HIRA T. JHAMTANI, MUMBAI V. ACIT 18(1), MUMBAI

ITA 7388/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7874 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2012-2013
• Appeal Filed On: 15-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR MISHRA CIT REVE
• Keywords: Depreciation; Earning of tax free income; Reasonable cause
• Section: 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI K BENCH, MUMBAI [BEFORE S HRI SHAMIM YAHYA , HONBLE ACCOUNTANT MEMBER & SHRI PAWAN SINGH , HONBLE JUDICIAL MEMBER ] I.T.A. NO. 7388 / MUM / 2016 ASSESSMENT YEAR: 201 2 - 13 HIRA T. JHAMTANI ... ........ .. . .. .. .. ....................................................... .................... APPELLANT 19, TULIPS UNION PART, 4 TH FLOOR, PALI HILL KHAR (W), MUMBAI 400 052. [PAN: ADAPJ 8790 R ] VS. ACIT 18(1), MUMBAI . ...... .. . . .... .............................................. RESPONDENT MUMBAI. APPEARANCES BY: NONE APPEARED ON BEHALF OF THE ASSESSEE. SHRI RAJESH KUMAR MISHRA, ADDL. CIT APPEARED ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : NOVEMBER 11, 2019 DATE OF PRONOUNCING THE ORDER : JANUARY 15 , 2020 ORDER PER SHRI SHAMIM YAHYA , A M THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 29, MUMBAI DATED 01.08.2016 AND PERTAINS TO A.Y. 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER: I. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. AO AMOUNT ING TO RS. 16,76,123/ - AS EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME BY INVOKING THE PROVISION OF SECTION 14A R.W.R. 8D OF THE INCOME TAX ACT, 1961. II. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND IN LAW THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADHOC ADDITION MADE BY THE LD. AO AMOUNTING TO RS. 46,290/ - TREATING 10% OF THE TOTAL EXPENDITURE DEBITED TO P/L ACCOUNT AS PERSONAL IN NATURE. 2 I.T.A. NO. 7300/MUM/2016 ASSESSMENT YEAR: 2012 - 13 HIRA T. JHAMTANI 3 . AT THE OUTSET IT IS NOTED THAT THERE IS A DELAY OF 17 DAYS IN FILING THE APPEAL. THE REASONABLE CAUSE HAS BEEN ATTRIBUTED TO THE MISPLACE MENT OF THE FILE. UPON CAREFUL CONSIDERATION WE CONDONE THE DELAY. 4 . APROPOS GROUND NO. 1, THE FACTS OF THE CASE AR E AS UNDER: THE APPELLANT ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF READYMADE GARMENTS, TOWELS ETC. FILED HIS RETURN OF INCOME FOR A.Y. 2012 - 13 DECLARING A TOTAL INCOME OF RS. 94,71,185/ - ON 28.09.2012. DURING THE RELEVANT ASSESSMENT YEAR, T HE APPELLANT RECEIVED EXEMPT INCOME IN THE FORM OF DIVIDEND OF RS. 1,64,821/ - AND PPF INTEREST OF RS. 3,740/ - . THE APPELLANT HAS NOT MADE ANY DISALLOWANCE U/S 14A TOWARDS EXPENDITURE INCURRED FOR EARNING INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. THE AO ISSUED A SHOW CAUSE TO THE APPELLANT SEEKING WHY DISALLOWANCE U/S 14A SHOULD NOT BE MADE TO WHICH THE APPELLANT REPLIED THAT MAJOR PARTS OF THE INVESTMENT ARE FORCED INVESTMENTS WHICH ARE MANDATORY FOR THE ASSESSEE TO OPERATE THE BUSINESS WITH THE FUTU RE GROUP AND OTHERS. FURTHER, HE CLAIMS TO HAVE HIS OWN CAPITAL AND INTEREST FREE FUNDS WHICH ARE MORE THAN THE AMOUNT OF INVESTMENTS. ACCORDING TO HIM, THE PROVISIONS OF SECTION 14A ARE NOT ATTRACTED TO HIS CASE. HOWEVER, THE AO WAS NOT SATISFIED WITH THE REPLY AND HAD PROCEEDED TO WORK OUT THE DISALLOWANCE U/S 14A R.W.R. 8D AND MADE A D ISALLOWANCE OF RS. 14,87,620/ - . 