Appeal details
Counselvise Citation
[2011] 123 COUNSELVISE.COM (IT) 6456 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
20-04-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I
Assessment Year
1997-1998
Appeal Filed On
25-02-2010
Judgement Text
1 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I BEFORE SHRI D.K. AGARWAL, J.M. AND SHRI B. RAMAKOTA IAH, A.M. MISC. APPLICATION NO. 133/MUM/2010 ARISING OUT OF ITA NO. 4933/MUM/2001 ASSESSMENT YEAR 1997-98 RAJIV AGARWAL, B-144, A VIJAYPATH, TILAK NAGAR, JAIPUR 302 004. PAN AAIPA 3418 Q VS. THE D.C.I.T. CIRCLE 23(1), 8 TH FLOOR, SMT. K.G. MITTAL BUILDING, CHARNI ROAD, MUMBAI 400 002. APPLICANT RESPONDENT MISC. APPLICATION NO. 134/MUM/2010 ARISING OUT OF ITA NO. 3256/MUM/2002 ASSESSMENT YEAR 1997-98 MRS. SAROJ AGARWAL, C/O JAIPUR SYNTEX LTD., A-15, NAND BHAVAN INDUSTRIAL ESTATE, 31, MAHAKALI CAVES ROAD, MUMBAI -400 093. PAN AMPDA 3483 E VS. THE A .C.I.T. CIRCLE 2 0 ( 3 ), PIRAMAL CHAMBERS, 5 TH FLOOR, LALBAUG, PAREL, MUMBAI 400 012. APPLICANT RESPONDENT APPLICANT BY M R. R.C. JAIN RESPONDENT BY MR. S.K. SINGH ORDER PER D.K. AGARWAL, J.M. ` THESE TWO MISC. APPLICATIONS FILED BY TWO ASSESSEES ARE DIRECTED AGAINST THE CONSOLIDATED ORDER PASSED BY THE TRIBUNAL IN IT A NO. 4933/M/01 AND 3256/M/02 FOR THE A.Y. 1997-98 DATED 9 TH MARCH, 2006. SINCE FACTS ARE 2 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL IDENTICAL AND THE ISSUES INVOLVED ARE COMMON, BOTH THESE MISC. APPLICATIONS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE. M.A. NO. 134/M/2010 2. THE ASSESSEE IN THE MISC. APPLICATION IN THE CAS E OF MRS. SAROJ AGARWAL HAS STATED THAT THE TRIBUNAL WHILE DECIDING THE ISS UE AGAINST THE ASSESSEE OF LONG TERM CAPITAL LOSS ON SALE OF SHARES TO M/S JAI PUR SYNTEX LTD. HAS NOT CONSIDERED/APPRECIATED THE MATERIAL FACTS FILED BEF ORE THE A.O. AND LD. CIT(A) WHICH HAVE ALSO BEEN DISCUSSED AND CONSIDERED BY TH E LD. CIT(A) IN PARA 5.2 OF HIS IMPUGNED ORDER IN THE CASE OF MRS. SAROJ AGARWA L, THE COPY OF WHICH WERE DULY FILED BY THE ASSESSEE BEFORE THE TRIBUNAL IN T HE PAPER BOOK. IT WAS FURTHER STATED THAT DURING THE COURSE OF HEARING IT WAS OBS ERVED BY THE BENCH THAT SINCE THE MATERIAL FACTS HAS NOT BEEN PROPERLY CONS IDERED AND APPRECIATED AND TO MEET THE ENDS OF JUSTICE TO BOTH PARTIES, THE IS SUE WILL BE SENT BACK TO THE A.O. WITH THE DIRECTION TO RE-ADJUDICATE THE MATTER AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. HOWEVER , TO THE SURPRISE OF THE APPLICANT, THE TRIBUNAL INSTEAD OF RESTORING BACK T HE MATTER TO THE FILE OF THE A.O. DECIDED THE ISSUE AGAINST THE ASSESSEE VIDE PA RA 8 OF ITS ORDER. IT WAS FURTHER SUBMITTED THAT THE TRIBUNAL WHILE DECIDING THE OTHER ISSUE OF ALLOWABILITY OF INTEREST ON THE LOAN TAKEN FOR PURC HASE OF SHARES HAS INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND SET AS IDE THE MATTER TO THE FILE OF THE A.O. WITHOUT CONSIDERING THE FACT THAT DURING T HE RELEVANT