DCIT, CC-XXV, KOLKATA, Kolkata V. M/s Baidyanath Glass Works (P) Ltd., Kolkata

ITSSA 42/KOL/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3089 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 11-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VARKE JUDICIAL MEMBER
• Assessee Lawyers: SUBHRO DAS JCITSRDR SHRI
• Keywords: Unexplained cash credit; Capital asset; Gift; Salary income; Additional evidence; Corroborative evidences; Revised return
• Section: 143(3); 2(14); 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI ABY.TVARKE, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 42 / KOL / 2014 ASSESSMENT YEAR :2006-07 ITO, WARD-4(2), P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAVAN, 8 TH FLOOR, KOLKATA-01 V/S . SHRI KEDAR NATH FATEHPURIA 1, R.N. MUKHERJEE ROAD, KOLKATA-700 001 [ PAN NO.AADPF 5700 D ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SUBHRO DAS, JCIT-SR-DR /BY RESPONDENT SHRI SOUMITRA CHOUDHURY, ADVOCATE /DATE OF HEARING 09-01-2017 /DATE OF PRONOUNCEMENT 08-02-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANTMEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOLKATA DA TED 04.09.2013. ASSESSMENT WAS FRAMED BY ITO WARD-4(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 05.12.2008 FOR ASSESSMENT YEAR 2006-07. SHRI SUBHRO DAS, LD. SENIOR DEPARTMENTAL REPRESENTA TIVE REPRESENTED ON BEHALF OF REVENUE AND SHRI SOUMITRA CHOUDHURY, LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE. ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 2 2. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND DERIVING HIS INCOME FROM SALARY, SALE OF LAND AND I NCOME FROM PARTNERSHIP FIRM NAMELY M/S SANTI COMMERCIAL CORPORATION. THE ASSESS EE IS ALSO A PROPRIETOR OF M/S K.N. FATEHPURIA AND COMPANY. THE ASSESSEE FO R THE YEAR UNDER CONSIDERATION HAS FILED HIS RETURN DECLARING TOTAL INCOME OF 4,11,220/-. THEREAFTER, CASE WAS SELECTED FOR SCRUTINY UNDER CA SS MODULE. ACCORDINGLY, NOTICE U/S 143(2)/142(1) OF THE ACT WAS ISSUED UPON THE ASSESSEE. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT AFT ER MAKING CERTAIN DISALLOWANCES / ADDITIONS TO THE TOTAL INCOME OF AS SESSEE. 3. FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION U/S. 68 OF THE ACT FOR 25 LACSON THE BASIS OF ADDITIONAL EVIDENCES WHICH WERE ACCEPTED IN CONTRAVENTION OF P ROVISION OF RULE 46A OF THE INCOME TAX RULE, 1962 (HEREINAFTER REFERRED TO AS THE RULE). THE ASSESSEE IN HIS REVISED RETURN HAS SHOWN ADVANC E OF 25 LACS WHICH WAS RECEIVED AGAINST THE SALE OF AGRICULTURAL LAND. HOW EVER, ASSESSING OFFICER TREATED THE SAME AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AS THE SUPPORTING EVIDENCE WERE SUBMITTED JUST ONE DAY BEF ORE PRIOR TO COMPLETION OF ASSESSMENT.THEREFORE THE AO COULD NOT VERIFY THE EV IDENCE AS SUBMITTED BY ASSESSEE. ACCORDINGLY, AO DISALLOWED A SUM OF 25 LACS AS UNEXPLAINED CASH CREDIT AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT LAND IN QUESTION WAS SOLD O N 17.07.2006 WHICH WAS SHOWN IN THE RETURN OF INCOME IN THE SUBSEQUENT YEA R. THE ASSESSEE ALSO SUBMITTED THE SALE DEED DATED 17.07.2006 IN SUPPORT OF HIS CLAIM. AFTER CONSIDERING THE SUBMISSION OF ASSESSEE LD. CIT(A) D ELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE ARGUMENTS ADDU CED BY THE AR OF THE APPELLANT AND THE DOCUMENTARY EVIDENCES PRODUCE D AND FIND THAT THE SAID AMOUNT OF RS.25,00,000/- WAS RECEIVED AS A N ADVANCE AGAINST ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 3 SALE OF LAND AT DONGARGAON FOR WHICH PURPOSE SALE D EED WAS AVAILABLE WITH THE AO AT THE TIME OF REMAND PROCEEDINGS AND T HE SAID AMOUNT WAS RECEIVED THROUGH A DEMAND DRAFT. NO ATTEMPT WAS MADE BY THE A.O TO VERIFY THE DOCUMENTATION IN THE FORM OF SALE DEED AND THE ORIGIN AND SOURCE OF RS.25,00,000/- RECEIVE BY THE APPELLA NT THROUGH BAKING CHANNELS. EVEN THE EXISTENCE OF SUCH A LAND COULD H AVE BEEN VERIFIED BY EXAMINING THE BALANCE SHEET OF THE APPELLANT BUT NO SUCH VERIFICATION WAS CONDUCTED. THE AR OF THE APPELLANT HAS ALSO IDE NTIFIED THE PAN OF THE PARTY WHO PURCHASED THE SAID LAND BUT AGAIN NO VERIFICATION WAS CONDUCTED. SECTION 68 OF THE IT ACT, 1961 IS INVOKE D ONLY WHEN THE ASSESSEE HAS NO EXPLANATION TO OFFER OR THE EXPLANA TION SO OFFERED IS NOT FOUND TO BE SATISFACTORY BY THE ASSESSING OFFICER. IN THIS CASE, AN EXPLANATION HAS BEEN OFFERED BY THE AR OF THE APPEL LANT AND THIS EXPLANATION HASNOT BEEN CONTRADICTED BY THE AO TROU GH A PROCESS OF VERIFICATION. UNDER THESE CIRCUMSTANCES, I AM OF TH E VIEW THAT THIS IS NOT A FIT CASE FOR ATTRACTING THE PROVISION OF SECTION 68 OF THE IT ACT, 1961. ADDITION MADE ON THIS ACCOUNT FOR S. 25,00,000/- IS ACCORDINGLY DELETED. AGGRIEVED BY THIS, REVENUE HAS COME UP IN APPEAL BE FORE US. 5. BEFORE US LD. DR FOR THE REVENUE SUBMITTED THAT LD. CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE IN CONTRAVENTION TO TH E PROVISION OF RULE 46A OF THE INCOME TAX RULES, 1962 (HEREUNDER REFERRED TO A S THE RULE) AND PRAYED BEFORE THE BENCH TO RESTORE THE ISSUE BACK TO THE F ILE OF AO FOR FRESH EXAMINATION. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE FILED PA PER BOOK WHICH IS RUNNING PAGES 1 TO 85 AND STATED THAT LD. CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER VIDE LETTER DATED 10.08.2009, HOW EVER, AO DID NOT VERIFY THE CONTENTS OF THE DOCUMENT CALLING FOR REMAND REPORT AND SIMPLY DENIED TO ADMIT THE ADDITIONAL EVIDENCE VIDE LETTER DATED 16.08.201 1. THE AO DENIED TO FURNISH THE COMMENTS ON THE DOCUMENT EVEN AFTER EXPIRY OF T WO YEARS FROM THE DATE OF LETTER ISSUED BY LD. CIT(A). HE RELIED ON THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE, AO HAS TREATED THE ADVANCE MONEY RECEIVED BY ASSESSEE AGAINST THE SALE OF AGRICULTURAL LAND AT A FUTURE DATE AS CASH CREDIT U/S. 68 OF THE ACT. THE REASON FOR TREATING THE CASH ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 4 CREDIT U/S. 68 OF THE ACT WAS THAT ASSESSEE FAILED TO FURNISH SUPPORTING EVIDENCE DURING THE ASSESSMENT PROCEEDINGS. IN FACT , THE DOCUMENTS WERE SUBMITTED JUST ONE DAY PRIOR TO COMPLETION OF ASSES SMENT PROCEEDINGS AND THESE DOCUMENTS WERE NOT CONSIDERED BY AO. HOWEVER, ON PERUSAL OF ORDERS OF AUTHORITIES BELOW, WE FIND THAT LD. CIT(A) CALLE D FOR REMAND REPORT FROM AO BUT AO DENIED TO PUT HIS COMMENTS ON THE CONTENTS O F DOCUMENTS SENT TO HIM CALLING FOR REMAND REPORT. HOWEVER, LD. CIT(A) GRAN TED RELIEF TO ASSESSEE ON THE BASIS OF ADDITIONAL EVIDENCE WHICH WAS ADMITTED BY HIM IN TERMS OF PROVISION OF RULE 46A OF THE RULES. FROM THE PERUSA L OF RECORDS, WE FIND THAT AO WAS GIVEN TIME TO VERIFY THE ADDITIONAL DOCUMENT FOR ALMOST TWO YEARS BUT HE HAS NOT BROUGHT ANY DEFECT IN THOSE DOCUMENTS BU T SIMPLY DENIED TO ACCEPT THE SAME. IN OUR CONSIDERED VIEW, THE DOCUMENTS WER E ADMITTED BY LD. CIT(A) IN TERMS OF PROVISION OF RULE 46A OF THE RULES. AT THIS JUNCTURE, WE FIND IMPORTANT TO REPRODUCE THE PROVISIONS OF RULE 46A W HICH READ AS UNDER:- [ PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE [DEPUT Y COMMISSIONER (APPEALS) [AND COMMISSIONER (APPEALS) ] 46A .(1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, TH E COMMISSIONER (APPEALS)], ANY EVIDENCE, WHETHER ORAL OR DOCUMENTA RY, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCE EDINGS BEFORE THE [ASSESSING OFFICER], EXCEPT IN THE FOLLOWING CIRCUM STANCES, NAMELY:- (A) (B) (C) .. (D) . (2) . (3) THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)] SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE [ASSESSING OFFICER] H AS BEEN ALLOWED A REASONABLE OPPORTUNITY- FROM THE ABOVE PROVISION, WE FIND THAT COMMISSIONER OF APPEAL(S) CAN ADMIT THE ADDITIONAL EVIDENCE AFTER GIVING REASONABLE OPP ORTUNITIES TO ASSESSING OFFICER. IN THE INSTANT CASETHE AO WAS GIVEN REASON ABLE OPPORTUNITY AT LEAST FOR 2 YEARS AND HE HAS NOT BROUGHT ANY DEFECT IN TH E ADDITIONAL EVIDENCE SUBMITTED FORHIS REMAND REPORT. ON PERUSAL OF PAPER BOOK, WE ALSO FIND THAT ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 5 THE PROPERTY WAS SOLD IN SUBSEQUENT YEAR AS PER SAL E DEED DATED 26.05.2006 WHICH IS PLACED ON PAGES 1 TO 56 OF THE PAPER BOOK. IN VIEW OF ABOVE, WE FIND NO REASON TO INTERFERE IN THE FINDINGS ARRIVED BY T HE LD. CIT(A). UNDER THE CIRCUMSTANCES, THIS ISSUE OF REVENUES APPEAL IS DI SMISSED. 7. NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR 48,09,476/- ON THE BASIS OF ADDITIONAL EVIDENCE. 8. ASSESSEE IN THE REVISED COMPUTATION OF INCOME HA S SHOWN THE LONG TERM CAPITAL GAINS (LTCG) ON SALE OF AGRICULTURAL L AND FOR RS.48,09,476/- WHICH ASSESSEE CLAIMED EXEMPTED FROM TAX. ASSESSEE SUBMITTED THE COPY OF SALE DEED IN SUPPORT OF HIS CLAIM. HOWEVER, AO WAS OF THE VIEW THAT THE SALE OF AGRICULTURAL LAND IS NOT ELIGIBLE FOR EXEMPTION UNDER THE INCOME TAX ACT. THE DOCUMENTS SUBMITTED BY THE ASSESSEE WERE NOT VERIFI ED BY THE AO AS THESE WERE SUBMITTED JUST ONE DAY PRIOR TO COMPLETION OF ASSESSMENT PROCEEDINGS. ACCORDINGLY, AO DISALLOWED THE LTCG OF 48,09,476/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT IMPUGNED LAND WAS LOCATED O UTSIDE THE JURISDICTION OF MUNICIPAL CORPORATION AS SPECIFIED UNDER 2(14)(B)(I II) OF THE ACT. THE ASSESSEE IN SUPPORT OF HIS CLAIM ATTACHED A CERTIFICATE FROM THE LOCAL GOVERNMENT BODY. IT WAS ALSO SUBMITTED THAT THE POPULATION OF THE AREA WAS ALSO LESS THAN 10,000. THEREFORE, THE IMPUGNED LAND IS NOT A CAPITAL ASSET WITHIN THE MEANING OF PROVISION OF SEC 2(14) OF THE ACT. LD. CIT(A) CALLE D FOR REMAND REPORT FROM THE AO ON THE ADDITIONAL DOCUMENTS SUBMITTED BY ASSESSE E. HOWEVER, AO DID NOT VERIFY THE ADDITIONAL EVIDENCE EVEN AFTER THE EXPIR Y OF TWO YEARS WHICH WERE SUBMITTED BY ASSESSEE BEFORE APPELLATE STAGE. ACCOR DINGLY, LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UND ER:- ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 6 4.3 I HAVE CAREFULLY CONSIDERED THE ARGUMENTS AND DOCUMENTARY EVIDENCES PRODUCED AND FIND THAT THE AGRICULTURE LA ND DOES NOT COME WITHIN THE AMBIT OF CAPITAL ASSET AND AS SUCH THE G AIN ON SALE OF SAID LAND IS EXEMPTED. WHEN DURING THE REMAND STAGE, VER IFICATION SHOULD HAVE BEEN CARRIED OUT AS THESE DOCUMENTS WERE AVAIL ABLE WITH THE AO EVEN AT THE TIME OF ASSESSMENT. THEREFORE, I AM OF THE VIEW THAT IN VIEW OF THE DESCRIPTION OF LAND AS FALLING WITHIN THE GR AM PANCHYAT OF VILLAGEMOHGON AT PAGE 4 OF REGISTRATION DEED AS WEL L AS THE CERTIFICATIONFROM THE STAGED GRAMPANCHAYAT REGARDIN G THE LAND LOCATION, THIS LAND SHOULD NOT BE TREATED AS A CAPI TAL ASSET US/S 2(14) OF THE IT ACT, 1961 AND SHOULD ACCORDINGLY BE EXEMPTED FROM TAXATION. HENCE, I DELETE THE SAID ADDITION RS.4809476/- AGGRIEVED BY THIS, REVENUE HAS COME UP IN APPEAL BE FORE US. 10. BEFORE US LD. DR FOR THE REVENUE SUBMITTED THAT LD. CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE IN CONTRAVENTION TO TH E PROVISION OF RULE 46A OF THE INCOME TAX RULES, 1962 (HEREUNDER REFERRED TO A S THE RULE) AND PRAYED BEFORE THE BENCH TO RESTORE THE ISSUE BACK TO THE F ILE OF AO FOR FRESH EXAMINATION. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE REITERAT ED SAME SUBMISSIONS AS MADE BEFORE LD. CIT(A) AND HE DREW OUR ATTENTION ON PAGES 64 TO 69 OF THE PAPER BOOK WHERE THE GRAM PANCHAYAT CERTIFICATE OF THE IMPUGNED LAND IN QUESTION WAS PLACED. HE RELIED ON THE ORDER OF LD. CIT(A). 11. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, THE AD DITION MADE BY AO AS THE LAND WAS THE CAPITAL ASSET WITHIN THE MEANING OF SE C. 2(14) OF THE ACT. THEREFORE THE CAPITAL GAINS AROSE ON THE SALE OF SU CH LAND WAS TAXABLE IN THE HANDS OF ASSESSEE, HOWEVER, LD. CIT(A) OPINED THAT LAND IS AGRICULTURAL LAND LOCATED IN AN AREA WHERE POPULATION IS LESS THAN 10 ,000 AND LAND ALSO DOES NOT FALL IN THE JURISDICTION OF 8 KMS.OF MUNICIPAL CORPORATION. BEFORE US LD. DR HAS NOT BROUGHT ANY DEFECT IN THE FINDING OF LD. CI T(A) AND HE SIMPLY STATED THAT RELIEF WAS GIVEN ON THE BASIS OF ADDITIONAL EV IDENCE WHICH WERE ACCEPTED BY LD. CIT(A) IN CONTRAVENTION OF PROVISION OF RULE 46A OF THE RULES. HOWEVER, ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 7 ON PERUSAL OF APPELLATE ORDER, WE FIND THAT AMPLE O PPORTUNITIES WERE GIVEN BY LD. CIT(A) TO AO FOR HIS COMMENT ON THE DOCUMENTS S UBMITTED AT THE TIME OF APPELLATE STAGE. BUT AO FAILED TO PROVIDE ANY COMME NT / DEFECT ON SUCH DOCUMENTS EVEN AFTER THE EXPIRY OF 2 YEARS. IN THE LIGHT OF ABOVE REASONING, WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS CORRECT AN D IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. HENCE, THIS GROUND O F REVENUES APPEAL IS DISMISSED. 12. NEXT ISSUE RAISED BY REVENUE IS THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR RS.50,000/- U/ S 68 OF THE ACT ON ACCOUNT OF ADDITIONAL EVIDENCE. 13. THE ASSESSEE, IN THE YEAR UNDER CONSIDERATION H AS CLAIMED TO RECEIVE GIFTS WORTH OF 50,000/- BUT FAILED TO FURNISH NECESSARY DETAILS O F THE GIFT DONOR AT THE TIME OF ASSESSMENT PROCEEDINGS. ACCORDINGLY, AO DISALLOWED THE SAME AND ADDED TO THE INCOME OF ASSESSEE. 14. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THE FOLLOWING DETAILS:- SL. NO. NAME OF DONOR RELATIONSHIP CQ. NO.& DATE BANK NAME & ADDRESS AMOUNT PAN NO. 1 SMT. SHANTI DEVI FATEHPURIA MOTHER-SON 547056 02.06.05 BHARAT OVERSEA BANK LTD. A/C NO. 341319794 DALHOUSIE SQ. BRANCH KOLKATA 75,000/- AADPF 9588K THE ASSESSEE ALSO FILED THE GIFT DEEDS IN SUPPORT O F HIS CLAIM BEFORE LD. CIT(A). THE LD. CIT(A) CALLED FOR REMAND REPORT FRO M AO WHO DENIED TO ACCEPT THE ADDITIONAL EVIDENCE IN TERMS OF RULE 46A OF THE RULES. HOWEVER, CONSIDERING THE SUBMISSIONS THE LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 6.2 I AM NOT AGREEMENT WITH THE VIEWS EXPRESSED BY THE AO THAT THE ADMISSIBILITY OF EVIDENCE AT THE APPELLANT STAG IS VIOLATIVE OF RULE 46A. I ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 8 FIND FROM THE ASSESSMENT ORDER THAT AT THE VERY FAG END WHEN THE ASSESSMENT PROCEEDINGS WE GETTING TIME-BARRED, SUCH DETAILS WERE CALLED FOR THE FIRST TIME BY THE AO THROUGH HIS LET TER DT. 17.12.2008, WHEN THESE COULD HAVE BEEN CALLED FOR EARLIER. TO MY VIE W, INSUFFICIENT TIME WAS ALLOWED TO THE APPELLANT AT THE ASSESSMENT STAG E. AT THE REMAND STAGE COMPLETE DETAILS IN THE FORM OF GIFT DEED, CH EQUE NOS. AND DATE, BAN A/C NO. AND BANK NAME AND PAN OF THE DONORS WER E PROVIDED TO THE AO WHICH HE FAILED TO VERIFY. THIS ADDITION OF RS.50,000/- BEEN MADE U/S. 68 IN SPITE OF THE FACT THAT TAT DUE EXPL ANATION WAS OFFERED AT THE REMAND STAGE BY THE AR OF THE APPELLANT AND THE EXPLANATION SO OFFERED WAS NOT CONTRADICTED FACTUALLY THROUGH ANY VERIFICATION BY THE AO. ADDITION MADE FOR RS.50,000/- IS, THEREFORE, OU TSIDE THE PURVIEW OF THE SEC. 68 AND, HENCE, DELETED. AGGRIEVED BY THIS, REVENUE HAS COME UP IN APPEAL BE FORE US. 15. BEFORE US BOTH PARTIES RELIED ON THE ORDERS OF AUTHORITIES BELOW AS FAVORABLE TO THEM. 16. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT GIFT WAS RECEIV ED BY ASSESSEE FROM HIS MOTHER. THE SOURCE OF MONEY WAS EXPLAINED OUT OF RE FUND OF PPF FROM ALLAHABAD BANK FOR 3,10,084/- DATED04.05.2005. WE ALSO FIND THAT SUFFI CIENT OPPORTUNITIES WERE GIVEN TO AO FOR HIS COMMENTS ON THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) THR OUGH REMAND REPORT. HOWEVER, AO HAS NOT POINTED OUT ANY DEFECT IN SUCH DOCUMENT. TO THIS POINT, LD. DR HAS ALSO NOT POINTED OUT ANYTHING CONTRARY T O THE FINDING OF LD. CIT(A). ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD . CIT(A). WE HOLD ACCORDINGLY. THIS GROUND OF REVENUES APPEAL IS DIS MISSED. 17. LAST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED DELETING THE ADDITION MADE BY AO FOR 14,00,025/- ON ACCOUNT OF INTEREST EXPENSE. 18. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S SHOWN ITS BUSINESS OF SALE-PURCHASE OF SHARE UNDER THE NAME AND STYLE OF M/S K.N.FATEHPURIA & CO. ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 9 THE ASSESSEE HAS SHOWN OPENING STOCK OF SHARE AND C LOSING STOCK OF SHARES AND SALES OF SHARE OF 40,810/-. IT WAS ALSO OBSERVED BY THE AO OBSERVED T HAT ASSESSEE HAS CLAIMED INTEREST EXPENSES FOR ITS SHAR E TRADING BUSINESS FOR 14,00,025/-. CONSIDERING THE SALE AND PURCHASE OF T HE BUSINESS, THE AO WAS OF THE VIEW THAT ASSESSEE IS NOT ENGAGED IN THE SHA RE TRADING ACTIVITIES BUT IT IS THE INVESTMENT ACTIVITY. 19. THE AO ALSO OBSERVED THAT ASSESSEE HAS GIVEN LO AN AND ADVANCE FOR 1.92 CRORES AND 5.42 CRORES RESPECTIVELY OUT OF THE UNSECURED LOAN OF 11.55 CRORES. ACCORDINGLY, AO OPINED THAT ASSESSEE IS NOT ENGAGED IN SHARE TRADING BUSINESS RATHER IT IS INVESTMENT ACTIVITY. THEREFORE, INTEREST FOR 14,00,025/- WAS DISALLOWED BY AO U/S14A OF THE ACT AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 20. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT HIS PROPRIETORSHIP FIRM M/S K.N.FATEHPURIA & CO. IS REGISTERED WITH SEBI AS DEALER IN SHARE AND SECURIT IES VIDE REGISTRATION NO. INB 030670915 DATED 23.11.1994. FURTHER, ASSESSEE S UBMITTED THAT INTEREST EXPENSE HAS ALSO BEEN CLAIMED IN EARLIER YEARS AND THE SAME HAS BEEN ALLOWED BY REVENUE. AFTER CONSIDERING THE SUBMISSIO NS OF ASSESSEE AND CONSIDERING THE FACTS AND CIRCUMSTANCES, LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 8.2 I HAVE CONSIDERED THE ARGUMENTS AND SUBMISSION OF BOTH THE AR OF THE APPELLANT AS WELL AS AO. THE SECTION UNDER WHIC H ADDITION HAS BEEN MADE IS SECTION 14A READ WITH RULE 8D(2)(II). IT MA Y BE STATED AT THE VERY OUTSET THAT RULE 8D BECAME OPERATIVE ONLY FROM AY 2008-09 AND JUDICIAL PRONOUNCEMENTS HAVE CLEARLY HELD THAT FOR THE PERIOD PRIOR TO A.Y 2008-09, RULE 8D IS NOT APPLICABLE. THE APPELLA NTS CASE PERTAINS TO A.Y 2006-07 DURING WHICH YEAR THERE WAS NO APPLICAB ILITY OF RULE 8D. AS FAR AS ANY DISALLOWANCE U/S. 14A IS CONCERNED, THE AO SHOULD HAVE FIRST QUANTIFIED IF THERE WAS ANY EXEMPTED INCOME EARNED BY THE APPELLANT DURING THE PREVIOUS YEAR AND, IF SO, WHETHER THERE WAS ANY NEXUS BETWEEN THE EXEMPTED INCOME EARNED AND EXPENSES INC URRED. DISALLOWANCE U/S. 14A IS NOT AUTOMATIC AND THE AO H AS TO GIVE HIS REASONING FOR INVOKING SECTION 14A. WHEN THE AO HAS NOT ESTABLISHED ANY NEXUS BETWEEN ANY EXEMPTED INCOME EARNED AND EX PENSES RELATABLE, I FIND THAT THERE IS NO CASE EITHER FOR INVOKING SEC. 14A. I AM OF ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 10 THE VIEW THAT NEITHER SEC. 14A NOR RULE 8D IS APPLI CABLE TO THE CASE OF THE APPELLANT, AND HENCE, ADDITION MADE FOR RS.14,0 0,025/- IS DELETED. AGGRIEVED BY THIS, REVENUE HAS COME UP IN APPEAL BE FORE US. 21. BEFORE US LD. DR FOR THE REVENUE SUBMITTED THAT IT IS TRUE THAT PROVISION OF RULE 8D OF INCOME TAX RULE CANNOT BE APPLIED IN THE INSTANT CASE AS THE INSTANT CASE PERTAINS TO THE A/Y 2006-07 AND THE RU LE 8D CAME IN EFFECT FROM THE AY 2008-09. HOWEVER THE DISALLOWANCE CAN CERTAI NLY BE MADE UNDER THE PROVISION OF SEC. 14A OF THE ACT. HE VEHEMENTLY REL IED ON THE ORDER OF AO WHEREAS LD. AR BEFORE US SUBMITTED THAT NO SATISFAC TION HAS BEEN RECORDED BY AO BEFORE INVOKING THE PROVISION OF SEC. 14A OF THE ACT. LD. AR REITERATED SAME SUBMISSION AS PLACED BEFORE LD. CIT(A) AND HE RELIED ON THE ORDER OF LD. CIT(A). 22. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, WE FIND THAT AO OBSERVED THAT ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF SHA RE TRADING AND HE TREATED THE ACTIVITY OF ASSESSEE AS INVESTMENT ACTIVITY. AC CORDINGLY, HE HAS NOT ALLOWED THE INTEREST EXPENSE. HOWEVER, LD. CIT(A) G RANTED RELIEF TO ASSESSEE BY OBSERVING THAT RULE 8D OF THE RULES IS APPLICABL E FROM THE ASSESSMENT YEAR 2008-09 AND THE INSTANT CASE, PERTAINS TO AY 2006-0 7. THEREFORE NO DISALLOWANCE CAN BE MADE BY ASSESSING OFFICER. NOW THE ISSUE BEFORE US ARISES WHETHER THE DISALLOWANCE MADE BY AO IS JUSTI FIABLE IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, WE FIND THAT TO INVOKE THE PROVISIONS OF SEC. 14A OF THE ACT THE AO HAS TO REC ORD HIS SATISFACTION WHICH IN THE INSTANT CASE, HAS NOT BEEN DONE. THE AO HAS NOT BROUGHT ANY DEFECT IN THE BOOKS OF ACCOUNT ASSESSEE. WE ALSO FIND THAT AO HAS NOT CONSIDERED THE FACTUAL POSITION THAT ASSESSEE WAS REGISTERED UNDER SEBI AS DEALER IN SHARE AND SECURITY. THE REGISTRATION CERTIFICATE FROM SEB I WAS GIVEN TO ASSESSEE VIDE DATED 29.11.1994. SINCE THEN ASSESSEE HAS BEEN CARRYING HIS SHARE TRADING ACTIVITY. ON PERUSAL OF ORDER OF AUTHORITIE S BELOW, WE ALSO FIND THAT INTEREST EXPENSE HAS BEEN ALLOWED BY REVENUE IN EAR LIER YEARS. SIMPLY IN THE ITA NO.42/KOL/2014 A.Y. 2006-07 ITO WD.-4(2), KOL. VS. SHKEDRNATHFATEHPURIA PAGE 11 YEAR UNDER CONSIDERATION, THE TURNOVER OF ASSESSEE IS LESS THAN IT CANNOT BE TERMED AS ASSESSEE IS NOT CARRYING BUSINESS OF SHAR E DEALING. WE ALSO OBSERVE THERE IS NO CHANGE IN THE FACTS OF ASSESSEE S CASE IN COMPARISON TO EARLIER YEARS AS THERE IS NO SUCH FINDING IN THIS R EGARD WAS BROUGHT ON RECORD. HENCE, IN OUR CONSIDERED VIEW, THE ASSESSEE HAS BEE N CARRYING BUSINESS OF SHARE TRADING ACTIVITY AND THEREFORE ELIGIBLE FOR C LAIMING DEDUCTION OF 14,00,025/-. IN THIS VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). WE HOLD ACCORDINGLY. THIS GROUND OF REVENUE S APPEAL IS DISMISSED. 23. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 08/0 2/2017 SD/- SD/- (ABY. T. VARKE) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- / 02 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO, WARD-4(2), P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 8 TH FLOOR, KOLKATA-0 01 2. /RESPONDENT-SHRI KEDAR NATH FATHEPURIA, 1 R.N. MUKH ERJEE ROAD, KOLKTA-001 3. ) *+ , , - / CONCERNED CIT KOLKATA 4., , -- / CIT (A) KOLKATA 5. 012 33*+,, *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,