ITO WD 5 (4), Pune V. DWARKA PRASAD N JALAN, Pune

MA 171/PUN/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7428 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 11-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER M.A NO 171/PN/2010 (IN ITA NO. 1124/PN/06) (ASSTT. YEARS: 2003-04) INCOME-TAX OFFICER, .. APPLICANT WD. 5(4), PUNE VS. DWARKAPRASD N JALAN, .. RE SPONDENT 726/26, BUDHWAR PETH, PUNE APPLICANT BY: SMT NEERA MA LHOTRA RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 07.10.2011 DATE OF PRONOUNCEMENT : 0 2.12.2011 ORDER PER G.S. PANNU, AM BY THIS MISCELLANEOUS APPLICATION, THE REVENUE HAS POIN TED OUT THAT A MISTAKE APPARENT FROM RECORDS HAS CREPT IN THE ORDER 11 .09.2009 PASSED BY THE TRIBUNAL IN ASSESSEES CASE IN ITA NO 1124/PN/06 FOR THE ASSESSMENT YEAR 2003-04. THE RELEVANT PORTION OF THE APPLICATION REA DS AS FOLLOWS: AGGRIEVED BY THE DECISION OF CIT (A), THE ASSESSE E PREFERRED FURTHER APPEAL BEFORE THE ITAT, PUNE. THE HONBLE ITAT AS MENTIONE D SUPRA RELYING ON THEIR EARLIER DECISION IN THE CASE OF MRS VARSHA KOLHE OF JALGAON , ALLOWED ASSESSEES APPEAL. HOWEVER, FACTS OF THE CASE OF MRS VARSHA KOLHE ARE DIFFERENT FROM THE PRESENT CASE. IN VARSHA KOLHES CASE THE ISSUE INVOLVED WAS DISALLOW ANCE OF CLAIM OF INTEREST EXPENDITURE IN VIEW OF THE APPLICABILITY OF SECTION 14A OF THE I.T. ACT. IN THE OPINION OF THE HONBLE TRIBUNAL THE SAME WAS NOT CORRECT. AS PER THE TRIBU NAL, THE SAID ASSESSEE (MRS VARSHA KOLHE0 WAS IN RECEIPT OF REMUNERATION FROM THE PART NERSHIP FIRM WHICH RETAIN THE CHARACTER OF BUSINESS INCOME AND AS SUCH THE PROVIS IONS OF SECTION 14A WERE NOT APPLICABLE. HOWEVER, IN THE PRESENT CASE (SHRI DWAR AKAPRASAD N JALAN), THE CIT (A) HAS ALREADY DECIDED THAT THERE IS NO APPLICABILITY OF S ECTION 14A OF THE L. T ACT. THE CIT(A) HAS CONFIRMED THE DISALLOWANCE OF INTEREST 2 HOWEVER, IT IS OBSERVED THAT THE ITAT HAS CONSIDERE D THE AOS REASONING FOR MAKING DISALLOWANCE ONLY IN PART WITH REFERENCE TO SEC. 14A. HIS REASONING WITH RESPECT TO SEC. 36(1)(III) OF THE I.T ACT 1961 HAS BEEN OVE RLOOKED BY THE ITSAT. THE ISSUE THAT THE INTEREST EXPENDITURE NOT INCURRED FOR PURPOSE OF BU SINESS CANNOT BE ALLOWED AS DEDUCTION HAS BEEN DECIDED IN FAVOUR OF THE REVENUE IN CATENA OF CASES. SOME OF THE RECENT DECISIONS ARE AS UNDER: CIT V ABHISHEK INDUST. (2006) 286 ITR 1 (PH), CIT V VI BABY & CO. (2002) 254 ITR 248 (KER) K SOMASUNDARAM BROS V CIT (1992) 238 ITR 939 (MAD) THE ORDER OF THE ITAT, THEREFORE, SUFFERS FROM MIST AKE OF FACTS AS WELL AS LAW, WHICH IS APPARENT FROM RECORD. IN VIEW OF THIS FACT , M.A FOR AY 2003-04 IS FILED HEREWITH.. 2. IN SUPPORT OF THE APPLICATION, THE LEARNED DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT SO FAR AS APPLICABILITY OF SECTION 14A WAS CONCERNED, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAD ALREADY HELD THE SAME AS INCORRECT AND, THEREFORE, THE ONLY REASON SURVIVING IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) TO SUPPORT THE DISALLOWANCE WAS ON A CCOUNT OF INVOKING OF SECTION 36(1)(III) OF THE ACT. THE TRIBUNAL IN ITS ORD ER HAS DECIDED THE ISSUE ONLY IN THE LIGHT OF INVOCATION OF SECTION 14A OF THE ACT BY TH E ASSESSING OFFICER AND DELETED THE ADDITION WITHOUT ADJUDICATING ON THE ASP ECT OF INVOKING OF SECTION 36(1)(III) OF THE ACT AND WHICH HAS BEEN SUSTAINED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). 3. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THERE WAS NO ERROR WITHIN THE MEANING OF SECTION 254( 2) OF THE ACT IN THE ORDER OF THE TRIBUNAL AND THE DISALLOWANCE HAS BEEN RIGHTLY DEL ETED BY THE TRIBUNAL. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. HAV ING PERUSED THE ORDERS OF THE AUTHORITIES BELOW, IT IS EMERGING THAT T HE DISALLOWANCE IN QUESTION WAS MADE BY THE ASSESSING OFFICER ON TWO COUNTS, NAMELY, BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT AS ALSO SECTION 36(1)( III) OF THE ACT WITH REGARD TO THE INTEREST PAID BY THE ASSESSEE ON LOAN FRO M THE FIRM IN WHICH HE WAS A PARTNER. THE COMMISSIONER OF INCOME-TAX (APPEALS) SUSTA INED THE DISALLOWANCE, BUT IN PARA 2.5 OF HIS ORDER, HE HELD TH AT SECTION 14A WAS 3 INCORRECTLY INVOKED BY THE ASSESSING OFFICER, WHILE UPHOLDI NG THE INVOKING OF SECTION 36(1)(III) OF THE ACT BY THE ASSESSING OFFICER. IN THE GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL, THE ASSESSEE HAS CHALLENGED T HE ACTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN CONFIRMING THE D ISALLOWANCE OF INTEREST BY INVOKING OF SECTION 36(1)(III) OF THE ACT. HOWEVER, THE TRIBUNAL HAS DELETED THE DISALLOWANCE BY FOLLOWING AN EARLIER ORDER OF THE TRI BUNAL DATED 31.3.2009, WHEREIN THE ISSUE RELATED TO INVOKING OF SECTION 14A IN SUCH CIRCUMSTANCES. QUITE CLEARLY, THE ISSUE TO BE CONSIDERED REVOLVED AROUN D THE APPLICABILITY OF SECTION 36(1)(III) OF THE ACT ON THE IMPUGNED DISALLOWA NCE, INASMUCH AS THAT WAS THE ONLY REASON SURVIVING AFTER THE ORDER OF THE COM MISSIONER OF INCOME-TAX (APPEALS). QUITE CLEARLY, THE ADDITION HAS BEEN DELETE D BY THE TRIBUNAL ON A MISTAKEN GROUND AND, THEREFORE, THE ORDER OF THE TRIB UNAL DATED 11.9.2009 SUFFERS FROM A MISTAKE APPARENT FROM RECORD WITHIN THE MEANIN G OF SECTION 254(2) OF THE ACT. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR-PL AY, WE RECALL THE ORDER OF THE TRIBUNAL AND DIRECT THE REGISTRY TO POST THE APPEAL FO R HEARING AFRESH BEFORE THE REGULAR BENCH ON 15.02.2012. THE PARTIES BE INFORMED ACCORDINGLY. 5. IN THE RESULT, THE APPLICATION IS ALLOWED AS ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 2ND DECEMBER, 2011 SD/- SD/- (I C SUDHIR) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 2 ND DECEMBER, 2011 B COPY OF THE ORDER IS FORWARDED TO: 1. APPLICANT 2. RESPONDENT 3. THE CIT(A)-II, PUNE 4. THE CIT-III, PUNE 5. THE D.R, B BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT, PUNE BENCHES, PUNE 4