S.M. Mehta & Sons (HUF), Ludhiana V. ACIT, Ludhiana

ITA 855/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8382 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 26-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 855/CHD/2015 (ASSESSMENT YEAR : 2008-09) M/S S.M. MEHTA & SONS (HUF), VS. THE A.C.I.T., C/O MEHTA ENGINEERS, CIRCLE-1, D-118-119, PHASE-V, LUDHIANA. FOCAL POINT, LUDHIANA. PAN: AAIHS6216E (APPELLANT) (RESPONDENT) APPELLANT BY : NONE (WRITTEN SUBMISSION) RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 25.02.2016 DATE OF PRONOUNCEMENT : 01.03.2016 O R D E R THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA DATED 28.9.2015 FOR ASSESSMEN T YEAR 2008-09, CHALLENGING THE DISALLOWANCE OF RS.1,91,17 9/- UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT). 2. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MAD E A NUMBER OF INVESTMENTS IN SHARES AND MUTUAL FUNDS, F ROM WHICH THE ASSESSEE WAS EARNING EXEMPT INCOME DURING THE 2 YEAR. ON THE OTHER HAND, THE ASSESSEE HAD ALSO DEB ITED INTEREST EXPENDITURE UNDER SECTION 57 OF THE ACT ON BORROWED FUNDS AMOUNTING TO RS.5,89,471/-. THE ASS ESSEE WAS, THEREFORE, ASKED TO EXPLAIN WHY EXPENSES INCUR RED FOR EARNING DIVIDEND INCOME BE NOT DISALLOWED. THE ASS ESSEE EXPLAINED THAT NO EXPENSES COVERED BY THE PROVISION S OF SECTION 14A OF THE ACT, HAS BEEN CLAIMED AGAINST TH E EXEMPT INCOME RECEIVED BY THE ASSESSEE. THE ASSESS EE ALSO EXPLAINED THAT SECTION 14A OF THE ACT IS NOT A PPLICABLE IN THIS CASE. THE ASSESSEE HAS ALREADY FILED COMPL ETE DETAILS OF ADDITIONS IN INVESTMENTS AND SOURCES THE REOF. THE ASSESSEE HAS NOT CLAIMED ANY INCOME NOT INCLUDI BLE IN TOTAL INCOME, AGAINST WHICH BORROWED FUNDS WERE UTI LIZED. THE COMPLETE DETAILS OF ACQUISITION OF SHARES/MUTUA L FUNDS WERE FILED. THE DETAILS OF ACQUISITION OF SH ARES WOULD SHOW THAT INVESTMENTS WERE MADE IN EARLIER YE ARS. IN VIEW OF THE DETAILS OF ACQUISITION OF SHARES, NO INVESTMENT WAS MADE OUT OF THE FUNDS BORROWED EITHE R DURING THE PREVIOUS OR THE EARLIER YEARS. THE ASS ESSING OFFICER WAS, HOWEVER, NOT SATISFIED WITH THE REPLY FILED BY THE ASSESSEE AND MADE DISALLOWANCE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS OUTSTANDING OPEN ING BALANCE OF LOANS AMOUNTING TO RS.44,40,000/- AS ON 31.3.2007 AND RS.40,34,808/- AS ON 31.3.2006 AND TH E ASSESSEE HAS BEEN PAYING INTEREST ON THESE LOANS. THE ASSESSEE MADE SIMILAR SUBMISSION BEFORE THE LEARNED CIT (APPEALS) AND IT WAS EXPLAINED THAT THE SHARES WERE PURCHASED BETWEEN THE PERIOD 1992 TO 2005 AND 3 INVESTMENT IN THE SHARES HAD NO RELEVANCE TO THE FU NDS, NOW RAISED. IT WAS ALSO SUBMITTED THAT NO INVESTME NT WAS MADE OUT FUNDS BORROWED EITHER DURING THE PREVIOUS YEAR OR EARLIER YEARS. THE LEARNED CIT (APPEALS) ALSO D ID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE. 3. THE ASSESSEE HAS FILED WRITTEN SUBMISSION, WHIC H IS TAKEN INTO CONSIDERATION. I HAVE ALSO HEARD THE LEARNED D.R. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN TH E CASE OF CIT-I, LUDHIANA VS. M/S ABHISHEK INDUSTRIE S LTD. IN INCOME TAX APPEAL NO.320 OF 2013 VIDE JUDGMENT D ATED 27.1.2015 CONSIDERED THE ISSUE OF DISALLOWANCE UNDE R SECTION 14A OF THE ACT. IN THIS CASE, THE LEARNED CIT (APPEALS) SET ASIDE THE FINDINGS BY HOLDING THAT TH E ASSESSING OFFICER HAD FAILED TO PROVE THAT THE INTE REST BEARING FUNDS WERE USED BY THE ASSESSEE. THE HON'B LE HIGH COURT FOLLOWING ITS EARLIER DECISION IN THIS C ASE OBSERVED THAT SECTION 14A OF THE ACT REQUIRES THE ASSESSING OFFICER TO RECORD SATISFACTION THAT THE I NTEREST BEARING FUNDS HAVE BEEN USED TO EARN TAX FREE INCOM E. THE SATISFACTION TO BE RECORDED MUST BE BASED UPON CREDIBLE AND RELEVANT EVIDENCE. THE ONUS, THEREFOR E, TO PROVE THAT THE INTEREST BEARING FUNDS WERE USED, LI ES SQUARELY ON THE SHOULDERS OF THE REVENUE. THE ASS ESSEE IN THE PRESENT CASE HAS BEEN CLAIMING BEFORE THE AUTHORITIES BELOW THAT THE INVESTMENTS WERE OLD AS HAVE BEEN MADE BETWEEN THE PERIOD 1992 TO 2005 AND NO 4 BORROWED FUNDS HAVE BEEN USED AND NO INVESTMENTS HA VE BEEN MADE IN THIS YEAR AS WELL AS IN THE EARLIER YE ARS OUT OF THE BORROWED FUNDS. THEREFORE, THE PLEA OF THE ASSESSEE SHOULD HAVE BEEN CONSIDERED IN PROPER PERSPECTIVE I N ACCORDANCE WITH LAW IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. (SUPRA). SINCE NO FINDING S FACT HAVE BEEN GIVEN BY THE LEARNED CIT (APPEALS) ON THE SAME, THEREFORE, I SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE LEARNED C IT (APPEALS) WITH DIRECTION TO RE-DECIDE THIS ISSUE IN ACCORDANCE WITH LAW IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. (SUPRA). THE LEARNED CIT (APPEALS) SHALL GIVE REASONABLE SUFFICIENT OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF MARCH, 2016. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 1 ST MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5