Shri Ramesh Kanodia, Howrah V. ACIT, CC-IV, Kolkata, Kolkata

ITA 666/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48183 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTAM MONDAL
• Section: 143(3); 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH-B: KO LKATA ( ) , , . . , ,) [BEFORE HONBLE SHRI MAHAVIR SINGH, J.M. & HONBLE SHRI C.D. RAO, A.M] /I.T.A. NO. 666/KOL./2011 ASSESSMENT YEAR : 2007-2008 RAMESH KANODIA, KOLKATA -VS.- ASSISTANT COMMISSIONER OF INCOME TAX, (PAN : AFAPK 8697 Q) CENTRAL CIRCLE-IV, KOLKA TA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEEVA KUMAR, A.R. RESPONDENT BY : SHRI GOUTAM MONDAL, SR. D.R. ' ' ' ' /O R D E R PER SHRI MAHAVIR SINGH, JUDICIAL MEMBER / , : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS), CENTRAL-1, KOLKATA IN APPEAL NO. 277 /CC-IV/CIT(A),C-1/09-10 DATED 25.02.2011. ASSESSMENT WAS FRAMED BY ACIT, C.C.IV, KOLKATA FOR ASSESSMENT YEAR 2007-08 U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 30.11.2009 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), CENTRAL-1, KOLKATA CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS.5,51,490/- BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D(II) OF THE INCOME TAX RULES, 1962. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- THAT THE LD. CIT(A.) WAS WRONG IN CONFIRMING ADDIT ION OF RS.5,51,490/- UNDER SECTION 14A READ WITH RULE 8D(I I) OF THE INCOME TAX RULE, 1962 WHICH IS UNREASONABLE. RULE 8D IS NO T APPLICABLE FOR THE YEAR UNDER CONSIDERATION. THE ADDITION NEEDS TO BE DELETED. ITA NO. 666/KOL.2011 RAMESH KANODIA ASSESSMENT YEAR 07-08 2 3. BRIEF FACTS RELATING TO THE ABOVE ISSUE ARE THAT THE ASSESSING OFFICER BY INVOKING THE PROVISION OF SECTION 14A READ WITH RULE 8D(II) OF T HE INCOME TAX RULE, 1962 DISALLOWED EXPENDITURE INCURRED BY WAY OF INTEREST AND OTHER D IRECT EXPENDITURE AMOUNTING TO RS.5,51,490/- AND PROPORTIONATE ADMINISTRATIVE EXPE NSES OF RS.39,012/-. AGGRIEVED AGAINST THE ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE CIT( APPEALS), WHO CONFIRMED THE DISALLOWANCE OF INTEREST AND OTHER DIRECT EXPENDITURE OF RS.5,51 ,490/- BY GIVING FINDING AT PARA 3.2 OF PAGE 4 , WHICH READS AS UNDER :- 3.2. THE AO HAS CALCULATED DISALLOWANCE OF RS.5,51 ,490/- ON ACCOUNT OF INTEREST AND OTHER DIRECT EXPENDITURE WHICH ARE ATT RIBUTABLE TO EARNING OF NON-TAXABLE INCOME. THOUGH RULE 8D IS NOT APPLICABL E FOR THE YEAR UNDER CONSIDERATION, THE HONBLE HIGH COURT HAS HELD THAT FOR EARLIER YEARS DISALLOWANCE HAS TO BE WORKED OUT ON REASONABLE BA SIS UNDER SECTION. 14A(1). I DONT FIND ANY INFIRMITY IN THE DISALLOWA NCE OF INTEREST AND OTHER DIRECT EXPENDITURE CALCULATED BY THE AO. ACCORDINGL Y THE DISALLOWANCE OF RS.5,51,490/- IS CONFIRMED. HOWEVER, FOLLOWING THE DECISION HONBLE ITAT KOLKATA IN THE CASE OF M/S. CIVIL ENGINEERING ENTER PRISES (P) LTD. VS.- DCIT (ITA NO. 895/KOL./2010 AND OTHER CASES THE DIS ALLOWANCE MADE UNDER RULE 8D(III) OF RS.39,012/- IS RESTRICTED TO RS.443/-. THE APPELLANT WILL GET NECESSARY RELIEF ACCORDINGLY. 3. AFTER HEARING RIVAL CONTENTIONS AND GOING THROU GH FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.17,560/-, INTEREST ON PPF AT RS.26,772/- AS AGAINST, ASSESSING OFFICER DISALLOWED EXPENSES O F INTEREST AT RS.4,77,900/-, TRANSACTION CHARGES AT RS.34,467/- AND DEMAT CHARGES AT RS.3,34 6/- AND BY MAKING PROPORTIONATE OF THE SAME DISALLOWED A SUM OF RS.5,90,502/-. WE FIND THA T THE ASSESSING OFFICER HAS DISALLOWED THESE EXPENDITURES BY INVOKING THE PROVISIONS OF SE CTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. WE FURTHER FIND THAT THE PRINCIPL E LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCEE MFG. CO. LTD. VS. DCI T [2010] 328 ITR 81 (BOM.) AT PAGES 138 & 139 VIDE SUB PARAS (V) TO (VII) ARE AS UNDER: (V) THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RU LES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, SHALL APPLY WITH E FFECT FROM THE ASSESSMENT YEAR 2008-09; (VI) EVEN PRIOR TO THE ASSESSMENT YEAR 2008-09, WHE N RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE TH E PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFF ICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; ITA NO. 666/KOL.2011 RAMESH KANODIA ASSESSMENT YEAR 07-08 3 (VII) THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002 -03 SHALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH D OES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT REASONABLE BASIS FOR EFFECTING THE APPORTIONM ENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT AND GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E IN VIEW OF THE ABOVE DECISION OF THE HONBLE BOMBA Y HIGH COURT, WE ARE OF THE VIEW THAT 1% OF THE TOTAL EXPENDITURE ATTRIBUTABLE TO EA RNING OF NON-TAXABLE INCOME CAN BE DISALLOWED AND OUT OF THE TOTAL EXPENDITURE RELATABLE FOUND BY THE ASSESSING OFFICER IS AT RS.6,77,404/- AND 1% OF THIS SHOULD HAVE BEEN DISALLOWED. THE ASSESSI NG OFFICER IS DIRECTED TO RE-COMPUTE THE DISALLOWANCE AT 1% OF THIS EXPENDITURE OF RS.6,77,4 04/-. 5. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- [C. D. RAO ( . . )] [ MAH AVIR SINGH / ] ACCOUNTANT MEMBER/ JUDICIAL MEMBER/ ] DATED : 13 / 06/ 2011 COPY OF THE ORDER FORWARDED TO: 1 . SHRI RAMESH KANODIA, 83B, BAZAL PARA LANE, BANDHA G HAT, HOWEVER, 711 106 2. ACIT, CC-IV, KOLKATA, 18, RABINDRA SARANI, KOLKATA- 1 3. CIT(APPEALS)- , KOLKATA 4 . CIT- , KOLKATA 5 . DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR I.T.A.T., KOLKATA. LAHA, SR. P.S.