PALMTRADE SERVICES P. LTD, MUMBAI V. ITO 8(2)(4), MUMBAI

ITA 7190/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5725 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: KESHAV B BHUJLE
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Additional evidence; Reasonable cause
• Section: 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.7190/M/2011 ( / ASSESSMENT YEAR: 2008 - 2009 ) PALMTRADE SERVICES P. LTD., 5 TH FLOOR, SQUARE - 1, 13 TH GULMOHAR ROAD, NO.1, JVPD SCHEME, VILE PAREL (W), MUMBAI 400 049. / VS. INCOME TAX OFFICER, WARD - 8(2)(4), MUMBAI. ./ PAN : AACCP 4924 F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI KESHAV B. BHUJLE / RESPONDENT BY : SMT. PARMINDER, DR / DATE OF HEARING : 16.1.2014 / DATE OF PRONOUNCEMENT : 31.1.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 24.10.2011 IS AGAINST THE ORDER OF THE CIT (A) - 17, MUMBAI DATED 19.8.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1.1. THE LD CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,15,094/ - BY WAY OF DISALLOWANCE U/S 14A OF THE ACT. 1.2. THE LD CIT (A) FAILED TO APPRECIATE THAT ON PROPER COMPUTATION UNDER RULE 8D THE DISALLOWANCE WOULD BE ONLY RS.1,797/ - . 2.1. T HE LD CIT (A) ER RED IN NOT ADMITTING THE LETTER DATED 8.11.2010 AND THE CONFIRMATION OF DIRECTOR AND IN DECIDING THE APPEAL IGNORING THE SAME. 2.2. THE LD CIT (A) ERRED IN HOLDING THAT APPELLANT HAD NOT FILED ANY DETAILS BEFORE THE AO. 2.3. THE LD CIT (A) FAILED TO APPREC IATE THAT AS DESIRED BY THE AO, THE APPELLANT HAD FILED DETAILS VIDE LETTERS DATED 28.7.2010 AND 16.8.2010. 3.1. THE LD CIT (A) ERRED IN CONFIRMING THE AD - HOC DISALLOWANCE OF RS. 35,506/ - OUT OF TRAVELING EXPENSES. 4.1. THE LD CIT (A) ERRED IN CONFIRMING T HE ADDITION OF RS. 1,00,000/ - MADE BY THE AO U/S 68 OF THE INCOME TAX ACT, 1961. 4.2. THE LD CIT (A) FAILED TO APPRECIATE THAT THE LOAN WAS RECEIVED FROM THE DIRECTOR WHO IS ASSESSED TO TAX AND HAS ALSO CONFIRMED THE LOAN. 5.1. THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATIO N OF RS. 43,390/ . 2 3. AT THE OUTSET, SHRI KESHAV B. BHUJLE, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ADDITIONAL GROUNDS FILED DURING THE PROCEEDINGS BEFORE US AND MENTIONED THAT THERE ARE 5 ISSUES FOR ADJUDICATION BEFORE US. ONE OF THEM RELATES TO ADMITTING OF THE ADDITIONAL EVIDENCES WHICH ARE OTHERWISE FILED BEFORE THE CIT (A) AND REJECTED IN A CASUAL MANNER. THE ISSUE WISE SUBMISSIONS AND ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS. 4. RE FERRING TO GROUND NO.1 WHICH RELATES TO THE ADDITION OF RS. 2,15,094/ - MADE U/S 14A READ WITH RULE 8D OF T HE IT RULES, 1962 . IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO THE PARA 3 OF THE ASSESSMENT ORDER AND SUBMITTED THA T THE AO DISALLOWED THE SUM OF RS. 2,13,297/ - UNDER RULE - 8D(2)(I) BY PROVIDING A NARRATION I.E., OF ADMINISTRATIVE EXPENSES OF RS. 14,10,692/ - . AS PER LD COUNSEL, THIS DISALLOWANCE IS ERRONEOUS AND IN THIS REGARD HE MENTIONED THAT THE SAID CLAUSE (I) RELATES TO THE AMOUNT OF EX PENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, IT SHOULD HAVE BEEN NIL HAVING REGARD TO THE BOOKS OF ACCOUNTS OF THE ASSESSEE. BUT HE ASSESSING OFFICER ERRONEOUSLY TREATED THE WHOLE OF THE ADMINISTRATIVE EXPENSES AS EXPEN DITURE DIRECTLY RELATING TO THE EXEMPT INCOME. AFTER CONSIDERING THE LD DRS OBJECTIONS IN THIS REGARD AND AFTER GOING THROUGH THE BOOKS OF ACCOUNTS PLACED BEFORE US, WE ARE OF THE OPINION THAT THE SAID ADDITION OF RS. 2,13,297/ - IS UNCALLED FOR AND THEREF ORE, WE DELETE THE SAME AND CONFIRM THE REST OF THE DISALLOWANCE OF RS. 1,797/ - MADE BY THE AO UNDER RULE - 8D(2)(III) OF THE IT RULES, 1962. ACCORDINGLY, THE ISSUE RAISED IN GROUND NO.1 IS PARTLY ALLOWED . 5. GROUNDS NO.2, 3 AND 4 ARE INTERCONNECTED. REFER RING TO THESE GROUNDS, LD COUNSEL MENTIONED THAT IF THE SAID ADDITIONAL EVIDENCES ARE ADMITTED, THEY WILL GO TO THE ROOT OF THE MATTERS RELATING TO DISALLOWANCE ON ACCOUNT OF (I) FOREIGN TRAVEL EXPENSES AND (II) DISALLOWANCE OF CASH CREDITS U/S 68 OF THE A CT. ON PERUSAL OF THE RELEVANT PAPERS PLACED BEFORE US, WE FIND THE ASSESSEE DID NOT OFFER ANY REASONABLE CAUSES FOR NOT FURNISHING THE SAME BEFORE THE AO. THESE PAPERS WERE GARNERED BY THE ASSESSEE ONLY AFTER RECEIPT OF THE ASSESSMENT ORDER CONTAINING T HE SAID DISALLOWANCE THEREFORE, WE ADMIT THE SAME AND DIRECT THE AO TO CONSIDER AND MAKE USE OF THE SAME FOR ADJUDICATING THE ISSUE RELATING TO DISALLOWANCES ON ACCOUNT OF TRAVELLING EXPENSES AND CASH CREDITS. ACCORDINGLY, GROUND NO.2 IS ALLOWED AND 3 GROUN DS NO.3 AND 4 ARE REMANDED TO THE FILES OF THE AO FOR ADJUDICATING THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS NO.3 AND 4 ARE ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO.5 RELATES TO TH E DISALLOWANCE OF DEPRECIATION OF RS. 43,390/ - . IN THIS REGARD, IT IS THE CLAIM OF THE ASSESSEE THAT THE OFFICE PREMISES WAS RENTED ONE AND IS NOT ELIGIBLE DEPRECIABLE ASSET AND THE QUESTION OF SALE OF THE SAID PREMISES DOES NOT ARISE. IT IS THE PRAYER O F THE LD COUNSEL THAT THE SAID GROUND MAY BE REMANDED TO THE FILES OF THE AO FOR FRESH ADJUDICATION. AFTER CONSIDERING THE LD DRS OBJECTIONS IN THIS REGARD, WE REMAND THE GROUND NO.5 ALSO TO THE FILES OF THE AO FOR ADJUDICATING THE ISSUE AFRESH AFTER AL LOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.5 IS ALLOWED FOR STATISTICAL PURPOSES . 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONO UNCED IN THE OPEN COURT ON 3 1 S T JANUARY, 2014. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 31 .1 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI