AMEER TRADING CORPORATION LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 7731/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1374 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Unexplained cash credit; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7731/M/2011 ASSESSMENT YEAR: 2008-09) M/S. AMEER TRADING CORPORATION LIMITED, 310B, VEER SAVARKAR MARG, DADAR (W), MUMBAI-400 028 PAN: AABCA 0761A / VS. ITO 2(1)(1), AAYAKAR BHAVAN, MUMBAI ( / APPELLANT) ( /RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI RAJESH KUMAR YADAV, D.R. / DATE OF HEARING : 06.02.2017 / DATE OF PRONOUNCEMENT : 07.04.2017 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 16.08.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2008-09. 2. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE ON 15 .11.11 AND SINCE THEN THE MATTER HAS BEEN ADJOURNED SEVERAL TIMES, BUT NONE H AS APPEARED ON BEHALF OF THE ASSESSEE DESPITE THE NOTICE BY RPAD HAS BEEN SE RVED BY ITAT SEVERAL TIMES. IT SEEMS THAT THE ASSESSEE IS NO MORE INTER ESTED IN PURSUING ITS APPEAL. HOWEVER, CONSIDERING THE PRINCIPLES OF NATURAL JUST ICE, WE PROCEED TO DECIDE THE APPEAL OF THE ASSESSEE ON MERITS EX-PARTE OF TH E ASSESSEE AFTER HEARING THE LD. D.R. ITA NO.7731/M/2011 M/S. AMEER TRADING CORPORATION LIMITED 2 THE ASSESSEE, THROUGH ITS GROUNDS OF APPEAL, HAS R AISED TWO EFFECTIVE ISSUES. GROUND NO.1 IS RELATING TO THE DISALLOWANC E UNDER SECTION 14A WHEREAS GROUND NO.2 IS RELATING TO THE ADDITION OF AN AMOUN T OF RS.2,76,180/- INTO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED CR EDIT INTO THE BANK ACCOUNT OF THE ASSESSEE. GROUND NO.1 3. AS OBSERVED ABOVE, GROUND NO.1 IS RELATING TO TH E DISALLOWANCE OF EXPENSES AMOUNTING TO RS.5,09,482/- UNDER SECTION 1 4A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES. IT HAS BEEN PLEADED IN THE GROUNDS OF APPEAL THAT THE ASSESSEE DURING THE YEAR HAD EARNED EXEMPT INCOME OF RS.833/- ONLY, BEING DIVIDEND INCOME OF RS.344/- AND LONG TERM CAPITAL GAIN OF RS.489/-. HOWEVER, THE ASSESSING OFFICER (HEREI NAFTER REFERRED TO AS THE AO) MADE THE TOTAL DISALLOWANCE OF RS.5,09,482/- OF THE EXPENDITURE UNDER SECTION 14A OF THE ACT IN RELATION TO THE ABOVE STA TED EXEMPT INCOME EARNED BY THE ASSESSEE. THE SAID DISALLOWANCE HAS BEEN FURTH ER CONFIRMED BY THE LD. CIT(A). 4. IT CAN BE NOTED FROM THE ASSESSMENT ORDER THAT W HILE MAKING THE AFORESAID DISALLOWANCE, THE AO HAS RELIED UPON THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF CHEM INVEST LTD. VS. I TO IN ITA NO.87/DEL/08. IT IS TO BE NOTED THAT THE SPECIAL BENCH DECISION O F THE TRIBUNAL IN THE CASE OF CHEM INVEST LTD. (SUPRA) HAS BEEN REVERSED BY THE HONBLE DELHI HIGH COURT. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEM INVESTMENTS VS. CIT (2015) 61 TAXMAN.COM 118 HAS HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR AND THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTA L INCOME, IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN ACTUAL RE CEIPT OF INCOME WHICH IS NOT INCLUDED IN THE TOTAL INCOME DURING THE RELEVANT PR EVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. ALMOST ITA NO.7731/M/2011 M/S. AMEER TRADING CORPORATION LIMITED 3 IDENTICAL ISSUE HAS BEEN TAKEN BY THE HONBLE ALLAH ABAD HIGH COURT IN THE CASE OF CIT KANPUR VS. M/S. SHIVAM MOTORS PVT. LTD. IN ITA NO.88 OF 2014 VIDE ORDER DATED 05.05.2014; BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECTH ENERGY PVT. LTD. IN ITA NO.239 OF 20 14 VIDE ORDER DATED 24.03.2014 AND BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. DELITE ENTERPRISES IN ITA NO.110 OF 2009 VIDE ORDER DATED 26.02.09. FURTHER, THE HONBLE DELHI HIGH COURT IN THE CASE O F JOINT INVESTMENT PRIVATE LIMITED REPORTED IN 372 ITR 694 HAS HELD THAT SECTI ON 14 OF THE ACT OR RULE 8D CANNOT BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME OF THE ASSESSEE IS TO BE DISALLOWED. THAT THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A, AND IS ONLY TO THE EXTENT OF DISALLOWI NG EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENT IRE AMOUNT OF TAX EXEMPT INCOME. IN THE LIGHT OF THE ABOVE STATED CASE LAWS , THE DISALLOWANCE UNDER SECTION 14A ON THIS ISSUE IS, THUS, RESTRICTED TO T HE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE. THIS ISSUE IS, THEREFORE, PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. GROUND NO.2 5. VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE ADDITION ON ACCOUNT OF UNEXPLAINED CREDITS IN ITS BANK ACCOUNT. THE ASSES SEE HAS PLEADED BEFORE THE LOWER AUTHORITIES THAT THE SAID AMOUNT DOES NOT BEL ONG TO IT. HOWEVER, NO EVIDENCE IN THIS RESPECT HAS BEEN FURNISHED BEFORE THE LOWER AUTHORITIES. THE AMOUNT HAS BEEN FOUND CREDITED INTO THE BANK ACCOUN T OF THE ASSESSEE. THE LOWER AUTHORITIES, THEREFORE, RIGHTLY MADE THE ADDI TION OF THE SAID AMOUNT TREATING THE SAME AS INCOME OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. THIS GR OUND IS THEREFORE DECIDED AGAINST THE ASSESSEE. ITA NO.7731/M/2011 M/S. AMEER TRADING CORPORATION LIMITED 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.04.2017. SD/- SD/- ( / RAJENDRA) ( / SANJAY GARG) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI / DATED 07 .04.2017 * KISHORE /COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED TO TOTO TO : :: : 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. / THE CIT(A) - 4. / CIT 5. / THE DR CONCERNED BENCH , 6. / GUARD FILE. / // / BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI