DCIT,CIRCLE-6,KOLKATA, Kolkata v. Sri Prasant Khandelwal, Kolkata

ITA 280/KOL/2010 | 2006-2007
Pronouncement Date: 11-11-2011 | Result: Allowed

Appeal Details

RSA Number 28023514 RSA 2010
Assessee PAN AFOPK1277Q
Bench Kolkata
Appeal Number ITA 280/KOL/2010
Duration Of Justice 1 year(s) 9 month(s) 2 day(s)
Appellant DCIT,CIRCLE-6,KOLKATA, Kolkata
Respondent Sri Prasant Khandelwal, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 11-11-2011
Date Of Final Hearing 13-07-2011
Next Hearing Date 13-07-2011
Assessment Year 2006-2007
Appeal Filed On 09-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA ( ) . . ) [BEFORE SRI S.V. MEHROTRA A.M. & SRI MAHAVIR SING H J.M.] ' ' ' ' / I.T.A NO. 280/KOL/2010 #$ %& / ASSESSMENT YEAR : 2006-2007 DEPUTY COMMISSIONER OF INCOME TAX -VS.- SRI PRASANT KHANDELWAL KOLKATA CIRCLE-6 KOLKATA (PAN : AFOPK 1277 Q) ( '( /APPELLANT ) ( )*'( / RESPONDENT ) & C.O. NO. 25/KOL./2010 ( ' ' ' ' / IN I.T.A NO. 280/KOL/2010) #$ %& / ASSESSMENT YEAR : 2006-2007 SRI PRASANT KHANDELWAL KOLKATA -VS.- DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-6 KOLKATA ( '( /APPELLANT ) ( )*'( / RESPONDENT ) FOR THE ASSESSEE : SHRI D.S. DAMLE A.R. FOR THE DEPARTMENT : SHRI S.K. MALAKAR D.R. + / ORDER PER SHRI S.V. MEHROTRA ACCOUNTANT MEMBER/ . . :- WE FIRST TAKE UP THE APPEAL BEING ITA NO. 280/KOL./2010 . THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME- TAX (APPEALS)-VI KOLKATA DATED 13.11.2009 FOR THE ASSESSMENT YEAR 2006-07. THE ONLY GROUND OF APPEAL IS AS UNDER :- THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A.) HAS ERRED IN LAW IN TREATING THE BUSINESS INCOME OF RS.36 86 776/- OF THE ASSESSEE AS SHORT-TERM CAPITAL GAIN. 2. THE OFFICE HAS REPORTED THAT THE APPEAL FILED BY THE DEPARTMENT IS DELAYED BY ONE DAY. DCIT CIRCLE-6 KOLKATA VIDE HIS LETTER DATED 09.02 .2010 HAS INTER ALIA POINTED OUT THAT DUE TO PROMOTION AND TRANSFER ORDER OF CBDT NEW INCUMBENT FOR THE CHARGE OF COMMISSIONER OF INCOME TAX KOLKATA-II KOLKATA TOOK OVER THE CHARG E ON 29.01.2010 AND FURTHER POINTED OUT ITA NO. 280/KOL../2010 & CO-25-KOL-2010 2 THAT COMMUNICATION REGARDING FILING OF APPEAL GROU NDS OF APPEAL AGAINST THE ORDER OF LD. CIT(APPEALS) WAS RECEIVED ON 08.02.2010. THE APPEAL THEREFORE COULD BE FILED ON 09.02.2010. LD. COUNSEL FOR THE ASSESSEE DID NOT OPPOSE THE CON TENTION OF LD. D.R. 3. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES WE ARE OF THE OPINION THAT ON ACCOUNT OF ADMINISTRATIVE REASONS THE APPEAL COULD NOT BE FILED WITHIN TIME AND THEREFORE WE CONDONE THE DELAY OF ONE DAY. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE D IRECTOR OF K.B. CAPITAL (P) LTD. IN THE RELEVANT ASSESSMENT YEAR FILED RETURN DECLARING TOT AL INCOME OF RS.89 94 982/- WHICH INTER ALIA INCLUDED SHORT-TERM CAPITAL GAIN OF RS.36 86 773/-. HE NOTED THAT THE ASSESSEE HAD SHOWN SAME OPENING AND CLOSING STOCK AT THE BEGINNING AND END OF THE YEAR RESPECTIVELY WITHOUT ENTERING INTO ANY TRANSACTION FOR THE WHOLE YEAR. FROM THE D ETAILS OF SHORT-TERM CAPITAL GAIN HE NOTICED THAT THE SHARES WERE PURCHASED AND SOLD VERY FREQUE NTLY AND THE ASSESSEE HAD DISCLOSED THESE SHARES UNDER THE HEAD SHORT-TERM CAPITAL GAIN. HE REQUIRED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM WITH REFERENCE TO CIRCULAR NO. 4/2007 WHEREI N THE BOARD GUIDELINES HAVE BEEN GIVEN REGARDING TAXATION OF THESE TYPE OF TRANSACTIONS. T HE ASSESSEE IN ITS REPLY POINTED OUT THAT THE ASSESSEES INTENTION AND THE MANNER OF THE MAINTENA NCE OF THE BOOKS OF ACCOUNT DEFINES THE CHARACTER OF THE TRANSACTIONS WHETHER IT IS BUSINES S DEALING OR INVESTMENT DEALING. THE ASSESSING OFFICER HOWEVER KEEPING THE VIEW THE FR EQUENCY OF TRANSACTIONS TREATED THE SHORT- TERM CAPITAL GAIN OF RS.36 86 773/- AS BUSINESS INC OME INTER ALIA OBSERVING AS UNDER :- NOW THE ASSESSEES SUBMISSION IS CONSIDERED IN THE LIGHT OF THE ABOVE CIRCULAR AND THE INFORMATION AVAILABLE ON RECORD. AT THE OUTSET THI S MAY BE MENTIONED THAT THE CIRCULAR SPECIFICALLY SUGGESTS THAT NO SINGLE PRINCIPLE WOUL D BE DECISIVE AND THE TOTAL EFFECT OF ALL THE PRINCIPLES WHICH WERE MENTIONED THEREIN SHOULD BE CONSIDERED IN TOTALITY TO DETERMINE WHETHER IN A GIVEN CASE THE TRANSACTION S ENTERED INTO BY THE ASSESSEE ARE GIVING RISE TO BUSINESS INCOME OR CAPITAL GAIN. THE ASSESSEE IN HER OWN SUBMISSION SAID THAT MOST OF SHARES ARE HELD FOR MORE THAN A M ONTH. ALTHOUGH A MONTH TIME ITSELF IS TO SHORT TO SAY THE HOLDING AS INVESTMENT WHEN THE ASSESSEE HERSELF KEEPING ALL THE STOCK IN TRADE FOR THE WHOLE YEAR BUT ON EXAMINATION OF T HE TRANSACTIONS IT IS FURTHER REVEALED THAT THE ASSESSEE IS EVEN TOO FREQUENT IN DISPOSING ITS SHARES. IT IS NOTICVED THAT CONSIDERABLE NUMBER OF SHARES WERE DISPOSED OFF JUS T WITHIN 10 -15 DAYS OF PURCHASES SHOWING NO SIGN OF ANY INTENTION OF INVESTMENT WHE RE HOLDING FOR APPRECIATION AND EARNING OF DIVIDEND INCOME SHOULD HAVE BEEN MAIN MO TTO OF THE ASSESSEE FOR TREATING THE SAME AS CAPITAL GAIN. THIS MAY BE FURTHER MENTI ONED THAT MOST OF THE DIVIDENDS ARE COMING FROM LONG TERM HOLDING OF SHARES GIVING RISE TO LTCG AND HARDLY ANY CONSIDERABLE DIVIDEND WAS EARNED ON THE SHARES ON W HICH STCG WAS OFFERED. HENCE THE PRINCIPLE LAID DOWN IN THE CIRCULAR THAT THE PU RCHASE AND SALE OF SHARES WITH THE MOTIVE OF EARNING A PROFIT WOULD RESULT IN THE TRA NSACTION BEING IN THE NATURE OF TRADE; ITA NO. 280/KOL../2010 & CO-25-KOL-2010 3 BUT WHERE THE OBJECT OF THE INVESTMENT IN SHARES OF A COMPANY IS TO DERIVE INCOME BY WAY OF DIVIDEND ETC. THEN THE PROFIT ACCRUING BY CH ANGE IN SUCH INVESTMENT WILL YIELD CAPITAL GAIN CLEARLY GOING AGAINST THE ASSESSEES T AX TREATMENT. EVEN THE PROPOSITION AS LAID DOWN THAT THE SUBSTANTIAL NATURE OF TRANSACTIO N MAGNITUDE OF PURCHASE AND SALE IN THE ASSESSEE CASE GOING TO SHOW THAT THESE TRANSACT IONS ARE BASICALLY TRADING ACTIVITIES OF THE ASSESSEE. IN VIEW OF THE ABOVE FATS AND CIRC UMSTANCES SHORT TERM CAPITAL GAIN OF RS.36 86 773/- AS DISCLOSED BY THE ASSESSEE IS BEIN G TREATED AS BUSINESS INCOME HOWEVER TRANSACTIONS RESULTING IN LTCG AS DISCLOS ED MAY BE ALLOWED AS LONG TERM CAPITAL GAIN IN VIEW OF THE NATURE AND INTENTION BE HIND SUCH TRANSACTIONS. 5. LD. CIT(APPEALS) ALLOWED THE ASSESSEES APPEAL F OR THE FOLLOWING REASONS :- (I) THE ASSESSEE WAS BOTH DEALER AND INVESTOR IN SH ARES WHICH FACT HAS BEEN ACCEPTED IN THE PAST INCOME-TAX ASSESSMENT AS WELL AS IN THE ASSESSMENT ORDER. (II) IN THE BOOKS OF ACCOUNT THE ASSESSEE ALWAYS M AINTAINED TWO DISTINCT AND DIFFERENT ACCOUNTS RELATING TO TRADING IN SHARES AN D INVESTMENTS WHICH WAS NOT DISPUTED BY THE ASSESSING OFFICER. (III) THE ASSESSEE VALUED THE STOCK-IN-TRADE AT LOW ER OF THE COST OR MARKET VALUE AND INVESTMENTS AT COST. (IV) IN EARLIER YEARS THE LOSS ARISING ON INVENTOR Y VALUATION FOR STOCK HELD AS TRADE WAS ALLOWED IN THE ASSESSMENTS. (V) IN THE AUDITED ACCOUNTS ALSO THE ASSESSEE HAD SHARES BY WAY OF INVESTMENTS APART FROM STOCK-IN-TRADE. (VI) THE INVESTMENTS WERE MADE OUT OF THE SURPLUS FUND OF THE ASSESSEE. (VII) ASSESSING OFFICER HAS NOT BROUGHT ON RECORD A NY MATERIAL TO SHOW THAT THE TRANSACTIONS WERE BASICALLY TRADING TRANSACTION AND THE MAGNITUDE OF THESE TRANSACTIONS WAS HEAVY AND FREQUENT. ITA NO. 280/KOL../2010 & CO-25-KOL-2010 4 6. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE FILE D BEFORE US A COPY OF THE DECISION IN THE CASE OF ASSESSEES WIFE SMT. BHARATI KHANDELWAL IN ITA NO. 268/KOL./2010 FOR THE ASSESSMENT YEAR 2006-07 WHEREIN TRIBUNAL VIDE ITS ORDER DATED 09.09.2011 DISMISSED THE REVENUES APPEAL. 7. LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT OPPO SE TO THE ABOVE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS OF THE CASE. AS THE FACTS ARE IDENTICAL TO THE FACTS AS OBTAINING IN THE CASE OF ASSESSEES WIFE SMT. BHARATI KHANDELWAL IN ITA NO. 268/KOL./2010 FOR THE ASSESSMENT YEAR 2006- 07 THE DECISION DATED 09.09.2011 RENDERED BY THE TRIBUNAL WILL APPLY MUTATIS MUTANDI S TO THE PRESENT APPEAL. WE FIND THAT TRIBUNAL HAS TAKEN NOTE OF THE FACTS OF THE CASE IN PARA 4 AND HAS GIVEN ITS FINDING IN PARA 5 AS UNDER :- 4. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT ASSESSEE HAS DISCLOSED SHORT TERM CAPITAL GAIN OF RS.25 50 910/- IN ITS RE TURN OF INCOME. THE ASSESSING OFFICER NOTED FROM THE ACCOUNTS OF ASSESSEE THAT IT HAD SHOWN SOME OPENING AND CLOSING STOCK AT THE BEGINNING AND END OF THE YEAR WITHOUT ENTERING INTO ANY TRANSACTION FOR WHOLE OF THE YEAR. THE ASSESSING OF FICER NOTED FROM DETAILS OF SHORT TERM CAPITAL GAIN THAT SHARES WERE PURCHASED AND SOLD FREQUENTLY AND ASSESSEE HAS DISCLOSED PROFIT FROM SALE OF SHARES U NDER THE HEAD SHORT TERM CAPITAL GAIN. ASSESSING OFFICER RELYING ON CBDT CIR CULAR NO.4/2007 TREATED THE ASSESSEES PROFIT DECLARED UNDER SHORT TERM CAPITAL GAIN AS BUSINESS INCOME BY HOLDING THAT THE ASSESSEES PERIOD OF HOLDING FREQ UENCY OF TRANSACTION AND SOURCE OF FUND MAGNITUDE OF TRANSACTION INTENTION OF ASSESSEE ARE GUIDING FACTORS FOR TREATING INCOME DECLARED BY ASSESSEE AS BUSINESS INCOME. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO TREATE D THE INCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN BY GIVING FOLLOWING FINDING IN PARA 7 OF HIS APPELLATE ORDER: 7. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APP ELLANT AND ALSO THE ORDER OF THE A. 0. THE APPELLANT IS BOTH DEALER AND INVESTOR IN SHARES. THIS FACT HAS BEEN ACCEPTED IN THE PAST INC OME TAX ASSESSMENTS AS WELL AS IN THE IMPUGNED ORDER. IN THE BOOKS OF A CCOUNT THE APPELLANT ALWAYS MAINTAINED TWO DISTINCT AND DIFFERENT ACCOUN TS RELATING TO TRADING IN SHARES AND INVESTMENTS WHICH IS NOT DIS PUTED BY THE A.O. AS SEEN FROM DETAILS FILED BEFORE ME THE APPELLANT HA S VALUED THE STOCK IN TRADE AT LOWER OF THE COST OR MARKET VALUE AND INV ESTMENTS AT COST. IN THE EARLIER YEARS THE LOSS ARISING ON INVENTORY VAL UATION OF STOCK IN ITA NO. 280/KOL../2010 & CO-25-KOL-2010 5 TRADE WAS ALLOWED IN THE ASSESSMENTS. BEFORE ME THE APPELLANT FILED COPIES OF AUDITED ACCOUNTS FOR THE RELEVANT YEAR AN D ALSO FOR EARLIER YEARS. IT APPEARED FROM THE AUDITED ACCOUNTS THAT I N THE PRECEDING YEAR ALSO THE APPELLANT HELD SHARES BY WAY OF INVESTMENT S APART FROM STOCK IN TRADE. SINCE THE APPELLANT HELD THE INVESTMENTS AT COST INVENTORY VALUATION LOSS WAS NOT ACCOUNTED IN THE BOOKS. IT APPEARED FROM THE AUDITED ACCOUNTS THAT THE INVE STMENTS WERE MADE OUT OF THE SURPLUS FUND OF THE APPELLANT. IT WAS AL SO SUBMITTED BY THE APPELLANT THAT SAVINGS OUT OF HER PAST EARNINGS WER E DEPLOYED IN SHARES OF FEW REPUTED COMPANIES WHICH YIELD THE APPELLANT DIVIDEND AND CAPITOL APPRECIATION. WHEN THE SHARES ARE ACCOUNTED FOR IN THE BOOKS AS INVESTMENT SHARES THE VOLUME OF TRANSACTION OF SUCH SHARES CANNOT ALTER ITS STATUS FROM INVESTMENT TO TRADING. PROFIT ON SALE OF SUCH INVESTMENT SHARES HELD AS CAPITAL ASSETS ARE ASSESS ABLE TINDER THE HEAD CAPITAL GAIN. THE PERIOD OF HOLDING SUCH ASSETS CAN NOT DETERMINE ITS STATUS OR CHANGE IT FROM INVESTMENT TO TRADING. THE INVESTMENT SHARES PURCHASED AND HELD TILL THEIR SALE HAD DUAL PURPOSE I.E. FOR EARNING DIVIDEND AS AN INCIDENTAL INCOME AS WELL AS TO MAKE PROFIT ON SALE AT APPROPRIATE TIME. IT APPEARS TO ME THAT THE A.OS D ECISION TO ASSESS PROFIT REALISED ON SALE OF INVESTMENTS AS BUSINESS INCOME WAS LARGELY INFLUENCED BY THE TIME OF HOLDING THE INVESTMENT SH ARES AND THAT NO SINGLE PRINCIPLE WOULD BE DECISIVE IN HOLDING THAT IN A GIVEN CASE THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE ARE GIVI NG RISE TO BUSINESS INCOME OR CAPITAL GAIN. THE A.O. HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE TRANSACTIONS ARE BASICALL Y TRADING TRANSACTIONS AND THE MAGNITUDE OF THESE TRANSACTION S IS HEAVY AND FREQUENT. THE DECISION OF THE AUTHORITY FOR ADVANCE RULING REPORTED IN (288 ITR 471) ALSO SUPPORTS THE APPELLANTS CONTENTI ON THAT THE PROFIT REALISED ON SALE OF INVESTMENTS WAS ASSESSABLE AS C APITAL GAINS. I HAVE ALSO CAREFULLY GONE THROUGH THE JUDICIAL DECISIONS ON WHICH APPELLANT PLACED RELIANCE AND CONSIDERED THE APPLICABLE PROVI SIONS OF LAW. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES THEREFORE 1 HOLD THAT THE INCOME OF RS.25 50 910/- IS TO BE ASS ESSED UNDER THE HEAD SHORT TERM CAPITAL GAINS. THESE GROUNDS OF APPEAL A RE ALLOWED. AGGRIEVED NOW REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E IS BOTH DEALER AS WELL AS INVESTOR IN SHARES AND THIS FACT HAS BEEN ACCEPTED IN ASSESSMENT OF ASSESSEE FOR PAST ASSESSMENT YEARS. THE ASSESSEE IN HER BOOKS OF ACCOUNT ALWAYS MAINTAINED TWO DISTINCT AND DIFFERENT ACCOUNTS RELATING TO TRA DING IN SHARES AND INVESTMENTS. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US FILED CO MPLETE SET OF ACCOUNTS WHEREIN DISTINCTION WAS APPARENT IN THE CURRENT YEAR AND HA S ARGUED THAT THIS DISTINCTION WAS IN PAST ALSO. ON THE BASIS OF THE SAME IN PAST ASSESSMENT YEARS THE ASSESSING OFFICER HAS ACCEPTED THE ASSESSEES DISCLOSED INCOM E ON ACCOUNT OF SHORT TERM CAPITAL GAIN. EVEN THE ASSESSEE HAS VALUED INVESTME NTS ON THE BASIS OF COST PRICE WHEREAS STOCK IN TRADE IS ALWAYS VALUED ON THE PRIN CIPLE OF COST OR MARKET VALUE WHICHEVER IS LOWER. THE LD. COUNSEL DEMONSTRATED BE FORE US THIS FACT FROM ACCOUNTS. WE FIND THAT THE NUMBER OF SHARES IN WHIC H ASSESSEE HAS CLAIMED SHORT ITA NO. 280/KOL../2010 & CO-25-KOL-2010 6 TERM CAPITAL GAINS FIND PLACED IN INVESTMENT IN THE BALANCE SHEET. ONCE IT IS ESTABLISHED THAT ASSESSEE MAINTAINED THE DISTINCTIO N IN HER BOOKS OF ACCOUNTS AND TAX RETURNS BETWEEN ITS INVESTMENTS AND STOCK IN TR ADE AND WHATEVER SOLD FROM INVESTMENT AND DISCLOSED AS SHORT TERM CAPITAL GAIN THE ASSESSEE HAS RIGHTLY COMPUTED HER INCOME. ACCORDINGLY WE ARE OF THE VIE W THAT CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE AND WE CONFIRM THE SA ME. APPEAL OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION DATED 09.09.201 1 IN THE CASE OF ASESSEES WIFE SMT. BHARATI KHANDELWAL IN ITA NO. 268/KOL./2010 FOR THE ASSESSM ENT YEAR 2006-07 WE UPHOLD THE FINDING OF LD. CIT(APPEALS) THAT THE IMPUGNED SUM WAS TAXAB LE AS SHORT-TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. 9. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. 10. NOW WE TAKE UP THE CROSS OBJECTION BEING C.O. NO. 25/KOL./2010 FILED BY THE ASSESSEE. THE ONLY GROUND OF C.O. IS THAT LD. CIT(A PPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF ENTIRE EXPENDITURE OF RS.93 544/- WHICH THE ASS ESSING OFFICER HAD MADE BY INVOKING RULE 8D(2)(III) OF THE INCOME TAX RULES. 11. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD SHOWN DIVIDEND INCOME OF RS.4 70 147/- BUT DID NOT DISALLOW ANY EXPENDITURE RELATABLE TO T HIS INCOME. FOLLOWING THE DECISION OF ITAT MUMBAI IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. VS.- ITO IN ITA NO. 8057/MUM./2003 ASSESSING OFFICER DISALLOWED % OF THE AVERAGE INVESTMENT OF THE ASSESSEE BY INVOKING RULE 8D(2)(III). IT WAS CONFIRMED BY LD . CIT(APPEALS). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANC ES TRIBUNAL IN THE CASE OF ASESSEES WIFE SMT. BHARATI KHANDELWAL IN ITA NO. 268/KOL./2010 FO R THE ASSESSMENT YEAR 2006-07 HAS RESTORED THE MATTER TO THE FILE OF CIT(APPEALS) BY OBSERVING AT PARA 7 AS UNDER :- 7. AFTER HEARING RIVAL CONTENTIONS AND PERUSING FA CTS AND CIRCUMSTANCES OF THE CASE WE AN OF THE VIEW THAT RULE 8D OF I.T. RULES WILL N OT APPLY FOR ASSESSMENT YEAR 2006-07 AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCEE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.). WE ALSO FIND THAT TH E PRINCIPLE LAID DOWN BY HONBLE BOMBAY HIGH COURT IR THE CASE OF GODREJ BOYCEE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.) AT PAGES 138 & 139 VIDE SUB PARAS (V) TO (VII) ARE AS UNDER: (V) THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RU LES WHICH HAVE BEEN NOT FILED WITH EFFECT FROM MARCH 24 2008 SHALL APPLY WITH EFFECT FROM THE ASSESSMENT YEAR 2008-09; ITA NO. 280/KOL../2010 & CO-25-KOL-2010 7 (VI) EVEN PRIOR TO THE ASSESSMENT YEAR 2008-09 WHE N RULE 8D WAS NOT APPLICABLE THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE THE ASSESSING OFFICER IS DUTY BOUND T O DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A R EASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMST ANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MA TERIAL ON THE RECORD; (VII) THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002- 03 SHALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) I N RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE T OTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT REASON ABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT AND GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COUR T WE SET ASIDE THIS ISSUE TO THE FILE OF CIT(A) TO DECIDE THIS ISSUE IN TERM OF DIRE CTIONS OF HONBLE BOMBAY HIGH COURT CITED SUPRA. THIS GROUND OF ASSESSEES CROSS OBJECT ION IS ALLOWED FOR STATISTICAL PURPOSES. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. RESPECTFUL LY FOLLOWING THE DECISION DATED 09.09.2011 OF ITAT KOLKATA IN THE CASE OF SMT. BHA RATI KHANDELWAL IN ITA NO. 268/KOL./2010 FOR THE ASSESSMENT YEAR 2006-07 (SUPR A) WE RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH. 13. IN THE RESULT THE APPEAL OF REVENUE AS WELL AS CROSS OBJECTION BY THE ASSESSEE BOTH ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11/ 11/2011. - . + 11/11/2011. SD/- SD/- [ MAHAVIR SINGH / ] [S.V. MEHROTRA/ ( . . )] JUDICIAL MEMBER/ ACCOUNTANT MEMBER/ DATED : 11/ 11/ 2011 ITA NO. 280/KOL../2010 & CO-25-KOL-2010 8 COPY OF THE ORDER FORWARDED TO: 1. SHRI PRASANT KHANDELWAL 25 SWALLOW LANE KOLKATA- 1. 2 DCIT CIRCLE-6 KOLKATA P-7 CHOWRINGHEE SQUARE K OLKATA-700 069. 3. COMMISSIONER OF INCOME-TAX (APPEALS)- KOLKATA 4. CIT WB- KOLKATA 5. DR KOLKATA BENCHES KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR I.T.A.T. KOLKATA LAHA SR. P.S.