDRA(E) MUMBAI-51 ( APPELLANT ) (RESPONDENT ) P.A. NO. AAHPM4127B ITA NO.6705/MUM/2014 ASSESSMENT YEAR: 2010-11 JT CIT 21(2), C-10 BLDG, 5 TH FLOOR, PRATYAKSHAKAR BHAVAN, BKC, BANDRA(E) MUMBAI-51 / VS. VIVEK MEHROTRA, 7 PLOT NO.231, SHRI NILAYAM BLDG., SION(E) MUMBAI-400022 (REVENUE ) (RESPONDENT ) P.A. NO. AAHPM4127B ASSESSEE BY SHRI NITESH JOSHI & RAJIV MEHROTRA (AR) REVENUE BY SHRI RAVINDER SINDHU (DR) / DATE OF HEARING: 13/07/2016 / DATE OF ORDER: 10/08/2016 VIVEK MEHROTRA 2 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND DEPARTMENT AGAINST ORDER OF LD. COMMISSIONER OF INC OME TAX(APPEALS), MUMBAI, {(IN SHORT CIT(A)}, DATED 2 8.08.2014 PASSED AGAINST ASSESSMENT ORDER U/S 143(3) OF THE A CT, DATED 28.03.2013 FOR A.Y. 2010-11. FIRST WE SHALL TAKE UP APPEAL OF THE ASSESSEE IN IT A NO.6383/MUM/2014 FOR THE A.Y.2010-11 ON THE FOLLOWI NG GROUNDS: 1.THE LD.CIT(A) ERRED IN LAW AS WELL AS ON FACTS I N UPHOLDING THE ADDITION MADE BY THE LD. A.O. U/S 14A OF THE I.T. ACT IN RESPECT OF SHARES HELD BY THE APPEL LANT AS STOCK IN TRADE. 2. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN NOT TAKING COGNIZANCE OF THE FACT THAT THE PROVISIONS O F SECTION 14A READ WITH RULE 8D WERE NOT APPLICABLE TO SHARES HELD AS STOCK IN TRADE AS THE GAIN FROM TRADING IN THE S AID SHARES WAS TAXABLE AS BUSINESS INCOME AND THE DIVIDEND INCOME, RECEIVED IN RESPECT OF SOME SHARES WAS ONLY INCIDENTAL IN NATURE. 3. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ADDITION IN RESPECT OF SHARES HELD AS STOCK IN TRADE WITHOUT APPRECIATING THE FACT THAT THE PRO VISIONS OF SECTION 14A R.W. RULE 8D APPLY IN CASE OF 'INVESTME NTS' YIELDING EXEMPT INCOME AND THE SAID RULE DOES NOT C OVER 'STOCK IN TRADE' WHICH YIELDS TAXABLE AS WELL AS TA X FREE INCOME. 4.THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS I N NOT APPRECIATING THAT THE ENTIRE INTEREST EXPENSE INCUR RED BY THE APPELLANT HAD A DIRECT NEXUS WITH THE SALE AND PURCHASE ACTIVITY OF SHARES AND SECURITIES AND NO P ART OF THE SAME WAS ATTRIBUTABLE TOWARDS EARNING OF EXEMPT DIVIDEND INCOME. VIVEK MEHROTRA 3 5. THE LD. CIT(A) ERRED IN LAW IN NOT TALKING COGNI ZANCE OF THE FACT THAT THE HONBLE ITAT, MUMBAI, IN THE APPE LLANTS OWN CASE FOR A.Y.2008-09 HAS DELETED ADDITION MADE U/S 14A IN RESPECT OF SHARES HELD AS STOCK IN TRADE ON SIMILAR FACTS. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI NITESH JOSHI & SHRI RAJIV MEHROTRA, AUTHORISED REPRESENTATIVES (ARS) ON BEHALF OF THE ASSESSEE AND BY SHRI RAVINDER SINDHU, DEPARTMENTAL REPRESENTATIVE (DR) O N BEHALF OF THE REVENUE. 3. THE BRIEF BACKGROUND AND FACTS CULLED OUT FROM THE ORDER OF THE AO ARE THAT ASSESSEE IS AN INDIVIDUAL AND DURIN G THE YEAR ASSESSEE WAS ENGAGED IN THE BUSINESS OF SHARE TRADI NG AND IS ALSO A PARTNER IN THE FIRM M/S. RASHI INVESTMENTS. HE ALSO HAS A PROPRIETORSHIP FIRM IN THE NAME OF M/S. KHATTRI A ROMAS. THE AO NOTED THAT THE ASSESSEE HAD EARNED A DIVIDEND IN COME OF RS.5,51,68,846/- ON SHARES AND INTEREST FROM RELIEF BONDS OF RS.3,62,55,993/- WHICH WAS CLAIMED EXEMPT U/S 10(34 ) OF THE ACT. THUS, AO ASKED THE ASSESSEE FOR MAKING DISALLO WANCE U/S 14A R.W. RULE 8D OUT OF THE CORRESPONDING EXPENSES. IN RESPONSE, THE ASSESSEE STATED THAT IT HAD ALREADY D ISALLOWED THE VOLUNTARILY A SUM OF RS.25,11,095/- IN ITS RETU RN U/S 14A OF THE ACT. BUT, THE AO OBSERVED THAT HE WAS SATISF IED THAT THE ASSESSEE'S CLAIM OF ONLY RS. 25,11,095/- AS EXPENSE INCURRED TO EARN INCOMES OF RS.5,51,68,846/- ON SHARES AND INTEREST FROM RELIEF BONDS OF RS.3,62,55,993/- WAS INCORRECT. HE FURTHER OBSERVED THAT THE INTERLACING OF ACTIVITIES CLEARLY INDICATED PROXIMATE RELATIONSHIP BETWEEN INCIDENCE OF EXPENDI TURE AND CONSEQUENTIAL EARNING OF EXEMPT INCOME, THAT LIVE N EXUS WAS VIVEK MEHROTRA 4 OBVIOUS GIVEN THAT ASSESSEE WAS HAVING F&O BUSINESS AND WAS INVESTING IN SHARES AT A VERY HIGH VOLUME. IT WAS ALSO OBSERVED THAT THE CLAIM OF THE ASSESSEE THAT H E HAD NO EXPERTISE AND TIME TO DO BUSINESS IN SHARES WAS ERR ONEOUS AND COUNTERPRODUCTIVE AS HE DERIVED INCOME FROM SHA RES IN F & O ACTIVITY. THEREFORE THE IMPLICIT NOTION OF APPO RTIONMENT AND ATTRIBUTION AS PROVIDED IN SECTION 14A R.W.R 8D WAS REQUIRED TO BE INVOKED, AS CLAIM OF THE ASSESSEE WA S ERRONEOUS AND INCORRECT. THE AO FURTHER OBSERVED TH AT THE ASSESSEE'S ACT IN NOT DEBITING ANY EXPENSE WAS ONLY AN ATTEMPT IN TREATING THE SAME AS INVESTMENT ACTIVITY AND ENJOYING THE PRIVILEGES OF EXEMPTION. ACCORDINGLY, DEDUCTION UNDER RULE 8D(2)(III) WAS COMPUTED, AS THE ASSESSEE HAD INCORRECTLY NOT CLAIMED ANY EXPENSES AND ALSO HAD C OMPOSITE ACTIVITY OF INVESTMENT AND BUSINESS. THE AO FURTHER DEALT WITH THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT I N THE WORKING GIVEN BY THE ASSESSEE U/S 14A OF THE ACT AT RS.25,11,095/- WAS NOT DETERMINED AS PER CLAUSE (I II) OF RULE 8D(2) OF THE RULES. THE AO ACCORDINGLY WORKED OUT THE DISALLOWANCE AS UNDER: TOTAL INTEREST PAID RS.5,35,93,045/- A OPENING INVESTMENT RS.34,38,86,800 CLOSING INVESTMENT RS.23,13,46,966 TOTAL RS.57,52,33,766 AVERAGE INVESTMENT= 57,52,33,766/2 RS.28,76 , 16,883 - B OPENING ASSETS RS.215,62,68,663 CLOSING ASSETS RS.344,35,03,488 TOTAL RS. 559,97,72,151 AVERAGE ASSETS=559,97,72,151/2= RS.279,98,86,075 C VIVEK MEHROTRA 5 WORKING OF DISALLOWANCE U/S. 14A OF THE INCOME TAX ACT, 1961 A X B / C 5,35,93,045 X 28,76,16,883 / 279,98,86,075 = 55,05, 318 DIRECT EXPENDITURE NIL INTEREST X AVERAGE INVESTMENT/ AVERAGE TOTAL ASSETS RS.55,05,318 0.5% OF AVERAGE INVESTMENT OF RS.28,76, 16,883 RS. 14,38,084 TOTAL DISALLOWANCE U/S. 14A AS PER I.T. ACT RS.69,43,402 ACCORDINGLY, THE AO FURTHER ADDED AN AMOUNT OF RS.44,32,307/-. (69,43,402 - 25,11,095) U/S 14A OF THE ACT. 3.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) AND CONTESTED THE DISALLOWANCE U/S 14A. THE ASSESSEE MADE DETAILED SUBMISSIONS BEFORE LD. CIT(A ) IN SUPPORT OF HIS CLAIM AND ALSO RELIED UPON THE DECIS IONS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS.2008-09 AN D 2009-10 WHEREIN THE DISALLOWANCE 14A WAS DELETED IN TOTAL B Y THE TRIBUNAL. BUT, LD. CIT(A) GIVE PART RELIEF TO THE A SSESSEE BY HOLDING THAT ASSESSEE WAS MAINTAINING TWO PORTFOLIO S I.E. INVESTMENT AND BUSINESS. IT WAS HELD BY THE LD. CIT(A) THAT WITH REGARD TO INVESTMENT PORTFOLIO THE ASSESSEE HA D INCURRED A TOTAL EXPENSES OF RS.2,22,867/- TOWARDS RATES AND TAXES AND STT, WHICH WERE ALREADY DISALLOWED AND THEREFORE, N O FURTHER DISALLOWANCE WAS REQUIRED TO BE MADE. BUT, WITH REG ARD TO THE BUSINESS PORTFOLIO THE DISALLOWANCE WAS REQUIRED TO BE MADE THE CLAUSES (II) AND (III) OF RULE 8D(2) AND DIRECT ED THE AO TO WORK OUT THE DISALLOWANCE ACCORDINGLY. VIVEK MEHROTRA 6 3.3. BEING AGGRIEVED WITH THE SAID ORDER, THE ASSESSEE CAME UP IN APPEAL BEFORE THE TRIBUNAL FOR THE DISALLOWANCE SUSTAINED BY LD. CIT(A) ON ACCOUNT OF BUSINESS PORTFOLIO AND R EVENUE CAME UP IN APPEAL BEFORE THE TRIBUNAL FOR THE DISALLOWAN CE DELETED BY THE LD. CIT(A) ON ACCOUNT OF INVESTMENT PORTFOL IO. DURING THE COURSE OF HEARING BEFORE US, IT HAS BEEN SUBMIT TED BY THE LD. COUNSEL THAT DISALLOWANCE U/S 14A WAS DELETED I N TOTAL IN VIEW BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y S. 2008-09 & 2009-10 AND ALSO RELIED UPON THE JUDGMENTS OF HON BLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE TRIBUN AL IN ITS ORDERS. HE VEHEMENTLY SUBMITTED THAT EVEN SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS CONTRARY TO L AW AND SINCE NO TAX CAN BE COLLECTED WITHOUT AUTHORITY OF LAW, THE DISALLOWANCE U/S 14A SHOULD BE DELETED IN TOTAL IN VIEW OF CORRECT LEGAL POSITION AS HAS BEEN NARRATED BY THE JURISDICTIONAL HIGH COURT. 3.4. PER CONTRA, LD. CIT-DR RELIED UPON THE ORDERS OF T HE LOWER AUTHORITIES AND SUBMITTED THAT DISALLOWANCE MADE SU O MOTO BY THE ASSESSEE SHOULD BE RETAINED AND BALANCE AMOU NT MAY BE DELETED. 3.5. WE HAVE GONE THROUGH THE FACTS OF THIS CASE, ORDER S OF THE LOWER AUTHORITIES, ORDERS PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ORDERS AS WELL AS SUBMISSIONS M ADE BY BOTH THE PARTIES BEFORE US. IT IS NOTED THAT THE AD MITTED FACTS ON RECORD ARE THAT THE ASSESSEE HAS BEEN MAINTAININ G TWO PORTFOLIOS SEPARATELY I.E. INVESTMENT PORTFOLIO A ND BUSINESS PORTFOLIO. DETAILED ACCOUNTS IN THIS REGARD HAVE B EEN FURNISHED BEFORE THE LOWER AUTHORITIES AND THERE IS NO DISPUT E ON THAT. VIVEK MEHROTRA 7 UNDER THESE CIRCUMSTANCES, BEFORE DISCUSSING THE LE GAL POSITION WITH REGARD TO DISALLOWANCE U/S 14A, WE FI ND IT APPROPRIATE TO REFER TO THE DECISIONS OF THE TRIBUN AL IN ASSESSEES OWN CASE FOR A.YS.2008-09 & 2009-10. IT IS NOTED THAT IN A.Y. 2008-09 THE TRIBUNAL VIDE ITS ORDER DA TED 11.01.2013, IN ITA NOS.6332 & 6563/MUM/2011 HELD TH AT NO DISALLOWANCE WOULD BE MADE IN THE CASE OF THE ASSES SEE ON INVESTMENT PORTFOLIO AS WELL AS BUSINESS PORTFOL IO. THE RELEVANT OBSERVATIONS GIVEN IN THE ORDER ARE REPROD UCED BELOW: WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIV AL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IN THESE APPEALS IS REGARDING DISALLOWANCE OF EXPENSES UNDER SECTION 14A IN RELATION TO EXEMPT INCOME. THE ASSESSEE HAS RECE IVED EXEMPT INCOME IN THE FORM OF DIVIDEND FROM PERSONAL INVESTMENT AS WELL AS DIVIDEND INCOME FROM TRADING IN SHARES. IT ALSO RECEIVED TAX FREE INTEREST FROM REL IEF BONDS. THE ASSESSEE HAS CLAIMED THAT IT HAD MADE SEPARATE ACCOUNTS INCLUDING SEPARATE BANK ACCOUNTS AND BALAN CE SHEETS FOR PERSONAL INVESTMENTS AND TRADING ACTIVIT IES IN WHICH EXPENSES RELATING TO THESE TWO ACTIVITIES HAV E BEEN SHOWN SEPARATELY. CIT(A) HAS GIVEN A CLEAR FINDING THAT THE ASSESSEE HAD MADE SEPARATE ACCOUNTS AND BALANCE SHE ETS FOR THE TWO ACTIVITIES. NOTHING HAS BEEN PRODUCED B EFORE US TO CONTROVERT THE FINDING OF THE CIT(A). THEREFORE, THE CLAIM OF THE ASSESSEE THAT SEPARATE ACCOUNTS INCLUDING BA NK ACCOUNTS AND BALANCE SHEETS HAD BEEN MAINTAINED FOR THE TWO ACTIVITIES HAVE TO BE ACCEPTED. WITH REGARD TO PERSONAL INVESTMENT FOR WHICH SEPARATE ACCOUNT HAS BEEN MAINTAINED CIT(A) HAS GIVEN A CLEAR FINDING THAT INVESTMENTS HAD BEEN MADE FROM OWN FUNDS. THE INVESTMENTS IN RBI RELIEF BONDS AND LIC HAD BEEN MA DE IN EARLIER YEARS AND SINCE THE ASSESSEE HAVING VAST EXPERIENCE IN THESE MATTERS WAS PERSONALLY HANDLING THESE INVESTMENTS, THERE WERE NO EXPENSES REQUIRED. SIMIL ARLY THE SHARES WHICH WERE OF UNLISTED GROUP COMPANIES H ELD FOR THE PURPOSE OF RETAINING CONTROL OVER THESE COM PANIES, DID NOT REQUIRE ANY DAY TO DAY EXPENSES. CIT(A), TH EREFORE, HAS GIVEN A CLEAR FINDING THAT NO EXPENSES HAD BEEN VIVEK MEHROTRA 8 INCURRED IN RELATION TO PERSONAL INVESTMENTS AND TH ESE FACTUAL FINDINGS HAVE NOT BEEN CONTROVERTED BEFORE US BY PRODUCING ANY MATERIAL. THEREFORE, ORDER OF CIT(A) IN RELATION TO DELETING DISALLOWANCE OF EXPENSES IN RE LATION TO PERSONAL INVESTMENT IS REASONABLE AND UPHELD. 5.1 CIT(A) HAS HOWEVER DISALLOWED EXPENSES RELATING TO TRADING ACTIVITY AS PER RULE 8D. NO DOUBT, IT IS TR UE THAT RULE 8D WAS APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR. HOWEVER, THE ISSUE IS WHETHER THE DISALLOWANCE OF A NY EXPENSES CAN BE MADE UNDER SECTION 14A IN RELATION TO TRADING IN SHARES. THE DEPARTMENT HAS PLACED RELIAN CE ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA), IN WHICH IT HAS BEEN HELD THAT SECTION 14A WOULD APPLY EVEN TO THE DIVIDEND INCOME FOR TRADING IN SHARES. HOWEV ER, SUBSEQUENTLY THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CCI LTD. VS JCIT (SUPRA), HAVE, IN RELATION TO TRADING SHARES HELD THAT THE ASSESSEE HAD NOT RETAI NED SHARES WITH THE INTENTION OF EARNING DIVIDEND INCOM E WHICH WAS ONLY INCIDENTAL TO THE SHARES REMAINED UN SOLD BY THE ASSESSEE. THE HIGH COURT, THEREFORE, HELD TH AT NO DISALLOWANCE OF EXPENSES WAS REQUIRED IN RELATION T O DIVIDEND FROM TRADING SHARES. RECENTLY, MUMBAI BENC H OF THE TRIBUNAL IN THE CASE OF DCIT VS. M/S. INDIA ADV ANTAGE SECURITIES (SUPRA), HAVE HELD THAT IN VIEW OF THE J UDGMENT OF HON'BLE HIGH COURT OF KARNATAKA IN CASE OF CCI L TD. VS. JCIT (SUPRA), THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT . LTD. COULD NOT BE FOLLOWED AND NO DISALLOWANCE COULD BE MADE OF EXPENSES IN RELATION TO DIVIDEND RECEIVED FROM T RADING SHARES. IN VIEW OF THIS POSITION THE ORDER OF CIT(A ) IN RELATION TO DISALLOWANCE IN RESPECT OF TRADING SHAR ES CANNOT BE UPHELD. WE, THEREFORE, SET ASIDE THE ORDE R OF CIT(A) AND DELETED THE DISALLOWANCE UPHELD BY HIM I N RELATION TO TRADING IN SHARES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AND THAT BY THE REVENUE IS DISMISSED. 3.6 . IT IS FURTHER NOTED THAT IDENTICAL ISSUE CAME UP BEFORE THE TRIBUNAL IN A.Y. 2009-10. THE AO DID NOT MAKE ANY DISALLOWANCE ON ACCOUNT OF INVESTMENT PORTFOLIO. THE DISALLOWANCE WAS MADE BY THE AO U/S 14A ON ACCOUNT OF VIVEK MEHROTRA 9 BUSINESS PORTFOLIO FOR SHARES HELD IN STOCK-IN-TR ADE WHICH WAS DELETED BY THE LD. CIT(A). THE REVENUE CARRIED THE MATTER BEFORE THE TRIBUNAL AND TRIBUNAL UPHELD THE ORDER O F LD. CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE BY F OLLOWING ORDER OF A.Y. 2008-09 AND ALSO THE JUDGMENT OF HON BLE BOMBAY HIGH COURT IN THE CASE OF INDIA ADVANTAGE SE CURITIES LTD. 380 ITR 471 (BOM); RELEVANT PART OF THE ORDER IS REPRODUCED BELOW FOR READY REFERENCE: 10. WE HAVE HEARD THE LD. D.R. WE HAVE OBSERVED TH AT THE MUMBAI TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 6332/MUM/2011 VIDE ORDERS DATED 11-01-2013 SET ASIDE THE ORDER OF CIT(A) AND DELETED THE DISALLOWANCE UPHELD BY THE CIT(A) I N RELATION TO TRADING IN SHARE. WE HAVE ALSO NOTED TH AT IN THE RECENT JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF HDFC BANK LTD. V. DCIT VIDE WRIT PETITION N O. 1753 OF 2016 DATED FEBRUARY, 25, 2016 [2016] 67 TAXMANN.COM 42 (BOMBAY) HAS APPROVED THE PROPOSITIO N THAT NO DISALLOWANCE OF EXPENDITURE CAN BE MADE U/S 14A OF THE ACT WITH RESPECT TO THE SHARES HELD BY TAX P AYERS AS STOCK-INTRADE WHEREBY THE DECISION OF THE MUMBAI TR IBUNAL IN INDIA ADVANTAGE SECURITIES LIMITED (2013) TAXPUB(DT)2301(MUM-TRIB.) WAS CONFIRMED BY HONBLE BOMBAY HIGH COURT IN ITA NO. 1131/31 DECIDED ON 31- 04- 2014 ((2016) 380 ITR 0471 (BOM.) ) WHEREBY HONBLE BOMBAY HIGH COURT HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISE FROM THE DECISION OF MUMBAI TRIBUNAL IN T HE CASE OF INDIA ADVANTAGE SECURITIES PRIVATE LIMITED. RESP ECTFULLY FOLLOWING THE ABOVE BINDING JUDICIAL PRECEDENTS OF HONBLE BOMBAY HIGH COURT IN INDIA ADVANTAGE SECURITIES PRI VATE LIMITED AND HDFC BANK LIMITED (SUPRA) AND DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CCI LIMITED(SUPRA) , WE DISMISS THE APPEAL FILED BY THE REVENUE. WE ORDER ACCORDINGLY. 3.7. DURING THE COURSE OF HEARING BEFORE US, BOTH THE P ARTIES AGREED THAT FACTS ARE SAME IN THIS YEAR AS WELL AND THEREFORE, THE ORDERS OF THE EARLIER YEARS NEED TO BE FOLLOWED . THE ONLY VIVEK MEHROTRA 10 DISTINCTION MADE OUT BY THE LD. DR WAS THAT IN THE YEAR BEFORE US THE ASSESSEE HAD MADE VOLUNTARY DISALLOWANCE OF RS.25,11,095/- ON ACCOUNT OF PROPORTIONATE EXPENSES . 3.8. PER CONTRA, LD. COUNSEL VEHEMENTLY OPPOSED THE ARGUMENTS OF LD. DR BY SUBMITTED THAT ADDITIONS AND DISALLOWANCE CAN BE MADE ONLY IN ACCORDANCE WITH LA W. THE TAXABLE INCOME MUST BE COMPUTED IN ACCORDANCE WIT H THE PROVISIONS OF THE ACT ONLY AND THEREFORE, WITH A VI EW TO BRING THE RETURN OF INCOME AND COMPUTATION OF TAXABLE INC OME FILED BY THE ASSESSEE IN LINE WITH THE ORDERS OF THE TRIB UNAL OF EARLIER YEARS AND LEGAL POSITION AS CLARIFIED BY HO NBLE BOMBAY HIGH COURT AND HONBLE KARNATAKA HIGH COURT, THE DISALLOWANCE U/S 14A SHOULD BE DELETED IN FULL. 3.9. WE HAVE CONSIDERED THE SUBMISSIONS MADE BEFORE US ON THIS ASPECT ALSO. THE SITUATION THAT HAS EMERGED BE FORE US IS THAT IN VIEW OF THE DECISION OF THE TRIBUNAL OF EAR LIER YEARS AS WELL AS JUDGMENTS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INDIA ADVANTAGE SECURITIES LTD. (SUPRA) AND HDFC BANK LTD. V. DCIT AND JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CCI LIMITED (SUPRA) , THE DISALLOWANCE U/S 14A SHOULD BE DELETED FOR BOTH THE PORTFOLIOS I.E. INV ESTMENT AS WELL AS BUSINESS. THE ONLY HITCH WITH REGARD TO D ISALLOWANCE MADE UNDER BUSINESS PORTFOLIO IS THAT ASSESSEE HA D HIMSELF MADE A VOLUNTARY DISALLOWANCE. 3.10 . WE HAVE CONSIDERED THIS ASPECT IN THE GIVEN FACTS CAREFULLY. IT IS WELL SETTLED POSITION OF LAW THAT TAXABLE INCOME OF AN ASSESSEE HAS TO BE COMPUTED STRICTLY IN ACCOR DANCE WITH THE PROVISIONS OF INCOME TAX ACT, 1961 AS EXPLAINED BY THE VIVEK MEHROTRA 11 COURTS FROM TIME TO TIME. THUS, DISALLOWANCE/ADDITI ONS IF ANY CAN BE MADE ONLY IN ACCORDANCE WITH LAW. NEITHER AN Y ITEM OF RECEIPTS CAN BE BROUGHT TO TAX NOR CAN ANY EXPENDIT URE BE ALLOWED/DISALLOWED, MERELY ON THE BASIS OF CONSENT OR ACQUIESCENCE OR WAIVER OF ANY PARTY OR OTHERWISE. I T COULD BE DONE ONLY IN ACCORDANCE WITH THE PROVISIONS OF LAW. IN THIS REGARD, WE CAN ALSO TAKE SUPPORT FROM THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARAT GENERAL REINSURANCE CO. LTD. 81 ITR 303 WHEREIN IT WAS HELD THAT MERELY BECAUSE AN ASSESSEE HAS RETURNED A PARTICULA R INCOME FOR A PARTICULAR YEAR, THE ITO DOES NOT GET JURISDI CTION TO ASSESSEE THE SAME IF IN FACT THAT INCOME DID NOT BE LONG TO THE ASSESSEE IN THAT ASSESSMENT YEAR. IT WAS HELD IN TH E SAID CASE THAT AN ASSESSEE CAN SUBSEQUENTLY RESILE FROM ITS R ETURN IF IT IS FOUND BY THE ASSESSEE THAT RETURN FILED WAS NOT IN ACCORDANCE WITH LAW. IT IS WELL ACCEPTED POSITION THAT PRINCIPLE OF ESTOPPEL HAS NO APPLICATION UNDER THE INCOME TAX PROCEEDINGS . WE ALSO RELY UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SANCHIT SOFTWARE AND SOLUTIONS PVT. LTD. V. CIT 25 TAXMANN.COM 123 (BOM) WHEREIN IT WAS HELD THAT INCOME TAX DEPARTMENT CANNOT TAKE ADVANTAGE OF MISTAKE OF THE ASSESSEE. WE ARE ALSO REMINDED OF THE CIRCULAR ISSUED BY THE CENTRAL BOARD OF REVENUE NO.14 DATED 11.04.1955 WHEREIN IT WAS INSTRUCTED TO THE AOS THAT NO UNDUE ADVANTAGE SHOUL D BE TAKEN OF THE IGNORANCE OF THE ASSESSEE AND TAXABLE INCOME AND TAX PAYABLE THEREON SHOULD BE COMPUTED FAIRLY AND I N ACCORDANCE WITH LAW. THE CIRCULAR HAS BEEN TAKEN NO TE OF BY MANY COURTS IN THEIR JUDGMENTS WHILE DECIDING THE I DENTICAL VIVEK MEHROTRA 12 ISSUES WHEREIN TAXPAYERS HAVE PAID MORE TAX THAN AC TUALLY DUE AS PER LAW. IN THIS REGARD, WE SHALL ALSO LIKE TO MAKE A MENTION OF ARTICLE 265 OF CONSTITUTION OF INDIA WHICH SAYS THAT NO TAX CAN BE COLLECTED EXCEPT BY THE AUTHORI TY OF LAW. THUS, IN THE GIVEN FACTS OF THE CASE BEFORE US AND THE AFORESAID LEGAL POSITION AND WE FIND THAT THE DISALLOWANCE MA DE BY THE AO U/S 14A ON ACCOUNT OF BUSINESS PORTFOLIO DESER VES TO BE DELETED IN TOTAL AND THEREFORE, WE DIRECT THE AO TO GIVE RELIEF ACCORDINGLY. GROUNDS RAISED BY THE ASSESSEE ARE ALL OWED. 3.11. AS A RESULT APPEAL OF THE ASSESSEE IS ALLOWED. NOW, WE SHALL TAKE UP REVENUES APPEAL IN ITA NO. 6705/MUM2014: 4. THE REVENUE IS AGGRIEVED WITH THE ACTION OF LD. CI T(A) IN DELETING THE DISALLOWANCE ON ACCOUNT OF INVESTMENT PORTFOLIO HELD BY THE ASSESSEE. IT IS NOTED THAT THIS ISSUE H AS ALREADY BEEN DISCUSSED BY US IN EARLIER PART OF OUR ORDER W HEREIN IT WAS NOTED THAT IN VIEW OF THE DECISIONS OF TRIBUNAL OF EARLIER YEARS, THE IMPUGNED DISALLOWANCE DESERVES TO BE DEL ETED. IT IS NOTED THAT THE TOTAL EXPENSES OF RS.2,22,867/- TOWA RDS RATES AND TAXES AND STT ONLY NEEDS TO BE DISALLOWED AS HA S BEEN HELD BY THE LD. CIT(A) ALSO. WE FIND THE ORDER OF T HE LD. CIT(A) TO BE IN ACCORDANCE WITH LAW AS WELL AS IN LINE WIT H THE DECISIONS OF THE TRIBUNAL OF EARLIER YEARS RENDERED IN ASSESSEES OWN CASE. NO DISTINCTION HAS BEEN MADE O N FACTS OR LEGAL POSITION. THUS, ISSUE STANDS COVERED WITH THE ORDER OF THE TRIBUNAL OF EARLIER YEARS. THUS, IN VIEW OF FACTS D ISCUSSED BY US IN EARLIER PART OF ORDER, WE DO NOT FIND ANY SUBSTA NCE IN THE APPEAL FILED BY THE REVENUE, AND SAME IS HEREBY DIS MISSED. VIVEK MEHROTRA 13 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 10/08/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI