Joseph Vellapally, New Delhi v. ACIT, New Delhi

ITA 1872/DEL/2013 | 2009-2010
Pronouncement Date: 10-10-2013 | Result: Allowed

Appeal Details

RSA Number 187220114 RSA 2013
Assessee PAN AAAPV2773M
Bench Delhi
Appeal Number ITA 1872/DEL/2013
Duration Of Justice 6 month(s) 7 day(s)
Appellant Joseph Vellapally, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 10-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 10-10-2013
Assessment Year 2009-2010
Appeal Filed On 02-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D: NEW DELHI) BEFORE U.B.S. BEDI JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.1872/DEL/ 2013 (ASSESSMENT YEAR: 2009-2010) MR. JOSEPH VELLAPALLY VS. ACIT CIRCLE 37 (1) P 8C 1 ST FLOOR HAUZ KHAS ENCLAVE NEW DELHI. NEW DELHI 110 016. (PAN : AAAPV2773M) (APPELLANT) (RESPONDENT) APPELLANT BY : MS. RUCHI KHURANA ADVOCAT E RESPONDENT BY : SHRI VI VEK KUMAR DR O R D E R PER B.C. MEENA ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XXVIII NEW DELHI DATED 03.01.2013. 2. THE ASSESSEE IS A PRACTICING SENIOR ADVOCATE LOC ATED AT DELHI AND HIS SOURCE OF INCOME WAS FROM HIS PROFESSION INCOM E FROM HOUSE PROPERTY CAPITAL GAINS ON THE DISPOSAL OF INVESTME NTS AND INCOME FROM OTHER SOURCES ARISING OUT OF THE INVESTMENT MADE OV ER THE PAST YEARS AND SOME IN THE YEAR UNDER CONSIDERATION. THE RETURN OF INCOME WAS FILED DECLARING INCOME AT RS.1 30 88 820/-. THE ASSESSING OFFICER HAS DISALLOWED OF RS.1 27 241/- U/S 14A OF THE INCOME-T AX ACT 1961 READ ITA NO.1872/DEL/2013 2 WITH RULE 8D OF THE INCOME-TAX RULES 1962. THE CIT (A) HAS CONFIRMED THIS ADDITION. NOW THE ASSESSEE IS IN APPEAL BEFOR E US BY TAKING THE FOLLOWING GROUNDS:- 1. THE LD CIT(A) ERRED IN CONCURRING WITH THE AO I N MAKING DISALLOWANCE OF RS.1 27 241/- U/S 14A OF THE ACT R/W RULE 8D OF THE RULES 2. THE LD CIT(A) GROSSLY ERRED IN LAW IN IGNORING T HE SUBMISSION MADE BY THE APPELLANT AND THE RELEVANT C ASE LAWS AND THUS CONTRAVENED THE PRINCIPLE OF NATURAL JUSTICE. 3. THE LD CIT(A) ERRED IN FACT AND IN LAW IN IGNORI NG THE ARGUMENTS OF THE APPELLANT AS TO THE PECULIARITY OF THE CASE WHEREIN NO EXPENDITURE WAS INCURRED BY THE ASSESSEE IN EARNING EXEMPT INCOME WHICH IS CLAIMED AS A DEDUCTI BLE EXPENSE UNDER THE HEAD 'BUSINESS OR PROFESSION' A CLAIM WHICH CAN EASILY BE SUBSTANTIATED BY A BARE PERUSAL OF THE EXPENSES IN THE PROFIT AND LOSS ACCOUNT. 4. THE LD CIT(A) ERRED IN FACT AND IN LAW IN ACCEPT ING THE ORDER WHEREIN THE AO MECHANICALLY MADE DISALLOW ANCE U/S 14A R/W RULE 8D WITHOUT CONSIDERING THE PECULIA RITIES OF THE CASE OF ESTABLISHING THAT EXPENSES WERE CLAIMED AS DEDUCTION FOR EARNING EXEMPT INCOME. 5. THE LD CIT(A) ERRED IN FACT AND IN LAW IN IGNORI NG THAT SUBSTANTIAL PART OF THE INVESTMENTS HAD BEEN MADE B Y THE ASSESSEE OVER THE EARLIER YEARS AND A BARE PERUSAL OF THE INVESTMENTS (OPENING AND CLOSING) WOULD ESTABLISH N IL EXPENSE IN EARNING EXEMPT INCOME. 6. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE AO HAS GROSSLY ERRED IN INITIATING PENALTY U/S 271(1)(C) OF THE ACT READ WITH SECTION 274 OF THE A CT. 7. YOUR APPELLANT CRAVES A RIGHT TO ADD TO OR AMEND ALTER SUBSTITUTE DELETE OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL. ITA NO.1872/DEL/2013 3 3. WHILE PLEADING ON BEHALF OF THE ASSESSEE LD. AR SUBMITTED THAT THE CIT (A) WAS NOT JUSTIFIED IN CONFIRMATION THE DISAL LOWANCE MADE U/S 14A OF THE INCOME-TAX ACT 1961 READ WITH RULE 8D OF IN COME-TAX RULES 1962 OF RS.1 27 241/-. THE ASSESSEE IS A SENIOR ADV OCATE PRACTICING IN DELHI AND WITH THE PECULIARITY OF THE CASE THERE W AS NO EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPTED I NCOME. THEREFORE NO EXPENDITURE WAS DEBITED IN INCOME AND EXPENDITURE A CCOUNTS OF ASSESSEE RELATING TO THE EXEMPTED INCOME. THIS FACT CAN EASI LY BE LOOKED INTO BY PERUSING THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. LD. AR FURTHER SUBMITTED THAT ASSESSING OFFICER HAS MECHANICALLY A PPLIED RULE 8D FOR MAKING THE DISALLOWANCE @ .5% OF THE AVERAGE VALUE OF INVESTMENT AS PER PROVISION OF RULE 8D(2)(III) OF THE INCOME-TAX RULE S. SHE FURTHER SUBMITTED THAT THE RULE 8D CAN BE INVOKED ONLY WHEN THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNTS OF THE ASSESS EE IN THE PERVIOUS YEAR IS NOT SATISFIED WITH THE CLAIM MADE BY THE ASSESSE E THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR A ND THEN ONLY THE AMOUNT WILL BE DETERMINED AS PER THE PROVISIONS OF RULE 8D (2). SINCE THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE IN RELATI ON TO THE EXEMPTED INCOME EARNED BY THE ASSESSEE DURING THE YEAR THER EFORE THERE WAS NO QUESTION OF MAKING ANY DISALLOWANCE. SHE ALSO PLEAD ED THAT MOST OF THE ITA NO.1872/DEL/2013 4 INVESTMENTS WERE MADE IN THE EARLIER YEARS AND THER E WERE VERY FEW FRESH INVESTMENTS DURING THE YEAR. THESE INVESTMENTS ARE MADE BY ASSESSEE HIMSELF. NO EMPLOYEE OR OFFICE IS REQUIRED FOR THES E INVESTMENTS. HENCE SHE PLEADED THAT ON THESE PECULIAR FACTS AND CIRCUM STANCES THE ORDERS OF THE LOWER AUTHORITIES DESERVE TO BE SET ASIDE. 4. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES. THE ASSESSMENT YEA R IS 2009-10. THE ASSESSEE IS A PRACTICING ADVOCATE. WE HAVE ALSO PERUSED THE PORTFOLIO OF THE INVESTMENT OF THE ASSESSEE. WE HAVE ALSO CON SIDERED THE FACT THAT MOST OF THE INVESTMENTS WERE MADE IN EARLIER YEARS FROM WHERE THE EXEMPTED INCOME HAS BEEN EARNED. CONSIDERING ALL TH ESE PECULIAR FACTS OF THE CASE WE FIND THAT THERE WAS NO NEED TO MAKE AN Y EXPENDITURE IN RELATION TO THE EXEMPTED INCOME EARNED BY THE ASSES SEE DURING THE YEAR THEREFORE WE ARE UNABLE TO SUSTAIN THE DISALLOWANC ES MADE UNDER RULE 8D(2)(III) OF THE INCOME-TAX RULES 1962 AND WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 10 TH DAY OF OCTOBER 2013. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 10 TH DAY OF OCTOBER 2013/TS ITA NO.1872/DEL/2013 5 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVIII NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR/ITAT NEW DELHI