A.Y., THE DIVIDEND INCOME WAS TAXABLE AND THEREFORE THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE AND THE INTEREST PAID WAS DULY ALLOWABLE IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. RAJENDRA PRASAD MOODY 115 ITR 519 (SC) AND THE LD. CIT(A) AFTER CONSIDERING THE SAME HAS ALLOWED THE DEDUCTION OF INTEREST. IT WAS, THEREFORE, SUBMITTED THAT ON BOT H THE ISSUES IN BOTH THE CASES, THERE ARE APPARENT MISTAKES IN THE ORDER PASSED BY THE TRIBUNAL AND, THEREFORE, THE SAME MAY BE RECALLED. 3 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED IN THE MISC. APPL ICATION ALSO REFERS TO PAGE NO. 28, 29, 30 AND 46 OF THE ASSESSEES PAPER BOOK TO SHOW THAT THE TRANSACTION OF SALE OF SHARES WAS A GENUINE TRANSAC TION AND MERELY BECAUSE THE ENTRY WAS PASSED ON 31 ST MARCH, 1997 FOR ADJUSTING THE PRICE OF SHARE OF ` 3 LACS OUT OF THE LOAN DOES NOT MEAN THAT THE SHARE T RANSACTION IS NOT GENUINE. IN THE LIGHT OF THE ABOVE, HE SUBMITS THAT ORDER PASSE D BY THE TRIBUNAL IN THE CASE OF MRS. SAROJ AGARWAL AND MR. RAJIV AGARWAL ON BOTH THE ISSUES BE RECALLED. 4. ON THE OTHER HAND, THE LD. D.R. WHILE RELYING ON THE ORDER OF THE TRIBUNAL SUBMITS THAT THERE IS NO MISTAKE IN THE ORDER OF TH E TRIBUNAL, THE ASSESSEE WANTS REVIEW WHICH IS NOT PERMISSIBLE AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON THE DECISION IN CIT VS. RAMESH ELECT RIC AND TRADING CO. [1993) 303 ITR 497 (BOM). HE, THEREFORE, SUBMITS THAT THE MISC. APPLICATIONS FILED BY BOTH THE ASSESSEES BE REJECTED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE ISSUE NO. 1 IN BOTH THE MISC. APPLICATIONS RELATES TO THE LONG TERM CAP ITAL LOSS CLAIMED BY THE ASSESSEE ON THE SALE OF SHARES OF M/S JAIPUR SYNTEX LTD. THE TRIBUNAL WHILE REVERSING THE ORDER OF THE LD. CIT(A) DECIDED THE I SSUE AGAINST THE ASSESSEE VIDE FINDING RECORDED IN PARA 8 OF ITS ORDER, WHICH IS R EPRODUCED BELOW:- HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CAREFUL PERUSAL OF THE RECORD, IT IS, NOTICED THAT NEITHER BEFORE THE LOWER AUTHORITI ES NOR BEFORE US ASSESSEE HAS STATED CATEGORICALLY AS TO WHEN HE HAS SOLD THESE S HARES TO ITS SISTER CONCERNS M/S EURASIA FINANCE PVT. LTD. FROM WHOM IT HAD BORR OWED SUBSTANTIAL AMOUNT. EVERYWHERE IT HAD BEEN STATED THAT THE SHARES WERE SOLD DURING THE MONTH OF MARCH, BUT, SPECIFIC DATE WAS NOT GIVEN ANYWHERE. MOREOVER, THE RELEVANT ENTRIES WITH REGARD TO SALE OF SHARES WERE PASSED O N 31.3.97 IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WHEREAS IN THE SHARE CERT IFICATE, THE TRANSFER ENTRY WAS MADE ON 3 RD MARCH, 1997. DURING THE COURSE OF HEARING, ASSESS EE HAS NOT FILED EVEN A SINGLE DOCUMENT TO PROVE THAT ON A PAR TICULAR DATE, THE SALE 4 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL AGREEMENT WAS EXECUTED AND SALES WERE EFFECTED. UN DISPUTEDLY, THE JAIPUR SYNTEX LTD. IS QUOTED ON STOCK EXCHANGE AND THE RAT ES OF SHARES WERE ALSO NOTIFIED ON THE STOCK EXCHANGE, BUT, NO EVIDENCE WA S FILED WITH REGARD TO RATE OF SHARES QUOTED ON THE STOCK EXCHANGE. THE ASSESSEE HAS FILED A PRESS RELEASE AND A CERTIFICATE OF ONE OF THE BROKERS WITH REGARD TO RATE OF SHARES AS ON 31 ST MARCH, 1997, WHEREAS THE SHARES WERE SOLD EVEN PRIO R TO 3 RD MARCH, 1997 AS THE TRANSFER ENTRY IN THE CERTIFICATE WAS RECORDED ON 3 RD MARCH, 1997. IN THESE CIRCUMSTANCES, THE RATES QUOTED ON 31 ST MARCH, 1997 CANNOT BE ADAPTED TO BE A PROPER RATE ON WHICH THE SHARES CAN BE SOLD. THE A SSESSEE HAS ALSO FILED ONE SALE BILL DATED 31-3-97 THROUGH WHICH THE SHARES WE RE CLAIMED TO BE SOLD TO M/S EURASIA FINANCE LTD. , WHEREAS, THE TRANSFER EN TRY IN THE SHARE CERTIFICATE IS RECORDED ON 3 RD MARCH, 1997. WE ARE UNABLE TO UNDERSTAND HOW THE TRANSFER ENTRY CAN BE RECORDED IN THE SHARES CERTIFICATE WIT HOUT TRANSFERRING THE SHARES IN THE NAME OF THE BUYER. NEITHER THE TRANSFER DEE D NOR ANY OTHER DOCUMENT IS PLACED ON RECORD THAT THE SHARES WERE TRANSFERRED P RIOR TO 3 RD MARCH, 1997 IN THE CASE OF MRS. SAROJ AGARWAL. WHATEVER DOCUMENTS ARE PLACED WITH REGARD TO SALE OF TRANSFER OF SHARES, IT CAN ONLY BE GATHERED THAT IT WAS DONE ON 31 ST MARCH, 1997. IF ALL THESE FACTS ARE TO BE EXAMINED COLLECTIVELY, ONE WOULD DRAW AN INFERENCE, THIS IS ALL MADE UP AFFAIRS OF THE AS SESSEE TO ADJUST HIS CAPITAL GAIN EARNED BY IT ON TRANSFER/ACQUISITION OF LAND. WE, THEREFORE, DO NOT AGREE WITH THE FINDINGS OF THE CIT(A) AND WE REVERSE THE SAME. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE IN THIS REGARD AND THAT OF THE ASSESSING OFFICER IS RESTORED. FROM THE READING OF THE ABOVE, IT IS SEEN THAT THE TRIBUNAL HAS OBSERVED THAT NO SPECIFIC DATE OF SALE OF SHARES WAS GIVEN ANYWHERE. MOREOVER, THE RELEVANT ENTRIES WITH REGARD TO SALE OF SHARES WERE PASSED O N 31.3.97 IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WHEREAS IN THE SHARE CERTIF ICATE, THE TRANSFER ENTRY WAS RECORDED ON 3 RD MARCH, 1997. ACCORDINGLY, IT WAS HELD BY THE TRIB UNAL THAT THESE ARE ALL MADE UP AFFAIRS OF THE ASSESSEE TO AD JUST HIS CAPITAL GAIN EARNED BY IT ON TRANSFER/ACQUISITION OF LAND. 6. WE FURTHER FIND THAT BEFORE THE LD. CIT(A), IT W AS SUBMITTED BY THE ASSESSEE THAT COPY OF CONFIRMATION LETTER OF M/S EU RASIA FINANCE PVT. LTD. TO WHOM SHARES WERE SOLD WAS FILED BEFORE THE A.O. TH E DETAIL ADDRESS OF M/S EURASIA FINANCE PVT. LTD. WAS ALSO FILED IN THE COU RSE OF HEARING. THE PRICE OF SHARE IN THE FORM OF QUOTATION OF NEWSPAPER COULD N OT BE PRODUCED BECAUSE THE ASSESSEE WAS OUT OF INDIA DURING THE RELEVANT TIME. HOWEVER, IT WAS SUBMITTED 5 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL THAT THE SHARES ARE QUOTED IN STOCK EXCHANGE AND CA N BE OBTAINED FROM BHAV COPY WHICH IS FILED IN APPEAL PROCEEDINGS. THE ASS ESSEE ALSO FILED COPY OF ALLOTMENT OF 80000 SHARES OF JAIPUR SYNTEX LTD. WHE REBY SHARES WERE ALLOTTED ON 14.07.1995. COPIES OF SHARE CERTIFICATES WERE A LSO FILED. IT WAS ALSO SUBMITTED THAT ON IDENTICAL ISSUE, THE LD. CIT(A) H AS ALLOWED LONG TERM CAPITAL LOSS ON SALE OF SHARES OF JAIPUR SYNTEX LTD. FOR A. Y. 1997-98 IN THE CASE OF RAJIV AGARWAL, SON OF THE ASSESSEE. THE LD. CIT(A) AFTER DISCUSSING THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCE WITH THE A.O. WHO HAS STATED THAT HE HAS NO OBJECTION OF ADMITTING THESE EVIDENCES FOR THE PURP OSE OF CORRECT COMPUTATION OF LONG TERM CAPITAL GAIN, ADMITTED THE ADDITIONAL EVI DENCE FILED BY THE ASSESSEE AND AFTER CONSIDERING THE ENTIRE MATERIAL EVIDENCE, DIRECTED THE A.O. TO RE- COMPUTE THE LONG TERM CAPITAL LOSS OF SALE OF 60,00 0 SHARES OF JAIPUR SYNTEX LTD. BY ADOPTING AVERAGE SALE PRICE AT ` 6.50 PER SHARE. 7. IN HONDA SIEL POWER PRODUCTS LTD. V. CIT [2007] 295 ITR 466 (SC) IT HAS BEEN HELD THAT THE UNDERLYING PURPOSE OF SECTION 25 4(2) IS BASED ON THE FUNDAMENTAL PRINCIPLE THAT A PARTY APPEARING BEFORE THE TRIBUNAL SHOULD NOT SUFFER ON ACCOUNT OF A MISTAKE COMMITTED BY THE TRI BUNAL. WHEN PREJUDICE RESULTS FROM AN ORDER ATTRIBUTABLE TO THE TRIBUNAL S MISTAKE, ERROR OR OMISSION, IT IS THE DUTY OF THE TRIBUNAL TO SET IT RIGHT AND IT HAS NOTHING TO DO WITH THE CONCEPT OF THE INHERENT POWER TO REVIEW. THE SUPREM E COURT HELD THAT THE TRIBUNAL WOULD BE REGARDED AS HAVING COMMITTED A MI STAKE IN NOT CONSIDERING THE MATERIAL WHICH IS ALREADY ON RECORD. 8. IN LACHMAN DASS BHATIA HINGWALA (P.) LTD. V. ASS T. C.I.T. [2011] 330 ITR 243 (DELHI) [FB] IT HAS BEEN OBSERVED AND HELD (HEA D NOTE PAGE 243-244):- , ..THE DECISION OF THE SUPREME COURT IN HONDA S IEL POWER PRODUCTS LTD. V. CIT [2007] 295 ITR 466 IS AN AUTHORITY FOR THE PROPOSITION THAT THE TRIBUNAL IN CERTAIN CIRCUMSTANCES CAN RECALL ITS OW N ORDER AND SECTION 254(2) OF THE ACT DOES NOT TOTALLY PROHIBITS SO. D ECISIONS WHICH LAY DOWN 6 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL THE PRINCIPLE THAT THE TRIBUNAL UNDER NO CIRCUMSTAN CES CAN RECALL ITS ORDER IN ENTIRETY DO NOT LAY DOWN THE CORRECT STATE MENT OF LAW. IT WAS FURTHER HELD THAT THE TRIBUNAL, WHILE EXERCISING T HE POWER OF RECTIFICATION UNDER SECTION 254(2) OF THE ACT, CAN RECALL ITS ORDER IN ENTIRETY IF IT IS SATISFIED THAT PREJUDICE HAS RESU LTED TO THE PARTY WHICH IS ATTRIBUTABLE TO THE TRIBUNALS MISTAKE, ERROR OR OM ISSION AND WHICH ERROR IS A MANIFEST ERROR AND IT HAS NOTHING TO DO WITH T HE DOCTRINE OR CONCEPT OF INHERENT POWER OF REVIEW.. 9. THE POSITION IN LAW IS WELL SETTLED THAT MAKING OF AN ENTRY OR ABSENCE OF AN ENTRY CANNOT DETERMINE RIGHTS AND LIABILITIES OF PARTIES. 10. IN TUTICORIN ALKALI CHEMICALS AND FERTILIZERS L TD. V. CIT [1997] 227 ITR 172 (PAGE 183) :- IT IS TRUE THAT THIS COURT HAS VERY OFTEN REFERRE D TO ACCOUNTING PRACTICE FOR ASCERTAINMENT OF PROFITS MADE BY A COMPANY OR V ALUE OF THE ASSETS OF A COMPANY. BUT WHEN THE QUESTION IS WHETHER A RECE IPT OF MONEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTIONS FROM T HAT RECEIPT ARE PERMISSIBLE IN LAW OR NOT, THE QUESTION HAS TO BE D ECIDED ACCORDING TO THE PRINCIPLES OF LAW AND NOT IN ACCORDANCE WITH THE AC COUNTANCY PRACTICE. ACCOUNTING PRACTICE CANNOT OVERRIDE SECTION 56 OR A NY OTHER PROVISION OF THE ACT. AS WAS POINTED OUT BY LORD RUSSEL IN THE CASE OF B.S.C. FOOTWEAR LTD. V. RIDGWAY (INSPECTOR OF TAXES) (1970 ) 70 ITR 857, 860 (CA) THE INCOME TAX LAW DOES NOT MARCH STEP BY STEP IN THE FOOTPRINTS OF THE ACCOUNTANCY PROFESSION. 11. IN CIT V. RAMESH ELECTRIC AND TRADING CO. [1993 ) 203 ITR 497 (BOM) IT HAS BEEN HELD THAT ONLY MISTAKE APPARENT FROM RECOR D CAN BE RECTIFIED, FAILURE OF TRIBUNAL TO CONSIDER ARGUMENTS IS NOT AN ERROR A PPARENT FROM RECORD. THE TRIBUNAL CANNOT IN EXERCISE OF ITS POWER OF RECTIFI CATION RE-DECIDE THE MATTER. 12. WHEREAS IN THE CASE BEFORE US, THERE IS NO IOTA OF EVIDENCE TO SHOW THAT THE TRIBUNAL WHILE DECIDING THE ISSUE HAS CONSIDERE D ALL THE MATERIAL EVIDENCE FILED BEFORE THE LD. CIT(A), THE COPY OF WHICH WAS ALREADY FILED BEFORE THE TRIBUNAL. THEREFORE, WE ARE OF THE VIEW THAT IN VIE W OF THE PRINCIPLE LAID DOWN 7 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL BY THE HONBLE APEX COURT IN THE DECISIONS AS REFER RED HEREINABOVE, THE DECISION RELIED ON BY THE LD. D.R. IS DISTINGUISHAB LE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 13. BY APPLYING THE AFORESAID PRINCIPLE OF LAW TO T HE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE TRIBUNAL WHILE DECIDING THE ABOVE ISSUE HAS NOT CONSIDERED THE MATERIAL EVIDENCE WHICH WAS FILED BE FORE THE LD. CIT(A) AND ALSO BEFORE THE TRIBUNAL, THEREFORE, IN OUR VIEW THERE W AS AN APPARENT MISTAKE IN THE ORDER OF THE TRIBUNAL IN TERMS OF SECTION 254(2 ) OF THE ACT. 14. WITH REGARD TO THE ISSUE NO. 2 IN BOTH THE MISC . APPLICATIONS WHICH RELATES TO THE ALLOWABILITY OF INTEREST ON THE LOAN S TAKEN BY THE ASSESSEE FOR THE PURPOSE OF PURCHASING OF SHARES, WE FIND THAT THERE IS NO DISPUTE THAT THE A.O. HAS NOT ADJUDICATED THE ABOVE ISSUE AND MERELY DISA LLOWED THE INTEREST WHILE COMPUTING THE INCOME OF THE ASSESSEE. HOWEVER, THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION AND REMAND REPORT OF THE A.O. AND OTHER MATERIAL ON RECORD HAS HELD THAT THE LOAN WAS TAKEN FOR THE PUR POSE OF INVESTMENT IN SHARES, THE DIVIDEND INCOME WAS TAXABLE, THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CIT VS. RAJENDRA PRASAD MO ODY (SUPRA), THE DEDUCTION OF INTEREST U/S 57(III) IS ALLOWABLE TO T HE ASSESSEE. HOWEVER, WE FIND THAT THE TRIBUNAL WHILE ADJUDICATING THE ABOVE ISSU E HAS INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND HAS SET ASIDE THE MAT TER TO THE FILE OF THE A.O. TO DECIDE THE SAME AFRESH DESPITE THE FACT THAT THE IN COME FROM DIVIDEND WAS TAXABLE IN THE YEAR UNDER CONSIDERATION. 15. IN GODREJ AND BOYCE MFG. CO. LTD. V. DCIT AND A NOTHER [2010] 328 ITR 81 (BOM) IT HAS BEEN OBSERVED AT PLACITUM 31 AT PAG E 99 AS UNDER:- THE FOLLOWING PRINCIPLES WOULD EMERGE FROM SECTION 14A AND THE DECISION IN WALFORT : 8 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL (A) THE MANDATE OF SECTION 14A IS TO PREVENT CLAIMS FOR DEDUCTION OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME OF THE ASSESSEE : (B) SECTION 14A(1) IS ENACTED TO ENSURE THAT ONLY EXPEN SES INCURRED IN RESPECT OF EARNING TAXABLE INCOME ARE ALLOWED ; (C) THE PRINCIPLE OF APPORTIONMENT OF EXPENSES IS WIDEN ED BY SECTION 14A TO INCLUDE EVEN THE APPORTIONMENT OF EXPENDITURE BETWE EN TAXABLE AND NON- TAXABLE INCOME OF AN INDIVISIBLE BUSINESS ; (D) THE BASIS PRINCIPLE OF TAXATION IS TO TAX NET INCOM E. THIS PRINCIPLE APPLIES EVEN FOR THE PURPOSES OF SECTION 14A AND EX PENSES TOWARDS NON- TAXABLE INCOME MUST BE EXCLUDED ; (E) ONCE A PROXIMATE CAUSE FOR DISALLOWANCE IS ESTABLIS HED WHICH IS THE RELATIONSHIP OF THE EXPENDITURE WITH INCOME WHICH D OES NOT FORM PART OF THE TOTAL INCOME A DISALLOWANCE HAS TO BE EFFECTE D. ALL EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT HAS TO BE DI SALLOWED UNDER SECTION 14A. INCOME WHICH DOES NOT FORM PART OF TH E TOTAL INCOME IS BROADLY ADVERTED TO AS EXEMPT INCOME AS AN ABBREVIA TED APPELLATION. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE PROVISIO NS OF SECTION 14A SHALL APPLY IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, IN THE CASE BEFORE US WE FIND THAT THE TRIBUNAL WHILE DECIDING THE ISSUE HAS NOT CONSIDERED THE BASIC FACT THAT THE DIVIDEND INCOME IN THE YEAR UNDER CONSIDERATION IS TAXABLE. THIS BEING SO, WE ARE OF THE VIEW THAT THERE IS AN APPARENT MISTAKE IN THE ORDER OF THE TRIBUNAL IN RE STORING THE MATTER BACK TO THE FILE OF THE A.O. TO ADJUDICATE THE SAME AFRESH IN THE LIGHT OF PROVISIONS OF SECTION 14A OF THE ACT. 16. FOR THE REASONS AS DISCUSSED ABOVE, WE RECALL T HE ORDER PASSED BY THE TRIBUNAL ON BOTH THE ISSUES. THE GROUNDS TAKEN BY THE APPLICANT ARE, THEREFORE, ALLOWED. MA NO. 133/M/10 17. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE REVENUE, WE FOR THE REASONS AS STATED IN PARA NO. 5 TO 16 OF THIS ORDER, RECALL 9 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL THE TRIBUNALS ORDER ON BOTH THE ISSUES IN THE CASE OF RAJIV AGARWAL ALSO. THE GROUNDS TAKEN BY THE APPLICANT ARE, THEREFORE, ALLO WED. 18. THE REGISTRY IS DIRECTED TO FIX THE ABOVE CASES IN DUE COURSE OF TIME. 19. IN THE RESULT, BOTH MISC. APPLICATIONS ARE ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.4.2011 SD/- SD/- (B. RAMAKOTAIAH) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20.04.2011 RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -XXVIII, MUMBAI 4. THE CIT- XXVIII, MUMBAI 5. THE DR BENCH, J 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 10 MA NO. 133/M/10 & 134/M/10 MR. RAJIV AGARWAL & MRS. SAROJ AGARWAL DATE INITIALS 1 DRAFT DICTATED ON 8.4.2011 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 11.4.2011 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER
Mehul