Shri Gaurang Manubhai Doshi, Ahmedabad V. The ACIT.,Cent.Circle-2(1), Ahmedabad

ITSSA 150/AHD/2009

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7993 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-11-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 10-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Opportunity of being heard; Condonation of delay
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.(SS) NO. 150, 151/ AHD/2009 (ASSESSMENT YEAR 2001-02 & 2002-03 RESPECTIVELY) GAURANG MANUBHAI DOSHI, 26, SAMASTA BRAHKSHATRIYA SOC. NARAYANNAGAR ROAD, PALDI, AHMEDABAD VS. ACIT, CENT. CIRCLE 2(1), AHMEDABAD PAN/GIR NO. : AAZPD2973L (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S N DIVETIA, AR RESPONDENT BY: SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 17.11.2011 DATE OF PRONOUNCEMENT: 25.11.2011 O R D E R PER SHRI A. K. GARODIA, AM:- BOTH THESE APPEALS ARE FILED BY THE ASSESSEE, WHIC H ARE DIRECTED AGAINST THE COMBINED ORDER OF LD. CIT(A) III, AHMED ABAD DATED 07.08.2009 FOR THE ASSESSMENT YEARS 2001-02 AND 200 2-03. SINCE THE ISSUE INVOLVED IS SIMILAR, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BOTH THESE APPEALS WERE TIME BARRED BY THREE DAY S AND THE ASSESSEE HAD FILED AN APPLICATION FOR CONDONATION OF DELAY I N WHICH, IT WAS SUBMITTED BY THE ASSESSEE THAT THESE APPEALS WERE R EQUIRED TO BE FILED BEFORE THE TRIBUNAL ON OR BEFORE 08.11.2009 WHICH W AS SUNDAY AND ON THE NEXT WORKING DAY I.E. 09.11.2009, ASSESSEE HAD TO G O TO PALLITANA I.T.(SS).NO.150,151 /AHD/2009 2 PILGRIMAGE ON COMPLETION OF CHATUR MAS AND HENCE, H E COULD NOT MAKE PAYMENT OF APPEAL FEE AND SIGN THE APPEAL MEMO AND THE DELAY OF THREE DAYS HAS ARISEN DUE TO THESE REASONS AND HENCE, IT SHOULD BE CONDONED. CONSIDERING THE FACTS OF THE PRESENT CASE, THE DELA Y IS CONDONED FOR BOTH THE YEARS. 3. IT WAS SUBMITTED BY THE LD. A.R. THAT GROUND NO. 3 & 1 IS NOT PRESSED IN BOTH THE YEARS AND ACCORDINGLY, THESE GR OUNDS IN BOTH THE YEARS ARE REJECTED AS NOT PRESSED. 4. THE ONLY ISSUE INVOLVED IS REGARDING DISALLOWANC E MADE BY THE A.O. U/S 14A TO THE EXTENT OF 30% OF DIVIDEND INCOM E IN BOTH THE YEARS AND IN THIS MANNER, HE MADE DISALLOWANCE OF RS.2,66 ,892/- IN ASSESSMENT YEAR 2001-02 AND RS.5,42,337/- IN ASSESSMENT YEAR 2 002-03. 5. IT WAS THE SUBMISSION BY THE LD. A.R. THAT THIS AD-HOC DISALLOWANCE IS NOT JUSTIFIED AND IT IS EXCESSIVE ALSO AND HENCE , ONLY REASONABLE DISALLOWANCE SHOULD BE MADE AS HAS BEEN HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTUR ING PVT. LTD. VS DCIT AS REPORTED IN 194 TAXMAN 203. 6. AS AGAINST THIS, LD. D.R. OF THE REVENUE DRAWN O UR ATTENTION TO PARA 5.2 OF THE ASSESSMENT ORDER IN ASSESSMENT YEAR 2001 -02, WHERE IT IS NOTED BY THE A.O. THAT THE ASSESSEE HAS NOT FILED ANY PRO OF TO ESTABLISH THAT THE SHARES HAVE BEEN PURCHASED OUT OF ITS OWN FUNDS. I T IS ALSO NOTED BY THE A.O. THAT THE ASSESSEE IN HIS SUBMISSION HAS ACCEPT ED TO HAVE BORROWED FUNDS FOR INVESTMENT IN SHARES AND HAS PAID INTERES T ON LOAN TAKEN FOR THE PURCHASE OF SHARES. IT WAS ALSO SUBMITTED THAT SIM ILARLY IN THE NEXT YEAR ALSO, SIMILAR OBSERVATIONS ARE MADE BY THE A.O. IN PARA 5.2 OF THE ASSESSMENT ORDER OF THAT YEAR AND IT WAS SUBMITTED THAT UNDER THESE FACTS, THE DISALLOWANCE MADE BY THE A.O. IS VERY MUCH REAS ONABLE AND HENCE, THE ASSESSMENT ORDER ON THIS ISSUE SHOULD BE UPHELD . I.T.(SS).NO.150,151 /AHD/2009 3 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY THE LD. A.R. OF THE ASSESSEE. W E FIND THAT IN BOTH THE YEARS, THE A.O. HAS MADE DISALLOWANCE TO THE EXTENT OF 30% OF DIVIDEND INCOME. IN OUR CONSIDERED OPINION, PERCENTAGE OF D IVIDEND INCOME SHOULD NOT BE THE BASIS FOR MAKING DISALLOWANCE U/S 14A BECAUSE THE EXPENSE TO BE INCURRED FOR EARNING THE DIVIDEND INC OME IS NOT DEPENDING ON QUANTUM OF DIVIDEND. IN ONE YEAR, THE COMPANY M AY DECLARE MORE DIVIDEND AND IN OTHER YEAR, THE COMPANY MAY DECLARE LESSER DIVIDEND AND EVEN IT MAY NOT DECLARE ANY DIVIDEND AND HENCE, THE EXPENSES OF THE ASSESSEE WILL NOT VARY ON THE BASIS OF DIVIDEND DEC LARED BY THE COMPANY AND THEREFORE, THIS BASIS ADOPTED BY THE A.O. FOR M AKING DISALLOWANCE U/S 14A IS NOT APPROPRIATE. REGARDING THIS SUBMISSION OF THE LD. A.R. THAT DISALLOWANCE MADE BY THE A.O. IS EXCESSIVE, WE WOUL D LIKE TO OBSERVE THAT NO SUCH DETAILS OR EVIDENCE HAS BEEN BROUGHT O UT ON RECORD BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW OR BEFORE US SHOWING THAT THE DISALLOWANCE MADE BY THE A.O. IS EXCESSIVE. IN SPI TE OF THE SPECIFIC QUERY BY THE BENCH, LD. A.R. DID NOT SUBMIT ANY DET AIL REGARDING THE ACTUAL EXPENSES INCURRED BY THE ASSESSEE IN RESPECT OF EARNING DIVIDEND INCOME. HE HAS ALSO NOT CONTROVERTED THE FINDING O F THE A.O. THAT INTEREST BEARING BORROWED FUNDS WERE USED FOR THE PURPOSE OF MAKING INVESTMENT IN SHARES AND HENCE IN OUR CONSIDERED OPINION, THIS ISSUE SHOULD GO BACK TO THE FILE OF THE A.O. FOR FRESH DECISION FOR MAKI NG REASONABLE DISALLOWANCE U/S14A AS PER THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ & BOYCE MANUFACTURIN G PVT. LTD. (SUPRA). WE ORDER ACCORDINGLY. THE A.O. SHOULD PASS NECESS ARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING AD EQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I.T.(SS).NO.150,151 /AHD/2009 4 7. THERE WAS ONE MORE SUBMISSION BY THE LD. A.R. TH AT DIRECTION SHOULD BE GIVEN TO THE A.O. THAT IN ANY CASE, THE D ISALLOWANCE IF MADE BY HIM, SHOULD NOT EXCEED 30% OF THE DIVIDEND INCOME B EING DISALLOWANCE MADE BY THE A.O. IN THE IMPUGNED ASSESSMENT ORDERS. IN THIS REGARD, WE WOULD LIKE TO OBSERVE THAT NO SUCH DIRECTION IS REQ UIRED TO BE GIVEN BECAUSE WE HAVE FOUND THAT THE BASIS ADOPTED BY THE A.O. IS NOT SUSTAINABLE AND WE HAVE DIRECTED TO FOLLOW THE JUDG MENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ & BOYCE MANUFACTURING PVT. LTD. (SUPRA) AND, THEREFORE, PRO PER DISALLOWANCE HAS TO BE MADE BY HIM WHICH IS REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AFTER ALLOWING ADEQUATE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.(SS).NO.150,151 /AHD/2009 5 1. DATE OF DICTATION 22/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23/11.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.24/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 25/11/2011 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.25/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25/11/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..