5. AGA INST THE ABOVE ORDER, ASSESSEE APPEAL ED BEFORE THE LD. CIT(A). IN SUPPORT OF ITS PROPOSITION THAT THE ASSESSEE HAS SUFFICIENT INTERES T FREE FUNDS OF ITS OWN AND NO DISALLOWANCE IS REQUIRED THE ASSESSEE PLACED RELIANCE UPON HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. 313 ITR 340 AND HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF HDFC BANK LTD. 366 ITR 505. HOWEVER THE LD. CIT(A) WENT ON TO DISTINGUISH THESE DIRECTLY APPLICABLE JURISDICTIONAL HIGH COURT DECISION BY NOTING THAT IN THESE 3 I.T.A. NO. 7300/MUM/2016 ASSESSMENT YEAR: 2012 - 13 HIRA T. JHAMTANI DECISIONS HON'BLE HIGH COURT WAS NOT INFORMED ABOUT THE DECISION OF GODREJ & BOYCE. 6 . AGAINST THE ABOVE ASSESSEE IS IN APPEAL BEFORE US. UPON CAREFUL CONSIDERATION, I N OUR CONSIDERED OPINION, THIS APPROACH OF LD. CIT(A) IS TOTALLY UNCALLED FOR. IN THE DECISION REFERRED BY THE ASSESSEE AS ABOVE, HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT IF ASSESSE E HAS SUFFICIENT INTEREST FREE FUNDS TO MAKE INVESTMENT IN INSTRUMENT S EARNING EXEMPT INCOME, NO DISALLOWANCE ON ACCOUNT OF INTEREST S TO BE MADE. IT WAS ALSO HELD THAT ASSESSEE WAS NOT REQUIRED TO ESTABLISH ONE TO ONE NEXUS. IN THESE CIRCUMSTANCES, IN OU R CONSIDERED OPINION THE INTEREST OF JUSTICE DEMANDS FOR THIS ISSUE BE REMITTED T O THE FILE OF ASSESSING OFFICER. T HE ASSESSI N G OFFICER IS DIRECT ED TO CONSIDER THE ISSUE AFRESH K EEPING IN MIND, THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD. AND RELIANCE UTILITIES & POWER LTD. (SUPRA). 7 . THE SECOND ISSUE IS DISALLOWANCE U/S 37. T HE AO HAS DISALLOWED 10% OF TELEPHONE EXPENSES, MOTOR CAR EXPENSES, DEPRECIATION ON MOTOR CAR AND MOTOR EXPENSES TOTALLING TO RS. 46,290/ - ON THE GROUND OF PERSONAL USE. THE AO SO HELD BY NOTING THAT LOG BOOK OR ITINERARIES WERE NOT FURNISHED OR MAINTAINED REGARDING THESE EXPENSES. UPON ASSESSEES APPEAL LD. CIT(A) UPHELD THE ABOVE DISALLOWANCE OF 10%. AGAINST THIS ORDER, ASSESSEE IS IN APPEAL BEFOR E US. WE HAVE HEARD LD. DR. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE NOTE THAT ASSESSING OFFICER HAS MADE THIS DISALLOWANCE ON ADHOC BASIS ON SURMISES AND CONJECTURES. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC 4 I.T.A. NO. 7300/MUM/2016 ASSESSMENT YEAR: 2012 - 13 HIRA T. JHAMTANI PERSONAL USE. IT IS ONLY THIS CONJECTURES OF POSSIBILITY OF PERSONAL USE. IN OUR CONSIDERED OPINION, THIS CANNOT SUSTAINED. HENCE WE DIRECT FOR DELETION OF DISALLOWANCE ON THIS ISSUE. 8 . APPEAL FILED BY THE ASSESSEE STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2020 . SD/ - SD/ - ( PAWAN SINGH ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 /01/2020 BISWAJIT, SR. PS C OPY OF THE ORDER FORWARDED TO: 1. HIRA T. JHAMTANI, 19, TULIPS UNION PARK, 4 TH FLOOR, PALI HILL KHAR (W), MUMBAI 400 052. 2. ACIT 18(1), MUMBAI. 3. CIT(A) - 4. CIT - , 5. CIT(DR), MUMBAI BENCHES, MUMBAI . TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES