SAIF ALI KHAN MANSURALI, MUMBAI V. ACIT 11(1), MUMBAI

ITA 7568/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2877 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K LALKAKA
• Keywords: Earning of tax free income
• Section: 143(3); 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 7568 /MUM/ 201 3 ( / ASSESSMENT YEAR : 20 1 0 - 11 ) SAIF ALI KHAN MANSURALI , C/O K K LALKAKA AND CO, 507, CHURCHGATE CHAMBERS 5, NEW MARINE LINES , MUMBAI - 400020 / VS. ASST . COMMISSIONER OF INCOME TAX - 11(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI . ./ PAN : AAHPKO520E / ASSESSEE BY SHRI K K LALKAKA / ASSESSEE BY SHRI VINOD KUMAR / DATE OF HEARING : 16 . 6. 2016 / DATE OF PRONOUNCEMENT : 22. 6. 2016 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER DATED 5.11.2013 PASSED BY LD.CIT(A) - 3 , MUMBAI , AND IT RELATES TO THE ASSESSMENT YEAR 20 10 - 11 . 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED HIS RETURN OF INCOME ON 30.9.2010 DECLARING A TOTAL INCOME OF RS.20,80,03,804/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE . DURING THE COURSE OF 2 7568 /MUM/ 201 3 ASSES SMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS TAX FREE INCOME AND HAS NOT DISALLOWED ANY EXPENSES ATTRIBUTABLE TO EARNING OF SUCH INCOME . SIMILARLY THE ASSESSEE HAS INCURRED SOME EXPENSES ON THE TRAVELLING OF HIS FIANCE MS.KAREENA KAPOOR AND ALSO DISALLOWED SOME TRAVELLING EXPENSES ON ADHOC BASIS. THE AO FRAMED THE ASSESSMENT VIDE ORDER DATED 4.2.2013 PASSED U/S 143(3) BY ASSESSING THE INCOME OF THE ASSESSEE AT RS.21,17,27,479/ - BY MAKING VARIOUS DISALLOWANCES AS STATED IN PARA 8 OF THE ASSESS MENT ORD ER. THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE BY DIRECTING THE AO T O CONSIDER HIS DIRECTIONS WITH REGARD TO WRONG CALCULATION OF AVERAGE INVESTMENT. 3. THE ISSUE RAISED IN THE FIRST GROUNDS OF APPEAL RELATES TO TH E WRONG CONFIRMATION OF DISALLOWANCE U/S 14A AMOUNTING TO RS.4,60,870/ - BY TAKING INTO ACCOUNT THE INVESTMENT S WHICH ARE NOT TAX FREE INCOME YIELDING INVESTMENT S . 4. THE LD.COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED BEFORE US THAT THE DISALLOWANCE MADE U/S 14A R.W.S.8D (2)(II) AMOUNTING TO RS.4 , 60 , 870/ - HAS BEEN WORKED OUT AND CALCULATED B Y TAKING IN TO CONSIDERATION THE ENTIRE INVES TMENT S STANDING AT THE BEGINNING AND AT THE END OF YEAR S UBSTANTIAL PART OF WHICH ARE INVESTMENT S ON WHICH INCOME WAS T AXABLE AND THEREFORE THE CALCULATION AS MADE BY T HE AO AND CONFIRMED BY THE LD CIT(A) WAS TOTALLY WRONG AN AGAINST T HE PROVISIONS OF LAW. THE LD.COUNSEL DREW OU R ATTENTION TO PAGE 19 3 7568 /MUM/ 201 3 OF THE PAPER BOOK WHICH CONTAINS TH E DETAILS O F TOTAL INVESTMENTS INCL UDING THE INVESTMENT IN SHARES. FINALLY, THE LD.COUNSEL OF THE ASSESSEE PRAYED THAT THE ORDER OF LD.CIT(A) B E SET ASIDE AND THE AO BE DIRECTED TO CALCULATE THE DISALLOWANCE ONLY BY TAKING INTO ACCOUNT THE TAX FREE INCOME YIELDING I NVESTMENT S . 5 . ON THE OTHER HAND , THE LD. DR RELIED HEAVILY ON THE ORDERS OF THE AUTHORITIES BELOW. 6 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND FROM PAGE 19 OF THE PAPER BOOK WHI CH COMPRISED OF DETAILS OPENING AND CLOSING INVESTMENT S CONSIDERED BY THE AO AS ON 1.4.2009 AND 31.3.2010 RS.5,53,64,439 AND RS.12,89,83,182/ - RESPECTIVELY. FROM THE DETAILS OF THE SAID INVESTMENT S WE FIND TH A T THERE WERE NUMBER OF INVESTMENT S THE INCOME OF WHICH ARE TAXABLE IN THE HANDS OF THE ASSESSEE. WE THEREFORE FIND MERIT IN THE ARGUMENT OF THE LD.AR THAT THE CALCULATION OF DISALLOWANCE U/S 14A R.W.R 8D(2) ( I II) BY TAKING INTO ACCOUNT THOSE INVESTMENT S, WHICH YIELDS TAX FREE INCOME AND DIRE CT THE AO TO WORK OUT THE DISALLOWANCE BY TAKING OTHER INVESTMENTS WHICH YIELD EXEMPT INCOME. THE GROUND OF APPEAL IS ALLOWED. 7 . THE SECOND GROUND OF APPEAL IS AGAINST THE UPHOLDING THE DISALLOWANCE OF RS.51,035/ - IN RESPECT OF TRAVELLING EXPENDITUR E INCURRED ON MS.KAREENA KAPOOR 4 7568 /MUM/ 201 3 THE FIANCE OF THE ASSESSEE . THE LD.COUNSEL OF THE ASSESSEE SUBMITTED BEFORE US THAT THE TRAVELLING EXPENSES OF MS.KAREENA KAPOOR WAS OUT OF BUSINESS EXIGENCY AND THEY WERE ACTING IN THE FILM LOVE AAJ KAL . 8 . ON THE OTHER HAND, THE LD. DR SUPPORT HEAVILY THE ORDERS OF AUTHORITIES BELOW. 9 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RECORD , WE FIND THAT THE DISALLOWANCE MADE BY THE AO AND FOUND BY THE LD.CIT(A) IS REASONABLE AND CORRECT IN VIEW OF THE FACT THAT BOTH A R E IN THE SAME PROFESSION AND IF ANY TRAVELLING EXPENSES ARE INCURRED BY T HE ASSESSEE FOR HIS CO - ACTRESS THAT SHOULD BE INCURRED BY T HE PERSON CONCERNED AND NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE . WE FIND FROM THE ORDERS OF AU THORITIES BELOW THAT TOTAL EXPENSES INCURRED ON FOREIGN TRAVELLING OF MS.KAREENA KAPOOR AND HER MOTHER WERE RS.5,63,629/ - AND RS.5,12,594/ - WAS DEBITED ON CAPITAL ACCOUNT BY THE ASSESSEE AND HENCE THE AO HAS RIGHTLY DISALLOWED RS.51,035/ - BEING THE DIFF ERENCE BETWEEN ACTUALLY INCURRED AND DEBITED TO THE CAPITAL ACCOUNT. THE GROUND N O.2 IS ACCORDINGLY DISMISSED. 10. THE ISSUE RAISED IN THE 3 RD GROUND OF APPEAL IS WITH REG ARD TO CONFIRMATION OF DISALLOWANCE OF RS.4,06,480/ - BEING 10% OF REMAINING TRAV ELLING EXPENSE ON ADHOC BASIS. 5 7568 /MUM/ 201 3 THE LD. CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY CONFIRMING THE ACTION OF THE AO WITHOUT GIVING ANY COGENT REASONING . 1 1 . THE LD. AR SUBMITTED BEFORE US THAT THE ADHOC DISALLOWANCE WAS TOTALLY WRONG AND WITHOUT ANY BASIS WHICH WAS WORKED OUT BY TAKING INTO ACCOUNT 10% DISALLOWANCE OF THE TOTAL TRAVELLING EXPENSES AFTER EXCLUDING THE AMOUNT AS REFERRED IN GROUND NO.2. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US FOR DELETION OF ADDITION BY SETTING ASIDE THE ORDER OF LD.CIT(A). 12 . ON THE OTHER HAND, THE LD.DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 1 3 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US IN RESPECT OF THE ISSUE IN HAND INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE OBSERVE THAT THE AO MADE DISALLOWANCE ON ADHOC BASIS FOR WHICH NO REASON WHATSOEVER IS GIVEN IN THE ASSESSMENT ORDER AND NO BASIS WAS DISCUSSED IN THE ASSESSMENT ORDER . T HE LD.CIT(A) ALSO MECHANICALLY CONFIRMED THE ADDITION WITHOUT PASSING ANY SPEAKI NG ORDER. IN VIEW OF THIS SITUATION, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) CANNOT BE SUSTAINED WHICH WAS MADE WITHOUT GIVING ANY REASON OR JUSTIFICATION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS DISALLOWANCE. 6 7568 /MUM/ 201 3 1 4 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22. 6. 2016. S D SD ( SHAILENDRA KUMAR YADAV ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 22 .6.2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI