Sir Sobha Singh & Sons Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 742/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2802 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Bonafide belief; Earning of tax free income; Difference of opinion; Revised return
• Section: 14A; 139(5); 154

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT ME MBER ITA NO.742/DEL/2015 ASSESSMENT YEAR: 2009-10 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 29.7.2013, PASSED BY LD. CIT (APPEALS) XI, IN RELATION TO THE PROCEEDINGS U/S 154 FOR THE ASSESSMENT YEAR 2009-1 0. IN VARIOUS GROUNDS OF APPEAL ASSESSEE HAS CHALLENGED MAINLY TH E DISALLOWANCE MADE U/S 14A R.W. RULE 8D AT RS. 4,25,836/- WHICH WA S STATED TO SIR SOBHA SINGH & SONS PVT. LTD. BAIKUNTH, A-1, JANPATH, NEW DELHI 110 011 PAN AAACS0008F VS. DCIT CIRCLE-8(1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI K. SAMPAT, ADVOCAT DEPARTMENT BY : SHRI S.S. RANA, CIT(DR) DATE OF HEARING 14/03/2018 DATE OF PRONOUNCEMENT 20/03/2018 2 HAVE BEEN ADDED BACK BY MISTAKE IN THE COMPUTATION OF INCOME BY THE ASSESSEE. 2. BRIEF FACTS AND BACKGROUND OF THE CASE ARE THA T ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME ON 23.9.2009, WHEREIN THE IT SOU MOTO HAD ADDED AN AMOUNT OF RS. 4,25,836/- IN THE COMPUTA TION OF INCOME TOWARDS DISALLOWANCE U/S 14A. DURING THE CO URSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE OBJECTED TO SUCH D ISALLOWANCE BY WAY OF A LETTER DATED 19 TH SEPTEMBER, 2011, CATEGORICALLY STATING THAT THERE HAS BEEN MISTAKE IN COMPUTATION OF THE DISALLOW ANCE U/S 14A AND REQUESTED THE AO TO TAKE INTO COGNIZANCE AND RECTIF Y IT BY PASSING THE ORDER, BECAUSE, NO INTEREST HAS BEEN PAID BY THE AS SESSEE AND CONSEQUENTLY NO DISALLOWANCE OF INTEREST CAN BE MADE U NDER THE PROVISIONS OF 14A. HOWEVER THE AO INSTEAD OF VERIFYIN G THE ASSESSEES CLAIM AS MADE IN THE SAID LETTER /APPLICATION REJECTE D THE SAME AFTER OBSERVING AND HOLDING AS UNDER :- 4. THE ASSESSEES CLAIM W.R.T. RECTIFICATION OF DISALLOWANCE U/S 14A MADE BY IT IS NOT ACCEPTED FOR THE SIMPLE REASO N THAT THIS OFFICE IS OF THE VIEW THAT AS PER PROVISIONS OF THE ACT THERE MUST BE DISALLOWANCE AS PER RULE 8D AGAINST THE TAX FREE IN COME CLAIMED BY THE ASSESSEE. THERE HAVE BEEN NUMBER OF DECISION S CONFIRMING THE STAND TAKEN BY THE DEPARTMENT ON THIS ISSUE. MO REOVER, THIS IS NOT A MISTAKE APPARENT FROM RECORD AND THEREFORE DO ES NOT COME UNDER THE PURVIEW OF SECTION 154 OF THE ACT. ANY RE LIEF AGAINST THE ORIGINAL RETURN OF INCOME CAN BE CLAIMED BY THE ASS ESSEE ONLY BY 3 REVISING ITS RETURN OF INCOME AND NOT OTHERWISE. TH US, THE CLAIM OF THE ASSESSEE CANNOT BE ADHERE TO AND REJECTED ACCOR DINGLY. 3. THE ASSESSEE AGGRIEVED BY THE SAID ASSESSMEN T ORDER, FILED FIRST APPEAL BEFORE THE LD. CIT(A), WHEREIN THIS ISSUE OF D ISALLOWANCE OF SECTION 14A WAS SPECIFICALLY RAISED BEFORE THE LD. CI T(A) WHICH IS EVIDENT FROM THE SUBMISSIONS NOTED IN THE APPELLATE OR DER WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCED HEREUNDER: - 2. SECTION 14A PROVIDES THAT WHERE TAX FREE INCOM E HAS BEEN EARNED, ANY EXPENSES INCURRED TO EARN SUCH INCOME A RE REQUIRED TO BE DISALLOWED. TWO ISSUES ARE INVOLVED IN THE AD DITION MADE BY THE ASSESSING OFFICER. FIRSTLY, EVEN THOUGH THERE W ERE NO EXPENSES WHICH WERE RELATABLE TO THE INVESTMENTS MADE FROM W HICH TAX FREE DIVIDENDS HAD BEEN EARNED, A DISALLOWANCE HAD ERRON EOUSLY BEEN MADE BY THE ASSESSEE UNDER RULE 8B. BEFORE THE ASSE SSING OFFICER IT WAS SUBMITTED THAT THIS WAS AN ERROR COMMITTED B Y THE ASSESSEE BECAUSE WHILE COMPUTING HIS INCOME HE HAD NOT CORRECTLY UNDERSTOOD THE PROVISIONS OF SECTION 14A AND WAS UN DER THE MISTAKEN NOTION THAT IT HAD TO BE APPLIED ON A MAND ATORY BASIS. THE CORRECT POSITION AS EXPLAINED IN THE STATEMENT OF FACTS AND THE CASE LAW CITED IS THAT IT APPLIES ONLY IF THERE ARE ANY EXPENSES DIRECTLY RELATED TO TAX FREE INCOME. OUR INVESTMENT OF 8.48 CRORES ON WHICH DIVIDENDS WERE EARNED WERE FUNDED ENTIRELY FROM OUR OWN RESOURCES (REFER SCHEDULE 5). THERE WERE NO SEC URED LOANS 4 AND THE UNSECURED LOANS WERE ON ACCOUNT OF (A) ADVA NCE FOR USE OF LAND PENDING SALE RS. 24.11 LAKHS AND (B) NON REFUN DABLE SECURITY FROM SIMLA HILLS, A TENANT RS. 49.56 LAKHS (SCHEDUL E 3). A REVIEW OF EXPENSES (SCHEDULE 14) CLEARLY SHOWS THAT THERE WAS NO EXPENDITURE ON ACCOUNT OF INTEREST AND THERE IS NO OTHER EXPENSE WHICH IS DIRECTLY OR INDIRECTLY RELATABLE TO THE EA RNING OF DIVIDENDS FROM OUR INVESTMENTS. WE HAVE CITED CASE LAW STATIN G THAT THE ASSESSING OFFICER HAS THE POWER TO CORRECTLY COMPUT E THE INCOME OF THE ASSESSEE AND IF HE DID SO THE INCORRECT ADDITIO N MADE BY THE ASSESSEE UNDER SECTION 14A SHOULD HAVE BEEN DELETED . HOWEVER, THE ASSESSING OFFICER INCORRECTLY HELD THAT RULE 8D WAS MANDATORY. CASE LAW HAS BEEN GIVEN AND THE HONBLE SUPREME COURT OF INDIA HAS CLEARLY HELD THAT IT IS THE DUTY OF THE ASSESSING OFFICER TO ARRIVE AT THE CORRECT TAXABLE INCOME. TH IS IMPLIES THAT IF DEDUCTIONS HAVE BEEN INCORRECTLY CLAIMED THEY SHOUL D BE ADDED BACK AND SIMILARLY IF ADDITIONS HAVE BEEN MADE INCO RRECTLY THESE SHOULD BE DEDUCTED FROM THE TAXABLE INCOME. THE SUP REME COURT HAS HELD THAT THE ASSESSING OFFICER IS DUTY BOUND T O MAKE A CORRECT COMPUTATION OF TAXABLE INCOME. THE RULE OF EQUITY AND JUSTICE PROVIDES THAT YOU CAN ONLY TAX WHAT IS THE CORRECT INCOME AS PER THE LAW PREVAILING; NO MORE AND NO LESS. SEC ONDLY, CASE LAW HAS ALSO BEEN FILED TO SHOW THAT ONLY THOSE EXP ENSES WHICH ARE DIRECTLY ATTRIBUTABLE TO THE EARNING OF TAX FRE E INCOME ARE 5 REQUIRED TO BE DISALLOWED. SINCE THIS IS NOT SO IN OUR CASE SINCE NO AMOUNT WAS BORROWED TO PURCHASE/ACQUIRE THE INVESTM ENTS ON WHICH DIVIDEND INCOME WAS EARNED, THE QUESTION OF A NY DISALLOWANCE UNDER SECTION 14A BY APPLYING RULE 8B DOES NOT ARISE. 3. A COPY OF OUR ACCOUNTS AND SUBMISSION MADE BEF ORE THE ASSESSING OFFICER TO ACCEPT THE WITHDRAWAL OF THE A MOUNT MISTAKENLY ADDED BY US UNDER SECTION 14A IS ALSO EN CLOSED. 4. LD. CIT (A), INSTEAD OF DECIDING THE ISSUE W HICH HE WAS REQUIRED UNDER THE LAW TO DO SO AS THE ISSUE WHICH WAS SPECIFIC ALLY CONTESTED/ RAISED BEFORE HIM, DIRECTED THE AO TO PASS SEPARATE O RDER DISPOSING OF THE RECTIFICATION APPLICATION FILED BY THE ASSESSEE. THE RELEVANT OBSERVATION AND FINDING OF LD. CIT (A) IN THIS REGARD READS AS UNDER:- GROUND NO. 5 IS IN R/O ADDITION OF RS. 4,25,836/- ON A/C OF DISALLOWANCE U/S 14A READ WITH RULE 8D. THE AO IN T HE ORDER HAS SIMPLY STATED THAT AS PER THE PROVISIONS OF THE ACT THERE MUST BE DISALLOWANCE AS PER RULE 8D IF TAX FREE INCOME HAS BEEN CLAIMED BY THE APPELLANT. THE FACTS ON THIS ISSUE ARE THAT THE APPELL ANT HAD HIMSELF ADDED AN INCOME OF RS. 4,25,836/- IN HIS COMPUTATIO N OF INCOME AS DISALLOWANCE U/S 14A. SUBSEQUENTLY THE APPELLANT MOVE AN APPLICATION U/S 154 STATING THAT IT HAD WRONGLY SUO MOTO MADE A 6 DISALLOWANCE U/S 14A. THE AO INSTEAD OF PASSING A S EPARATE ORDER IN R/O THE RECTIFICATION APPLICATION FILED BY THE APPELLANT SIMPLY WROTE IN THE ASSTT. ORDER THAT THE APPELLANT S PLEA WAS NOT ACCEPTABLE. NO ADDITION HAS BEEN MADE IN THE ORDER OF THIS ISSUE. THE AO IS THEREFORE DIRECTED TO PASS A SEPARATE ORD ER DISPOSING OFF THE RECTIFICATION APPLICATION FILED BY THE APPELLAN T. 5. THE ASSESSEE IN PURSUANCE OF SUCH DIRECTION BY THE CIT (A) AGAIN FILED AN APPLICATION U/S 154 BEFORE THE AO, VIDE LETT ER DATED 21.9.2012, RELEVANT EXTRACT OF WHICH HAS BEEN INCORPOR ATED IN THE IMPUGNED ORDER PASSED BY THE AO U/S 154 DATED 28.1.20 13. HOWEVER THE LD. AO REJECTED THE ASSESSEES PETITION/ APPLICATI ON AFTER OBSERVING AND HOLDING AS UNDER:- 4. THERE WAS NO ORDER ON THE DATE OF APPLICATION ON WHICH ACTION FOR REVISION/RECTIFICATION/AMENDMENT COULD BE EXERC ISED. AS A RESULT THERE WAS NO CAUSE FOR THE ASSESSEE FOR FILI NG THE APPLICATION U/S 154. AS SUCH, FILING OF APPLICATION BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS PRE MATURE ACTION ON THE PART OF THE ASSESSEE. 4.1 THE ASSESSEE HAD FILED ITS ORIGINAL RETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2009-10 WITH IN THE D UE TIME AND HAD PRIVILEGE UNDER THE ACT TO REVISE ITS RETURN OF INCOME UP TO THE PRESCRIBED TIME PERIOD UNDER SECTION 139(5) WHICH W AS NOT OPTED 7 BY THE ASSESSEE. THIS INACTION ON THE PART OF THE A SSESSEE IS A PROOF IN ITSELF TO CONCLUDE THAT THE ASSESSEE WAS F ULLY CONVERSANT WITH THE LEGAL PROVISIONS INCLUDING DISALLOWANCES M ADE U/S 14A READ WITH RULE 8D AGAINST EXEMPT INCOME. 6. AGAIN THIS MATTER WAS RAKED APPEAL IN APPEAL F ILED BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER THE LD. CIT (A) AFTER INC ORPORATING THE ASSESSEES DETAIL SUBMISSIONS, HAS DISMISSED THE ASSE SSEES APPEAL ON THE GROUND THAT, THE POINT IN ISSUE CANNOT BE RAKED U P IN PROCEEDING U/S 154, BECAUSE DURING THE COURSE OF ORIGINAL ASSES SMENT PROCEEDINGS, THE ASSESSEE HAD MADE A CLAIM BEFORE THE AO ON WHICH AO HAS GIVEN HIS DECISION, RIGHT OR WRONG BUT THE MATT ER HAD ATTAINED FINALITY FROM HIS STAGE. LD. CIT(A) EVEN FIND FAULT WITH HIS PREDECESSORS EARLIER ORDER OF THE LD. CIT(A) IN THE QUANTUM PROCE EDINGS WHEREIN HE HAD HELD THAT, THIS ISSUE SHOULD BE DEALT SEPARATELY U/ S 154. HE OBSERVED THAT, THIS ISSUE CANNOT BE TERMED AS MISTAKE A PPARENT FROM RECORD AND SUBJECT TO RECTIFICATION U/S 154. SINCE, EAR LIER IN QUANTUM PROCEEDINGS LD. CIT(A) HAD NOT DECIDED THE ISSUE ON M ERITS AND MATTER GOT MATURED IN THE ASSESSMENT PROCEEDINGS ON WHICH AO HAS ALSO GIVEN HIS FINDINGS, THEREFORE, THIS IS BEYOND THE PURV IEW OF RECTIFICATION PROCEEDINGS U/S 154. HE FURTHER HELD THAT, WHETHER ANY INTEREST BEARING FUNDS WERE ACTUALLY INVESTED FOR DERIVING TAX FREE INCOME IS THE ISSUE WHICH CANNOT BE EXAMINED U/S 154 BY AO AND NOW THAT THERE IS 8 DIFFERENCE OF OPINION, I.E., BY THE AO IN ASSESSMENT ORDER, THEREFORE REVIEW OF THE DECISION OF THE AO U/S 154 IS NOT PERMIS SIBLE UNDER THE LAW. HE HELD THAT ALL THE DECISIONS RELIED UPON BY THE ASSESSEE WOULD HAVE HELPED THE ASSESSEE IN THE APPEAL AGAINST ASSESSM ENT ORDER U/S 143(3), BUT ARE OF NO CONSEQUENCE AS THIS ISSUE CANNO T BE ADJUDICATED U/S 154. 7. WE HAVE HEARD BOTH THE PARTIES EXTENSIVELY AND ALSO PERUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDERS AS WELL AS MATERIAL REFERRED TO BEFORE US. FROM THE FACTS AS DISCUSSED AB OVE WE FIND THAT, EVEN THOUGH BY MISTAKE ASSESSEE HAD DISALLOWED THE INTE REST EXPENDITURE U/S 14A, BUT DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, ASSESSEE IMMEDIATELY MADE THE CLAIM BEF ORE THE AO THAT INTEREST EXPENDITURE CANNOT BE DISALLOWED, BECAUSE ASS ESSEE HAS NOT PAID ANY INTEREST AND THERE WERE NO DIRECT EXPENSES REL ATING TO EARNING OF TAX FREE INCOME; AND ASSESSEES INVESTMENT IN WHICH DIVIDEND INCOME HAS BEEN EARNED WERE ENTIRELY FROM ASSESSEES OWN SOURCES, I.E., INTEREST FREE SURPLUS FUNDS AND THERE WERE NO S ECURED LOANS. ONLY UNSECURED LOANS ON ACCOUNT OF ADVANCE FOR USE OF LA ND PENDING SALE; NON REFUNDABLE SECURITY FROM A TENANT, WERE SHOWN IN BALANCE SHEET ON WHICH NO INTEREST WAS PAYABLE. ONCE THERE IS NO EXP ENDITURE INCURRED ON ACCOUNT OF INTEREST, THEN WHERE IS THE QUE STION OF DISALLOWANCE OF INTEREST U/S 14A. SUCH A LETTER WRITTE N TO THE AO WAS 9 GIVEN IN THE FORM OF RECTIFICATION APPLICATION WHICH A O INSTEAD OF TAKING COGNIZANCE OF SUCH A CLAIM AND VERIFYING THE C LAIM, WHETHER SUSTAINABLE OR NOT, SIMPLY REJECTED THE ASSESSEES AP PLICATION ON THE GROUND THAT IT IS NOT MISTAKE APPARENT FROM THE RECORD A ND ASSESSEE SHOULD HAVE CLAIMED RELIEF BY REVISING ITS RETURN OF INCOME. IN THE FIRST APPEAL AGAINST THE SAID FINDING, LD. CIT (A), INSTEAD OF DECIDING THE ISSUE ON LEGAL AND FACTUAL GROUNDS, THROUGH THE BALL FROM HIS COURT TO THE AO ON THE GROUND THAT AO SHOULD HAVE PASS A SEPARA TE ORDER IN RESPECT OF THE RECTIFICATION APPLICATION AND ACCORDINGLY , DIRECTED THE AO TO PASS A SEPARATE ORDER. THE ASSESSEE LEFT WITH N O ALTERNATIVE AND FOLLOWING THE SAID DIRECTION, AGAIN KNOCKED THE DOOR OF THE AO AND FILED A RECTIFICATION APPLICATION AND WHO INSTEAD OF C ARRYING OUT THE DIRECTION OF THE LD. CIT (A) SHUT DOWN THE DOOR OF REM EDY ON THE GROUND THAT SUCH A CLAIM IS NOW BEYOND THE PURVIEW AND SCOPE OF RECTIFICATION APPLICATION U/S 154. AGAIN AGGRIEVED BY SUCH AN ACTION OF THE AO ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT (A) WHO THOUGH INCORPORATED ASSESSEES EXTENSIVE SUBMISSIONS FROM P AGES 2 TO 13 OF THE APPELLANT ORDER, BUT INSTEAD OF PROVIDING ANY REME DY, HE FIRST OF ALL FOUND FAULT IN THE ORDER OF HIS PREDECESSOR THAT HE SH OULD NOT HAVE DIRECTED THE AO TO PASS A SEPARATE ORDER AND THEN AFTE R SUCH AN OBSERVATION HE COMES TO THE CONCLUSION THAT ASSESSEE SHO ULD HAVE TAKEN UP THIS ISSUE BEFORE THE TRIBUNAL OR HIGH COURT A GAINST THE ORDER OF SUCH QUANTUM. THE MANNER IN WHICH THE AUTHORI TIES BELOW 10 HAVE TRIED TO SHUT THE DOOR OF REMEDY TO THE ASSESSEE ON TECHNICAL GROUNDS RIGHT FROM THE FIRST STAGE AND FOR CONTINUOUS MO RE THAN SEVEN YEARS, ASSESSEE HAS BEEN RUNNING FROM ONE AUTHORITY TO OTHER ON VERY SIMPLE ISSUE, WHETHER DISALLOWANCE SHOULD HAVE BEEN MADE AT ALL FOR THE PURPOSE OF SECTION 14A IN THE LIGHT OF THE FACTS AND MATERIAL ON RECORD. WE ARE OF THE FIRM OPINION THAT THE LD. CIT (A) IN THE FIRST ROUND OF PROCEEDINGS SHOULD HAVE DECIDED THIS ISSUE IN ACCORDANCE WITH THE LAW, BECAUSE IF AO HAS REJECTED THE CLAIM ON THE GROUND THAT ASSESSEE SHOULD HAVE FILE A REVISED RETURN, THEN IT WA S INCUMBENT UPON THE LD. CIT (A) TO DEAL AND DECIDE SUCH A CLAI M AND OR DIRECT THE AO TO VERIFY AND ALLOW THE SAME. INSTEAD HE DIRECTED TH E AO TO PASS A SEPARATE ORDER WHICH HAS LED TO GREAT HARDSHIP AND JE OPARDY TO THE ASSESSEE TO CARRY OUT SUCH A PROLONGED LITIGATION, BEC AUSE ASSESSEE WAS COMPLYING WITH DIRECTION OF CIT (A) WHO THEN HAD HELD THAT REMEDY LIED WITH THE AO. EVEN THOUGH IT IS HELD THAT THE I SSUE OF ALLOWABILITY OF INTEREST MAY NOT BE LOOKED INTO WITHIN T HE SCOPE AND PURVIEW OF SECTION 154; HOWEVER WHEN THE ASSESSEE HAD SPECIFICALLY RAISED THIS ISSUE AND CHALLENGED THE MATER IN THE FIRS T APPELLATE AUTHORITY, THEN SAME SHOULD HAVE BEEN ADJUDICATED. 8. NOW IN LIGHT OF THE PECULIAR CIRCUMSTANCES A ND IN THE INTEREST OF SUBSTANTIAL JUSTICE AND EQUITY, WE THINK THAT INSTEAD OF BLANKET SETTING ASIDE THE ISSUE OR REMANDING BACK THE MATTER TO THE AO TO DECIDE THE 11 ISSUE AFRESH, WE DEEM FIT TO DECIDE THE MATTER ON THE B ASIS OF MATERIAL FACTS AVAILABLE ON RECORD. FIRST OF ALL, WE FIND THAT I N THE RETURN OF INCOME, THE ASSESSEE IN THE COMPUTATION OF INCOME HAD SHOWN TAX FREE INCOME OF RS. 4,23,434/-, CONSISTING OF RS. 85,531 ON UTI US-64 (TAX FREE BONDS) AND DIVIDENDS ON MUTUAL FUNDS OF RS. 3, 37,903. THE ASSESSEE FOR THE PURPOSE OF DISALLOWANCE U/S14A HAS DISALLOWED SUM OF RS. 4,25,836/-. IN THE COURSE OF THE ASSESSMENT PR OCEEDINGS, THE ASSESSEE BROUGHT TO THE NOTICE OF AO THAT NO EXPENSES HA VE BEEN INCURRED WHICH CAN BE RELATABLE TO THE INVESTMENTS MADE FOR EARNING OF TAX FREE INCOME, BECAUSE, FIRSTLY , ASSESSEE HAS NOT PAID ANY INTEREST EXPENDITURE ON SECURED LOANS AND ALL THE UNSECURED LO ANS WERE ON ACCOUNT OF ADVANCE AND NON REFUNDABLE SECURITY RECEI VED FROM TENANTS; AND SECONDLY , ASSESSEE HAS MADE INVESTMENT OUT OF HIS OWN SURPLUS FUNDS. THIS FACT IS DULY BORNE OUT FROM THE SUBMISSION S WHICH HAVE BEEN INCORPORATED ABOVE. WHEN THE ASSESSEE HAS NOT IN CURRED ANY EXPENDITURE ON ANY LOAN THEN OSTENSIBLY NO DISALLOWAN CE OF INTEREST EXPENDITURE CAN BE WORKED OUT IN THE GIVEN FORMULA OF RULE 8D. OTHERWISE ALSO, WHEN ASSESSEE HAS MADE THE ENTIRE INVE STMENTS OUT OF HIS OWN SURPLUS FUNDS, THEN ALSO, IN VIEW OF THE SETTLE D PROPOSITION OF LAW, SUCH DISALLOWANCE OF INTEREST UNDER RULE 8D IS U NCALLED FOR. ACCORDINGLY, WE DIRECT FOR THE DELETION OF SUCH DISAL LOWANCE OF INTEREST EXPENDITURE U/S 14A. SINCE NOTHING IS BORNE OUT OF THE ELEMENT OF INDIRECT EXPENDITURE, THEREFORE, AO IS DIRECTED TO EXAM INE AND DECIDE 12 ONLY THE INDIRECT/ADMINISTRATIVE EXPENSES WHICH CAN BE SAID TO BE ATTRIBUTABLE FOR THE EARNING OF EXEMPT INCOME HAVING RE GARD TO THE ACCOUNTS AND NATURE OF EXPENDITURE DEBITED AND IN ACC ORDANCE WITH THE LAW. THUS THE ISSUE OF DISALLOWANCE U/S 14A IS TR EATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. BEFORE US THE LD. DR HAD RAISED OBJECTION THA T, FIRSTLY, IT IS BEYOND THE SCOPE OF PROVISION OF SECTION 154; AND SECONDLY , SUCH A CLAIM COULD HAVE ONLY BE MADE BY WAY OF REVISED RETU RN. SO FAR AS THE FIRST OBJECTION IS CONCERNED, WE HAVE ALREADY TAKEN A NOTE OF THIS FACT AND THIS BEING A VERY PECULIAR CASE WHERE ASSESSEE H AS SUFFERED GRAVE INJUSTICE AND PROLONGED LITIGATION DUE TO INCORRECT UNDE RSTANDING OF LAW BY THE LD. CIT (A) IN THE FIRST ROUND OF PROCEEDIN GS AS HE HAD ONLY DIRECTED THE AO TO CONSIDER THIS CLAIM AND PASS A SEPA RATE ORDER, THE ASSESSEE UNDER A BONAFIDE BELIEF DID NOT FILE ANY AP PEAL BEFORE THE TRIBUNAL. IT IS IN THE LIGHT OF THIS PECULIAR FACT; WE HAVE DECIDED TO DECIDE THE APPEAL ON MERITS AT OUR STAGE ONLY. SO FAR AS THE ISSUE THAT SUCH A CLAIM COULD HAVE BEEN MADE BY WAY OF REVISED RETURN, NOW IT IS WELL A SETTLED PROPOSITION BY THE JUDGMENT OF HONBLE S UPREME COURT IN THE CASE OF GOETZ INDIA, 284 ITR 323, THAT SUCH A CLAIM CAN BE MADE BEFORE THE APPELLATE AUTHORITIES AND THIS PRINCIPL E HAS BEEN REITERATED AND CLARIFIED IN THE CATENA OF JUDGMENT IN CLUDING THAT OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. 13 JAI PARABOLIC SPRINGS LTD. [2008] 306 ITR 42 (DEL). ACCORDINGLY, WE REJECT THE CONTENTION OF THE LD. DR AND GRANT RELIEF TO THE ASSESSEE. HOWEVER AS A CAVEAT WE CLARIFY THAT THE FINDING GIVEN ABOVE IS PECULIAR TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND L OOKING TO THE HARDSHIP FACED BY THE ASSESSEE AT VARIOUS ROUNDS OF L ITIGATION BEFORE THE AUTHORITIES BELOW, HENCE IT SHALL NOT HAVE BINDING P RECEDENT ON ANY OTHER CASE. 10 IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2018. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20/03/2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI