Shri Rajpal P.Mehta,, Ahmedabad v. The Dy.CIT.,Circle-1,, Ahmedabad

ITA 1278/AHD/2011 | 2004-2005
Pronouncement Date: 24-04-2015 | Result: Partly Allowed

Appeal Details

RSA Number 127820514 RSA 2011
Assessee PAN ABCPM1469Q
Bench Ahmedabad
Appeal Number ITA 1278/AHD/2011
Duration Of Justice 3 year(s) 11 month(s) 25 day(s)
Appellant Shri Rajpal P.Mehta,, Ahmedabad
Respondent The Dy.CIT.,Circle-1,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-04-2015
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 24-04-2015
Date Of Final Hearing 09-04-2015
Next Hearing Date 09-04-2015
Assessment Year 2004-2005
Appeal Filed On 29-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI G. D. AGARWAL VICE PRESIDENT AND SHRI S.S. GODARA JUDICIAL MEMBER ITA NO S1278 & 1279 /AHD/201 1 A. Y . 20 04 - 0 5 & 2007 - 08 SHRI RAJPAL P. MEHTA 15 NAVYUG SOCIETY S.M. ROAD AMBAWADI AHMEDABAD. PAN: A BCPM 1469Q VS DY. COMMISSIONER OF INCOME TAX AHMEDABAD . (APPELLANT) (RESPONDENT) REVENUE BY : SHRI DINESH SINGH SR.D.R. ASSESSEE(S) BY : MS. URVASHI SHODAN A.R. / DATE OF HEARING : 0 9 / 0 4 /201 5 / DATE OF PRONOUNCEMENT: 24 / 04 /201 5 / O R D E R PER: S. S. GODARA JUDICIAL MEMBER THESE TWO ASSESSEE S APPEALS ARISE FROM DIFFERENT ORDERS OF THE CIT(A) - VI AHMEDABAD DATED 21.02.2011 AND 18.03.2011 IN CASE APPEAL NO S .CIT(A) - VI/DCIT.CIR.1/369/08 - 09 & CIR.1/374/09 - 10 FOR A.YS. 2004 - 05 & 2007 - 08 IN PROCEEDINGS U/S.143(3) R.W.S.147 AND 143(3) OF THE INCOME TAX ACT IN SHORT THE ACT RESPECTIVELY . 2. THE ASSES SEE S FORMER APPEAL ITA 1278 CHALLENGES VALIDITY OF THE REOPENING AS WELL AS SECTION 14A DISALLOWANCE OF RS.10 76 092/ - ITS LATTER CASE RAISES ONLY ONE SUBSTANTIVE GROUND CHALLENGING AN ALIKE DISALLOWANCE OF RS.3 08 483/ - . THE ASSESSEE DOES NOT PRESS FOR ITA NO S . 1278 & 1279 /AHD /201 1 SHRI RAJPAL P. MEHTA FOR A.Y S . 2004 - 05 & 2007 - 08 - 2 - I TS REOPENING GROUND . THIS LEAVES US WITH AN IDENTICAL ISSUE OF SECTION 14A DISALLOWANCE IN BOTH CASES. THEREFORE WE TREAT ITA 1278 AS THE LEAD APPEAL. 3. THE ASSESSEE - INDIVIDUAL IS PROPRIETOR OF THREE PROPRIETARY CONCERNS HAVING INCOME FROM PROPERTY S ALARY RECEIVED FROM COMPANY CAPITAL GAINS AND FROM OTHER SOURCES. HE FILED ITS RETURN ON 1.11.2004 ADMITTING TOTAL INCOME OF RS.1 01 64 220/ - . THE ASSESSING OFFICER COMPLETED A REGULAR ASSESSMENT ON 22.12.2006 DETERMINING HIS TAXABLE INCOME AT RS.1 02 63 220/ - . THEREAFTER HE FORMED AN OPINION ON REASONS TO BELIEVE THAT THE ASSESSEE HAD EARNED EXEMPT INCOME FROM INTEREST AND DIVIDENDS TOTALING RS.37 10 047/ - HE WAS OF THE VIEW THAT SINCE NO EXPENDITURE DISALLOWANCE HAD BEEN MADE QUA TH IS EXEMPT INC OME ASSESSEE S ASSESSABLE INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. THIS MADE HIM TO REOPEN THE ASSESSMENT AND ISSUE A SECTION 148 NOTICE . 3. IN PROCEEDINGS IN CONSEQUENCE THERETO THE A SSESSING O FFICER CAME ACROSS THE ASSESSEE S INVESTMENT S O F RS.1 59 47 229/ - AS ON 31.03.2004 FOR EARNING HIS EXEMPT INCOME. AMOUNT OF LOANS AVAILED READ RS.1 83 15 655/ - RESULTING IN AN INTEREST OUTGO OF RS.21 61 993/ - . THE A SSESSING O FFICER OPINED IN THE RE - ASSESSMENT ORDER DATED 02.12.2008 THAT THE ASSESSEE HAD INVESTED SUBSTANTIAL FUNDS IN EARNING EXEMPT INCOME WHICH WOULD REFLECT INTERMINGLING OF SURPLUS AND INTEREST BEARING FUNDS. HE SOUGHT TO INVOKE SECTION 14A DISALLOWANCE AND CALLED FOR ALL RELEVANT DETAILS. THEREAFTER THE ITA NO S . 1278 & 1279 /AHD /201 1 SHRI RAJPAL P. MEHTA FOR A.Y S . 2004 - 05 & 2007 - 08 - 3 - A SSESSING O FFICER QUOTED ASSESS EE S FAILURE IN PRODUCING THE SAID INFORMATION FOR COMPUTING SECTION 14A R.W.S. RULE 8D DISALLOWANCE OF RS.9 76 092/ - ALONG WITH AN AD HOC ADMINISTRATIVE EXPENSES OF RS.1 LAC RESULTING IN GROSS DISALLOWANCE / ADDITION OF RS.10 76 092/ - . 4. THE ASSESSEE FIL ED AN APPEAL. HE CHALLENG ED VALIDITY OF REOPENING AS WELL AS THE IMPUGNED DISALLOWANCE ON MERITS . THE CIT(A) HAS REJECTED BOTH THESE CONTENTIONS . H E HAS GRANTED A LIMITED RELIEF QUA QUANTIFICATION OF THE DISALLOWANCE AS PER RULE 8D. THIS LEAVES THE ASSESSE E AGGRIEVED. 5. WE HAVE HEARD BOTH SIDES AND PERUSED THE CASE FILE. THE IMPUGNED ASSESSMENT YEAR IS 2004 - 05. TH E ASSESSEE QUOTES CASE LAW OF M/S. GODREJ AND BOYCE MFG. CO. VS. DCIT 328 ITR 81 (BOM) TO SUBMIT THAT RULE 8D WOULD ONLY APPLY FROM 2008 - 09. H E CONTEND S THAT THE AUTHORITIES BELOW HAVE NOT GIVEN ANY FINDING PROVING NEXUS BETWEEN HIS INTEREST BEARING FUNDS WITH THE IMPUGNED INVESTMENTS MADE FOR EARNING THE EXEMPT INCOME IN QUESTION. THE REVENUE DOES NOT DISPUTE THE FACTUAL POSITION NARRATED IN PR ECEDING PARAGRAPHS. THE ASSESSING AUTHORITY APPLIED RULE 8D IN COMPUTING SECTION 14A DISALLOWANCE. THE HON BLE BOMBAY HIGH COURT HEREINABOVE HOLDS THAT THE SAID SAME WOULD APPLY FROM A SSESSMENT Y EAR 2008 - 09 ONLY . IT IS FURTHER NOTICED FROM THE CASE LAW CIT VS. TORRENT POWER LTD. (2014) 363 ITR 474 (GUJ) THAT BEFORE INVOKING SUCH A DISALLOWANCE U/S.14A IN THE NATURE OF INTEREST AND ADMINISTRATIVE EXPENSES A SPECIFIC FINDING REGARD ACTUAL INCURRING OF THE VERY EXPENDITURE HAS ITA NO S . 1278 & 1279 /AHD /201 1 SHRI RAJPAL P. MEHTA FOR A.Y S . 2004 - 05 & 2007 - 08 - 4 - TO BE ARRIVED AT BY THE REVENUE AUTHORITIES. THE HON BLE JURISDICTIONAL HIGH COURT IN CIT VS. GUJARAT INDUSTRIAL CORPORATION LTD. (2013) 218 TAXMAN 142 HOLD S THAT A NEXUS BETWEEN INTEREST BEARING FUNDS AND THE INVEST MENT FOR EARNING EXEMPT INCOME HAS TO BE ESTABLISHED BEFORE INVOKING S ECTION 14A DISALLOWANCE. T HE LOWER AUTHORITIES ORDERS DO NOT REVEAL ANY SUCH NEXUS. THEREFORE WE ACCEPT THE ASSESSEE S CONTENTIONS FOR STATISTICAL PURPOSE S AND DIRECT THE ASSESSING AUTHORITY TO RE - EXAMINE THE ISSUE IN THE LIGHT OF THE HON BLE JURISDICTION AL H IGH C OURT S DECISION ABOVESAID . ITA 1278 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE S. 6. ITA 1279 IS ALLOWED FOR STATISTICAL PURPOSE. 7. TO SUM UP THE ASSESSEE S APPEAL IAT 1278 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA 1279 IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON THIS DAY 2 4 APRIL 2014 AT AHMEDABAD. S D/ - SD/ - ( G. D. AGARWAL ) ( S.S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 24 / 0 4 / 20 1 5 PRABHAT KR. KESARWANI SR. P . S . S / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / TH E RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III AHMEDABAD ITA NO S . 1278 & 1279 /AHD /201 1 SHRI RAJPAL P. MEHTA FOR A.Y S . 2004 - 05 & 2007 - 08 - 5 - 5. / DR ITAT AHMEDABAD 6. / GUARD FILE . / BY ORDER / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD